FSA VS HSA (Federal Employee)

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lighthouse1972
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Joined: Fri Oct 19, 2018 10:52 pm

FSA VS HSA (Federal Employee)

Post by lighthouse1972 »

Question: I have Flexible Spending Account now and I was reading this blog post: https://bobbfinancial.com/blog/do-this- ... g-your-tsp. I was curious what are folks experiences with an HSA and is it better to fund an HSA over an FSA? Thanks for your thoughts.
DarkHelmetII
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Re: FSA VS HSA (Federal Employee)

Post by DarkHelmetII »

lighthouse1972 wrote: Sun Nov 22, 2020 8:05 am Question: I have Flexible Spending Account now and I was reading this blog post: https://bobbfinancial.com/blog/do-this- ... g-your-tsp. I was curious what are folks experiences with an HSA and is it better to fund an HSA over an FSA? Thanks for your thoughts.
HSA is not use it or lose it. Plus you can invest it. Kind of like a triple tax advantaged IRA. You can also fund directly whereas FSA, to my knowledge, must always fund via payroll deduction.
aristotelian
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Re: FSA VS HSA (Federal Employee)

Post by aristotelian »

FSA and HSA are tied to different types of insurance. The decision has to be made holistically. FSA is use it or lose it, which is a huge constraint, but HSA means higher deductible. Personally, I would choose the better insurance first and then the tax advantaged account that goes with it. If it is close, then the advantages of the HSA can tip the scale. (*The exception is that HSA is compatible with Limited Purpose FSA for optical and dental).
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grabiner
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Re: FSA VS HSA (Federal Employee)

Post by grabiner »

Because of the way the US government subsidizes health plans (75% subsidy on most plans, which means that you pay $250 out of pocket for the plan to contribute $1000 to your HSA), the HDHPs are particularly attractive.

In most tax brackets, your total cost will be lower under the HDHP than under the standard plan from the insurer, regardless of your medical costs. The plan's contribution to your HSA, plus the tax savings on your own contribution to the HSA, are about equal to the deductible. Therefore, if you can use an insurer which offers an HDHP, the HDHP is a good deal. But if your doctors are not in network, that is a good reason to choose a different plan.

Even if you have an HDHP, you can still use a Limited Expense FSA for dental and vision expenses, so you get some of its tax benefit in addition to the HSA.

If you do choose an HDHP, max out the HSA in preference to anything else except the 5% TSP contribution that gets you the full government match. HSA contributions are deductible when made, and tax-free when withdrawn according to the rules; TSP and IRA contributions get you the benefit on only one side. This is the reason for the advice on the linked page.
Wiki David Grabiner
Topic Author
lighthouse1972
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Joined: Fri Oct 19, 2018 10:52 pm

Re: FSA VS HSA (Federal Employee)

Post by lighthouse1972 »

Thanks for the responses.
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