This vs That ⚡ Health Savings vs Flexible Spending Accounts

By TRG Advisors on April 29, 2021

Health Spending Accounts (HSA) and Flexible Spending Accounts (FSA) are both tax-advantaged accounts that allow you to save specifically for medical costs. In general, electing to sign up for an HSA or FSA is a good financial move. Knowing which one to select and how to get the most out of it may take a deeper dive into the details.

An HSA is a savings account with tax advantages. If you qualify, you can contribute money on a pre-tax basis, which lowers your tax bill. You can invest the money in your HSA, and any growth on assets in the account also isn’t taxed. The money in your HSA can be used to pay for medical expenses like deductibles and copayments.

HSAs have several benefits:

• The funds in your HSA grow tax-free.
• You don’t pay taxes on funds you withdraw to pay for medical expenses.
• Your contributions stay in your HSA until you use them.¹

An FSA is an employer-owned account employees use to set aside funds for qualified expenses. The account allows you to contribute a portion of your regular earnings through pre-tax payroll deductions. Distributions from the account must be used to reimburse the employee for qualified expenses related to medical, dental, and vision services.

FSAs also have several benefits:

• Unlike a HSA, you don’t have to maintain a health plan at all to open an FSA.
• Funds contributed to the account are deducted from your earnings
• before taxes, lowering your taxable income.

Regardless of whether you choose an HSA or FSA plan, you benefit. Although you are unable to contribute to both at the same time, they are a good way to save money for and on medical expenses. Please reach out to us if you have any questions and for more information on what plan is the best fit for you.

Disclosure

The Rand Group is a team of investment professionals registered with Hightower Securities, LLC, member FINRA and SIPC & Hightower Advisors, LLC a registered investment advisor with the SEC. All securities are offered through Hightower Securities, LLC and advisory services are offered through Hightower Advisors, LLC. This is not an offer to buy or sell securities. No investment process is free of risk and there is no guarantee that the investment process described herein will be profitable. Investors may lose all of their investments. Past performance is not indicative of current or future performance and is not a guarantee. In preparing these materials, we have relied upon and assumed without independent verification, the accuracy and completeness of all information available from public and internal sources. Hightower shall not in any way be liable for claims and make no expressed or implied representations or warranties as to their accuracy or completeness or for statements or errors contained in or omissions from them. This document was created for informational purposes only; the opinions expressed are solely those of the author, and do not represent those of Hightower Advisors, LLC or any of its affiliates. Third-party links and references are provided solely to share social, cultural and educational information. Any reference in this post to any person, or organization, or activities, products, or services related to such person or organization, or any linkages from this post to the web site of another party, do not constitute or imply the endorsement, recommendation, or favoring of The Rand Group or Hightower Advisors, LLC, or any of its affiliates, employees or contractors acting on its behalf.  Hightower Advisors, LLC, does not guarantee the accuracy or safety of any linked site. Hightower Advisors do not provide tax or legal advice. This material was not intended or written to be used or presented to any entity as tax advice or tax information. Tax laws vary based on the client’s individual circumstances and can change at any time without notice. Clients are urged to consult their tax or legal advisor for related questions.

¹ Source: IRS. “Publication 969 Health Savings Accounts and Other Tax-Favored Health Plans.”
² Source: The Lively Blog. “Differences Between HSA vs Healthcare FSA.”