5 Little-Known Perks Of Health Savings And Flexible Spending Accounts

Millions sign up for s or s at work and often overlook the valuable features these accounts offer. While most people know about the tax savings, these accounts actually go much further and provide extra benefits that can make a real difference in your financial well-being. This guide breaks down five surprising perks that help you use every dollar more effectively. By discovering these hidden advantages, you can make smarter choices about your health spending and find new ways to prepare for future expenses, making the most out of your or .

How HSAs and FSAs Differ

A (HSA) pairs with a high-deductible health plan. You deposit pre-tax money that you can spend on eligible medical costs. Your balance rolls over year to year, and you can even invest it. That makes the account a powerful tool for long-term health spending.

A (FSA) usually comes with a lower deductible plan. You choose a contribution amount at the start of the year, and your employer deducts that from your paychecks. Most FSAs follow a “use it or lose it” rule, though some let you carry over small balances. Your funds become available on day one, which is handy for early expenses.

Perk 1: Smart Ways to Save on Taxes

Most people know you avoid federal income tax on money you contribute. But few consider special methods to boost those savings.

• Contribute the maximum before year-end. In 2024, you can put up to $4,150 into an FSA and $4,150 into an HSA as an individual. Check these limits every January.
• Claim the Saver’s Credit if you qualify. Low- and moderate-income taxpayers can get back a percentage of HSA contributions. You’ll need to file Form 8880 when you claim this credit.
• Combine with a health care flexible credit. If your state allows a deduction for HSA or FSA contributions, you might save on state taxes as well. Check local rules on your state’s revenue website.

Set up automatic payroll deductions for your deposits to avoid overspending from your take-home pay. Your account grows pre-tax without manual transfers.

By maximizing every possible tax break, you reduce taxable income and free up cash for other goals, like building an emergency fund or saving for a short trip.

Perk 2: Carry Over Unused Money

Your never expires. If your balance stays untouched, it moves forward indefinitely. Think of it as a small retirement account set aside for health costs. Over several years, small deposits can turn into a sizable reserve.

Some employers now offer “grace periods” or allow $610 rollovers in their plans. That means you get two extra months to spend leftover funds or keep up to $610 each year. Instead of rushing to see a doctor before December 31, you gain extra time.

Keep track of your balances monthly. Use simple alerts on your phone. That way, you avoid last-minute claims or missing out on contributions you have already made.

If you change jobs, remember that your HSA stays with you. Unused FSA balances might require a plan exit claim, but you can use COBRA to keep your account active for a few more months. Consider this if you expect significant medical expenses.

Perk 3: Investing Your Funds

HSAs allow you to invest your balance similarly to a 401(k). You can select mutual funds, index funds, or other options available through your provider.

1. Build a reserve: Keep a small cash balance for routine visits to the dentist or pharmacy. Invest the rest for long-term growth.
2. Rebalance once a year: Adjust your investments based on your age and comfort with risk. Younger people may favor stocks, while those nearer to retirement might prefer bonds.
3. Review your investments: Check your holdings quarterly and make adjustments based on market changes or new health plan details.

Over time, the growth in your HSA can outpace inflation, turning it into a hidden backup source for health costs during retirement. Since withdrawals for qualified medical expenses stay tax-free, you effectively lock in tax-free gains.

To begin, log into your HSA provider’s website and explore the investment options. Set up an automatic transfer each month to keep your balance invested rather than letting it dwindle in a low-interest cash account.

Perk 4: Employer Contributions and Matching Funds

Some employers add their own contributions to HSAs or FSAs to encourage employees to enroll. They may contribute $500 or more annually. That “free money” effectively boosts your total health fund.

Ask your HR department if your company matches HSA deposits up to a certain percentage of your salary. Even a 3% match turns every $100 you contribute into $103 of health savings. Over a 30-year career, that additional money adds up significantly.

If you change roles within the same company, look for grace periods that let you access remaining FSA balances. Some employers even make a lump sum contribution for the entire year’s worth of HSA deposits upfront, giving you immediate access to funds.

Make sure to accept any employer contributions first. They don’t reduce your individual contribution limit; you just need to keep track of the combined total to avoid exceeding the IRS limit.

Perk 5: Wide Range of Eligible Expenses

You can buy bandages, contact lens solution, and SPF 15 or higher sunscreen. Many providers offer online catalogs to shop tax-free with your HSA or FSA debit card. That turns your health account into a direct line for everyday needs.

If you are caring for family, FSAs can reimburse expenses like daycare or summer camps. HSAs also pay for services that manage chronic conditions at home. You have real flexibility in how you use these funds.

Keep all receipts and check IRS Publication 502 for a list of eligible items. Storing digital copies in a folder or app helps you stay organized during tax time or audits.

Review your *HSA* and *FSA* details, set up automatic contributions, and track expenses to save money. Small management changes can lead to bigger savings and easier budgeting over time.