People should be smarter when it comes to handling their finances. And there are many ways to go about it. They can save for the future by investing in insurances or simply put away a portion of their money for the rainy days to come. However, one technique that people should learn is to have either a flexible spending account or a health savings account.
A Strategy with Multiple Benefits
What makes these a great option in terms of managing finances is that the amounts contributed to these accounts are nontaxable. Thus, computing for taxes doesn’t include the amount set aside for these accounts. It then translates to a smaller taxable income and lesser tax liabilities.
Aside from the taxability aspect of these accounts, people can have more option on how they would like to save for the future. This is most especially the case for their future health and medical needs. Going for either FSA or HSA automatically gives you an assurance that you will have funds for these concerns that are not covered by health insurances.
Getting These Plans
So what’s the real score of FSA vs HSA? Funds for FSA accounts are usually provided by employers. This is why these plans are strongly linked with one’s employment career. Employers own the FSA plans that their employees enjoy. And if there are funds that have been unused for the year, they can either be forfeited or used within a grace period of 2.5 months after the year ends. Needless to say, rollovers of funds to the next year can be minimal with FSA plans.
On the other hand, HSA accounts are individually owned and managed by individuals. This is as long as they have a high-deduction health plan. Unlike FSA, these plans are not tied up with their work. Thus, even if a person hops from one job to another within the year, they can still maintain their HAS plans. It also translates to the complete and total rollover of funds to the next year even if the funds for the recent year haven’t been used.