Defining FSAs & HSAs and How To Make Them Work For You
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I'm to call lap in the only financial expert. You don't need a dictionary to understand. It's time for some money. We have.

IT is open enrollment season, which means is time to decide on your health insurance plan for twenty twenty five. If you get your health insurance through the government's marketplace, you need to sign up for your plan by december fifteen if you get your health insurance through your employer, your deadline is probably before that.

When you do sign up for your plan, depending on how you get your health insurance, you'll be given the option to sign up for an fsa or an ha. And if you're like my renders and vivo, who's the editor and chief of entrepreneur magazine and also the co host of one of my other podcasts, help wanted the fsa. H sa.

Option drives him nuts. Here's a voice. Know that he sent me about this a few years ago.

The call I won't to rent to you, and you can feel free to use this on the show if you think that I would make for a good episode, subject or not, or just delete. But i'm going to rent to you anyway. Why am I supposed to use an H.

R, A health savings account? My employer has this account offerings where I can put a certain amount of money in for health and for childcare and for transit. And they're like arbitrary random amounts of money, right? It's like five thousand, six hundred dollars in something and small amount and whatever IT is.

And so so I got to deal with the fall amount money and then IT doesn't roll over after a year or so. I got to have to use IT during the year and there's a one more account that I have to find. And then every time I use IT, it's like incredibly burden some, because I have to hold onto these receipts and often upload them to this terrible website that was built in one thousand nine hundred ninety four.

And they give me a deep card, yes, but half the time they still need the receipt. So then I use the democrat think, to use the decca, I have to Carry around the, and then I use the decor, and then I still have to hold on to the sea and then upload, two weeks later, to this, from ninety ninety four IT makes absolutely innocence. And the thing that I can understand is, am I actually saving enough money to make this unbelievably burdensome m and stupid process worth IT? So you tell me, should I continue to support through this? Or should I just say, screw IT, I hate this thing. I'm just going to pay all the stuff out of my own pocket. That's what I wanted know.

So Jason went, F, S, says not. H. S, says, but that is a perfect example of how confusing this topic can be. I've talked about these accounts before on the show, but today I really wanted focus on telling you how to get the most out of these accounts. But first, let's do a quick refresher.

Ethos and h says our accounts where you save pretax money to use on health care expenses, but health expenses is more generally defined than you might think most costs you incur at a hospital are eligible, of course, but a good amount of things that you might already have in your bathroom are also eligible, things like first aid, kids sudden screen allergy medicine, chapstick and even red light anti aging face masks. So where actually has an entire section on their site for F, S, A eligible items using pretext? Money for these purchases means you're getting an automatic discount before you even start hunting for sales.

It's estimated that you can save around thirty percent on medical purchases through F, S says or h says. There is a certain limit of how much money you can contribute, of course, but that money is yours to use for the year on eligible health purchases. But we on getting discounts on culture products.

These accounts can also work hard for you and your money. Let's start by breaking down how emphases and agrees work, because one letter makes a really big difference. Think about IT this way.

The fsa is like the french zone account. IT is there for a good time, but not a long time. Meanwhile, the aga is your have and to hold account built to stick ground for the long haul.

Okay, that might mean nothing to you right now, but I will all make sense very shortly. Let's start with fsa. Fsa, or flexible savings account like a health care credit card more than a regular savings account.

F, S, S, are offered by employers. And while some might kick a little extra funding, most sadly do not. Within F, S, A, A set amount of your pre tax pain is earmarked for health expenses.

But here is the magic. You can get the entire years set amount up front. So if you have a baby in january, you can cover the cost of the birth right away, even using part of your decembers paycheck interest fronted by your employer.

Since it's managed by your employer, F S says, might come with stricter rules, but there are some cool perks if your doctor has ever recommended working out and you get ta note about that, you might be able to cover your membership and beyond some of the basics like thailand all and bandages if is often cover some quirky items like a four hundred dollar outlet baby monitor and a crib camera stream able tear phone obviously have a one track mind or baby registry items right out, but reissue, there are eligible items for adults too. But in porton, hands up, if you don't use your fsa funds, by the end of the year, they can vanish. This is where the around for a good time, not a long time, thinking comes in.

