If there’s anything this COVID pandemic has reminded us of, it’s that your health is important.
And if you’ve been delaying a visit to your doctor because you’re worried you’ll have to deal with pesky out-of-pocket costs, look no further!
There might be a solution to help you save on medical expenses. Oh, and did we mention it’s tax-free? ;)
In this post, we cover everything you need to know about Health Savings Accounts (HSAs), Flexible Spending Accounts (FSAs), including:
...Other than the money-saving perks, obviously!
Let’s start with HSAs first.
AKA: Health Savings Account
An HSA is an arrangement, set up through your employer, that lets you pay for many out-of-pocket medical expenses with tax-free dollars.
Both you and your employer can contribute to this account for eligible medical expenses. And you don't have to pay taxes on the money you add in. (woohoo!)
When you sign up for an insurance provider during open enrollment, you select the HSA option, and decide how much you want to contribute to it.
Similar to how your insurance premiums are withdrawn from your paycheck, HSA dollars also get taken out of your paycheck, pre-tax.
Your HSA cash goes straight from your company, into the account -- excluding them from federal, state, medicare and social security taxes and fees.
Once you’re set up, you get an HSA debit card in the mail. It literally looks like a credit card, and you can use it whenever you pay for eligible out-of-pocket health care expenses.
If you forget your HSA debit card at home, just pay with your regular debit or credit card, and submit your receipt (plus other relevant info, if required) through their online portal.
The online portal also allows you to track how much you've spent, and the balance on your “allowance”, so it’s pretty nifty.
HSAs are limited to $3,550 per year. You can carry over any un-spent money (usually up to $500) to the next year -- so you don't lose it. And you can invest the money in this account if your employer offers the ability to. Win-win!
Yes, but ONLY IF:
If you don’t fall within either of these 2 categories, an HSA may not be worth it.
Your money is somewhat locked up in this account, since it can't be used for other things, and it might just rot away in there until you have an eligible medical expense come up.
Keep in mind, sometimes other health-related things are covered by HSA, like:
But you definitely gotta check with your insurance first, since they may require you to present a special doctor's note to get reimbursed for these.
AKA: Flexible Spending Account
This is ALSO an arrangement through your employer that lets you pay for many out-of-pocket medical expenses with tax-free dollars.
Literally the same as an HSA! Same concept, you gotta spend the money on qualified medical expenses, otherwise you won’t get reimbursed.
FSAs are limited to $2,750 per year. In most cases, you HAVE to spend all the money within the year. And you CANNOT invest the money in this account.
Maybe! An FSA makes sense for you if:
Our view is simple.
...If you are someone who doesn't have underlying health conditions, and you go to the doctor only 1x a year, dentist 2x a year, and that's it -- you don't need an HSA or FSA!
...If you are someone who does have high medical expenses -- maybe you’re going through IVF, or you have diabetes, or other health conditions -- then, an HSA and FSA are a great way to get more bang for your buck!!!
Only exception to this rule: If your company is going to put in $500 or more into an HSA for you, FOR FREE -- DO IT. Free is Free. And “free” money is always a yes. ;)
On a last note: If you don’t have health care insurance at all, you won’t be able to get an HSA or FSA. Your first step would be to register for a health plan instead.
And if you do want an HSA or FSA… Know that open enrollment only happens once a year, and are only open for about a month starting around November.
You can find the specific dates at https://www.healthcare.gov/ -- so, make sure you don’t miss this window!
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