Episode 137: Flexible Spending and Heathcare Savings Accounts

Flexible Spending and Heath Care Savings Accounts are both ways to pay for your medical expenses with pre-tax money. Anytime you can use pretax money to pay for anything, you are getting generally getting a 22% discount or more depending on your tax bracket. 

Flexible Spending Accounts (FSA) are benefits that may be provided by your Employer. Not all Employers will provide this benefit and with some employers, you may pay a fee to have this benefit. Money is taking out of your paycheck throughout the year which can be used to directly pay for or reimburse qualified medical expenses. The money is use it or lose it so you want to consider your healthcare expenses carefully before decided how much money to set aside in these accounts. 

Healthcare Savings Accounts (HSA) are available to anyone with a qualified High Deductible Healthcare Insurance Plan. This is not a benefit from your employer, but will often be set up with your employer if you are using a healthcare insurance plan they offer you as a benefit. You contribute pretax money into the account where you can invest it to grow tax free. If you use that money anytime in the future for qualified healthcare expenses, it comes out tax free as well. You can reimburse yourself for qualified medical expenses years after you incurred the expense, as long as the expense was incurred after the account was created. There is no other tax advantaged account where money goes in pre-tax, grows tax free, and can be withdrawn without paying taxes as well. 

Tune in to this week’s podcast to learn more about the details of these two types of accounts.

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Disclaimer: The content provided in the Grow Your Wealthy Mindset Podcast is for informational and entertainment only and should not be considered professional investment, legal, or tax advice. Dr Elisa Chiang is not a certified financial planner, attorney, or accountant.  The views expressed are the personal opinion of Elisa Chiang and her guests and should not be taken as advice specific to you, the listener of the podcast. Personal finance is personal and your personal financial decision need to be made based on your personal financial situation and risk tolerance after having completed your own due diligence.