Luckily, most people set aside a reasonable amount and find IT easy to use up on glasses, dental visits or even that travel size pepto dismal that you pick up at the airport. And if you have leftovers, hey, maybe this is your moment to get a four hundred dollar massage. Got seriously, some companies will allow employees to roll over some of their F A baLance into the next year.

The irs sets the annual relevant limit, which is six hundred and forty dollars for twenty twenty four. But once the irs sets the limit, IT is really up to your employer to let you take IT. So don't assume will be able to Carry over your baLance into twenty twenty five.

You have to ask first h essays or health savings accounts on the other hand or yours do keep forever unlike the employer tide fsa and a esa is connected to your health plan, which means that you can get one even if yourself employed, agent says, are always pared with high deductable health plans. But before we dig into that, let's double click on premium versus deductables. Remember, a premium is the monthly cost you paid to your insurance company, and a deductive is what you pay out of pocket at the doctor.

A large scale study by a national insurance company found that many people are overpaying on premiums and after saving for retirement, and there's often a direct relationship between the two I got at the thought of being out of pocket for a medical bill can be scary, ed, but it's worth considering if a high deductible, low premium plan within H. S. I might work.

career. The cool thing about ago says is that they're like attacks haven that's accessible a lot. Attacks havens are only accessible to the very rich.

But H. S, S. Are for everyone. This year, you can contribute up to four thousand, one hundred and fifty dollars per person, or eighty three hundred bugs per family pre tax.

Like in fsa, you can use these funds for bad dates, hospital bills, even that red light marketing a. But if you want to max out your H. C. Benefits, let that money grow by investing IT. Because h says, have this amazing ability to transform into an iron ray like account more than that injustice.

C, but first, how do you use your aga to invest? anyway? The way to set this up when you sign up for a health insurances plan is to confirm that it's A S A eligible.

Then see what A S abe vitals are compatible with your plan. I'd also asked the bank if they offer H. C.

Options to summit due. Once you fund at the account, IT kind looks like a broken age account or a retirement account. You can take the funds in that account and invested in the market.

Some, H I says, will have offerings that help you choose investments, while others may only offer specific investments. If you're a newbie investor who wants some extra support, you might want to find an hr saper provider that offers perks like robo advising or automatic rebalancing. So when you're signing up for health insurance plans, don't just check if it's ages, say eligible, but check which providers supported for day to day costs.

You could use your hr a for things like unexpected medical costs, like when I have that health scare last year and how to take an ambuLance another day is a fun part of an h sa. Is that there is no time limit on reivers yourself for medical expenses, so you can let your account grow over the years while still keeping IT in your back pocket as an emergency fund or a fun find. So let's say I had paid two thousand dollars for the ambuLance bill out of pocket, which I did not.

I negotiated, which is the whole other episode, and I kept the receipt. I could have the money in my age, just a untouched, invested and growing, and then sell some of those investments later on to reivers myself, and then use that tax free reimbursement for fun money. Once you hit sixty five ages, evolve into something even more flexible.

You can withdraw money, tax free for medical expenses, or treat yourself to something non medical, and just pay the income tax much like a traditional ioe. Withdraw one less know most people fought their accounts with pre tax money, but IT may actually Better, in some cases, to use post tax dollars and take deduction on your contributions. But however you funded, h says, do offer a lot of ways to save and earn.

For today's day, you can take straight to the thing, do you have kids and are looking for another tax advantage account? Check out the coverdell education savings account, while contributions are limited to two thousand dollars a year. And these accounts, do you have some other restrictions? They can be used to pay for far more things than a traditional five twenty nine educational savings account, including private school tuition, school supplies and after school care.

They also have far more investment options than a more limited five twenty nine account, making them potentially a Better investment. Money we have is a production of money news network. I'm your host nickle lap in money rehabs executive producer is more than the void. Our researcher is Emily homes. Do you need some money rehab? And let's be honest, we all do.

So email is your money questions, money rehab at money news networker dog, come to potentially have your and answered on the show or even have a one on one intervention with me and follow us on instagram at money news and tiktok at money news network for exclusive video content. And lastly, thank you so seriously, thank you. Thank you for listening and for investing in yourself, which is the most important investment you can make.