HSA vs. FSA: Choosing the Right Savings Strategy Before Year-End

As we approach the end of the year, it's a great time to review your health insurance benefits—especially if you're enrolled in an ACA marketplace plan. You have probably heard about healthcare savings plans like a Health Savings Account (HSA) or a Flexible Spending Account (FSA), and knowing the differences can help you make smart decisions about your healthcare dollars.

First, what are HSAs and FSAs?

Both accounts let you set aside money before taxes to pay for qualified medical expenses like copays, prescriptions, and more. But there are key differences:

Health Savings Account (HSA)

• Only available with a High Deductible Health Plan (HDHP).
   
• Funds roll over year after year—no "use it or lose it" rule.
   
• The money stays with you, even if you change jobs or insurance plans.
   
• You can invest your HSA funds, which makes it a powerful long-term savings tool.
   
• Contribution limit for 2025 (subject to change):
   
• $4,150 for individuals
   
• $8,300 for families
   
• +$1,000 catch-up for age 55+
  

Flexible Spending Account (FSA)

• Usually offered through employers, but some ACA consumers may access an FSA through a family member’s plan or COBRA.
   
• "Use it or lose it": Most FSAs require you to use the funds by year-end, although some plans allow a short grace period or small rollover.
   
• Funds must be used while you're enrolled—you don’t take the money with you if your coverage ends.
  

Why it matters now

If you're currently on an ACA High Deductible Health Plan, you may be eligible to open and contribute to an HSA before year-end to reduce your 2025 taxable income and prepare for future medical expenses.

On the other hand, if you or a spouse has access to an FSA, now is the time to check your balance and spend any unused funds before they expire. Eligible expenses include everything from eyeglasses to over-the-counter meds.

Bottom line:

• HSA = more flexibility and long-term benefits, and available on some ACA plans.
   
• FSA = great short-term savings, but watch those year-end deadlines.
   

Need help understanding which accounts work with your ACA plan? Reach out—we're happy to guide you toward a smart, tax-efficient health strategy.