Here are a few key differences between the two accounts:
Remaining balances: You can carry over your entire remaining balance in your HSA into the next year.
Meanwhile, FSAs are “use it or lose it”: Your employer may give you the option of carrying over up to $500 in remaining funds into the following year or give you a grace period of 2½ months after the end of the plan year to use the money.
Companies with FSAs can offer either carryover option or none at all — in which case, you would forfeit any unspent amounts by the end of the year.
Portability: If you leave a job where you participate in a plan with an HSA, you’ll be able to take the account with you. This can create an opportunity for you to shift your balance to a provider with low-cost investment options.
This isn’t so with FSAs.
Once you’ve parted ways with your employer, you can no longer participate in the FSA and you forfeit any balances left over.
Fund access: Employees participating in HSAs and FSAs have amounts deducted from their paycheck to fund the accounts throughout the year.
However, with FSAs, individuals who elect to make the full contribution — $2,650 in 2018 — are able to access that full amount at the beginning of the year, even if they haven’t fully funded the account yet.
You can only tap your HSA balance to the extent that you and your employer have already funded it. The money needs to accumulate before you can use it.
Investing: Depending on where you hold your HSA and how much money you keep in the account, you may have investment options available to you. FSAs don’t earn interest.
Because you can invest your HSA and carry the money over from one year to the next, you may be able to use it to help pay for health -care costs in retirement.
If you’re planning on investing your HSA, be sure to keep an eye on your provider’s fund lineup and the related costs, including investment expenses and account fees. High costs can eat away your returns over time.
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