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Smart Healthcare: Distinctions between FSA and HSA

Jul 31, 2019 - Posted by: Rocky Mountain Credit Union

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When it comes to deciphering the differences between FSAs and HSAs, it’s fortunately pretty simple. If you’re mystified already by the acronyms, don’t worry. Flexible Savings Accounts (FSA) are similar to Health Savings Accounts (HSA), in that they both can be used to pay for healthcare expenses. But that’s really just the tip of the iceberg. So let’s dive deep into the nitty-gritty, and see what there is to know about these two savings options that are both good for your health.

To learn more about the ins and outs of HSAs in-depth, check out this guide that tells you all the details.

FSA vs HSA

When the two accounts go head-to-head, which will win? You decide: the battle is below.

FSA > HSA

An FSA is a type of account that allows you to make tax-free contributions, like an HSA, but it has the benefit of allowing you to make withdrawals for childcare in addition to healthcare. Unlike an HSA, it is available regardless of whether you have insurance, or what type of insurance you have. With an FSA, you can withdraw up to your annual limit at any time, even if you haven’t paid that amount into it yet, whereas with an HSA you can only take out what you’ve already put in.

FSA < HSA

However, FSAs have a much lower annual contribution limit ($2650 compared to $3450 for an individual or $6900 for families with an HSA). An FSA account cannot earn interest (while an HSA can), and an FSA is owned by your employer, meaning you can’t take it with you if you change jobs. Also, since they’re owned by an employer, FSAs are not available for self-employed people. It also has a lower annual tax-deductible contribution limit. Another downside to an FSA is that the unused contribution is lost at the end of the year, whereas an HSA rolls over, making it a valuable part of a retirement portfolio.

Who Benefits from an FSA?

An FSA could work well if you’re traditionally employed, intend to stay in your job for the long term and have high childcare costs that will run down your FSA account balance quickly, since it doesn’t roll over from year to year. That way you aren’t leaving money on the table, but you’re still giving yourself a tax break. It can also benefit you if you don’t have a high-deductible insurance plan and can’t qualify for an HSA.

What are the Benefits of having an HSA?

The fact of the matter is, most people will benefit more from an HSA. Anyone with a high-deductible health insurance plan can take advantage of the benefits of this type of account. The money you deposit won’t go away if you don’t spend it in a year, and HSAs can be a valuable asset to your retirement savings. And this way, you don’t have to be tied to your job to keep the account, giving you more flexibility in the long run.

Benefits of an HSA with RMCU

An HSA from Rocky Mountain Credit Union offers a few benefits you can get excited about. Unlike many HSAs, here you’ll find no annual or monthly fees, plus a competitive interest rate. Free online and mobile banking comes standard, making it easy to manage your money wherever you are.

Visit the RMCU Savings Accounts page to apply online and easily begin saving for your health, starting now.

 

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