A female receptionist helps a female patient pay a medical bill using her HSA at a doctor’s office.

How to Maximize HSA and FSA Accounts


Using a Health Savings Account and Flexible Spending Account can help you save on taxes and reduce healthcare costs.

American families on average spend more than 5% of their household income on out-of-pocket medical costs each year, according to research from Third Way. That’s a significant amount of money—and finding ways to reduce those costs frees up dollars that families can put toward many other needs.

This is where tax-advantaged health savings accounts (HSA) and flexible spending accounts (FSA) really help. Both types of account, which are available if you have a health plan with your employer, provide tax benefits that ultimately enable families to save on healthcare costs in the near term and maximize their savings for the future.

Here’s what to know about how these accounts differ and the benefits each provides.

What Is a Flexible Spending Account?

A flexible spending account, also known as an FSA, enables you to save pre-tax dollars that you can then use for a wide range of out-of-pocket healthcare costs. For 2023, the pre-tax contribution limit increases to $3,050 from $2,850.

FSA Benefits

  • Pre-tax contributions. The ability to save pre-tax dollars means that FSA contributions are deducted from your earnings, reducing your taxable income—and the taxes you pay annually.
  • Immediately available funds. You can access the amount that you’ve decided to save in your FSA for the year as soon as you need it, regardless of how much you’ve contributed.
  • An array of qualified expenses. You can spend your FSA funds on a broad range of qualified expenses that include prescription and over-the-counter medications, medical equipment and procedures, and dental and vision expenses.

Important FSA Considerations

  • The account stays with the employer. Because FSAs are provided by your employer, you can’t take them with you if you leave your job. Instead, you have to find a way to use the funds before you go.
  • You must use the funds within the year. In general, FSAs have a use-it-or-lose-it rule, which requires that you use the account funds before the end of the plan year.

What Is a Health Savings Account?

Like FSAs, health savings accounts (HSAs) allow you to save pre-tax dollars for qualified healthcare expenses. For 2024, a family can contribute $8,300 to an HSA—or $9,300 if you’re older than 55. However, there are some key differences, unique benefits, and considerations that come with HSAs. Check out these HSA Resources for more information, and learn how to get the most out of your HSA here.

HSA Benefits

  • Even more tax advantages. Similar to FSAs, you make pre-tax contributions to HSAs. But HSAs also provide two other tax benefits: The money in the account grows tax-free, and withdrawals for qualified medical expenses are also tax-free.
  • Rolling funds. HSAs belong to you—not your employer—and the money that you contribute to your HSA rolls over year after year, meaning that you can build up a significant amount in your account.
  • Retirement options. After you reach the age of 65, you can withdraw the money from your HSA for nonmedical expenses without incurring a penalty (though you will need to pay income tax on those withdrawals).
  • Investment opportunities. Many HSAs allow you to invest funds in the account, just like how you invest your retirement savings. This gives you the opportunity to benefit from compounding interest and investment growth beyond what you contribute.

Important HSA Considerations

  • Must pair with a high-deductible health plan. The only way to open and contribute to an HSA is to pair it with a high-deductible health plan. These plans often offer lower premiums, but they may not be the best option for people or families who want a more comprehensive healthcare plan. Also, you can’t contribute to an HSA and an FSA simultaneously.
  • Less insurance coverage. In exchange for lower premiums, high-deductible health plans have—as you may have guessed—high deductibles. That means you can spend significantly more out-of-pocket dollars on healthcare costs before your insurance plan begins to pay. This may be ideal for single young people, but less so for families with significant medical expenses planned for the coming year.

When to Use HSA vs. FSA

Both FSAs and HSAs are valuable tools for saving on healthcare costs; however, their unique rules make each suitable for different situations. For instance, a family with regular or significant healthcare expenses may not want a high-deductible insurance plan, which means they’re not eligible for an HSA. Or an individual may not be able to access an FSA because their employer doesn’t offer one.

Familiarize yourself with the benefits and considerations of each savings plan to determine which one works best for you. Then take advantage of their tax benefits to maximize your savings and make your healthcare dollars go that much further.

To learn more about tax-advantaged accounts, check out Fifth Third Bank’s Health Savings Account to help support medical care and expenses.