Key Insights
What are the key differences between FSAs and HSAs?
FSAs are employer-tied and offer immediate access to funds but do not roll over year to year. HSAs are tied to high-deductible health plans and can be kept and invested long-term, with no time limit on reimbursements.
Why might someone choose a high-deductible health plan with an HSA?
High-deductible plans often come with lower premiums, allowing individuals to save more pre-tax money in an HSA, which can be invested and used tax-free for medical expenses.
How can HSAs be beneficial for long-term financial planning?
HSAs can be invested and grow over time, similar to an IRA, providing tax-free withdrawals for medical expenses even after retirement.
What are some eligible expenses for FSAs and HSAs beyond typical medical costs?
Eligible expenses include items like sunscreen, allergy medicine, gym memberships recommended by a doctor, and even some high-tech baby monitors.
Why might someone consider using a Coverdell Education Savings Account (ESA) over a 529 plan?
Coverdell ESAs can be used for a broader range of expenses, including private school tuition and after-school care, and offer more investment options compared to 529 plans.
How can individuals maximize their HSA benefits?
Maximizing HSA benefits involves contributing the maximum allowed pre-tax, investing the funds, and using the account for eligible medical expenses to allow it to grow tax-free.
What is the main drawback of FSAs compared to HSAs?
The main drawback of FSAs is that unused funds do not roll over to the next year, unlike HSAs which can be kept and invested indefinitely.
Chapters
- Open enrollment season is the time to decide on health insurance plans.
- FSAs and HSAs are often confusing for people due to their complex rules and requirements.
- A personal story highlights the burdensome nature of managing these accounts.
Shownotes Transcript
