Managing healthcare costs can feel overwhelming, especially for seniors and their families. Whether you’re an older adult planning ahead or a caregiver helping a loved one, understanding FSA vs HSA can make a big difference in how you handle medical expenses. Both accounts offer tax advantages and help you save money for healthcare needs - but they work differently.

What Is an FSA (Flexible Spending Account)?

An FSA, or Flexible Spending Account, is a special account you can use to pay for eligible healthcare expenses using pre-tax dollars. It’s typically offered through an employer, and funds are deducted from your paycheck before taxes.

You can use an FSA to cover things like copayments, prescription medications, bandages, mobility aids, and other medical supplies.

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Key Takeaways

FSAs lower your taxable income and give you access to tax-free funds for healthcare, but they come with spending deadlines.

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Pro Tip

Always plan your yearly medical expenses carefully. FSAs often have a “use it or lose it” policy - meaning unused money at year’s end might not roll over.

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What Is an HSA (Health Savings Account)?

An HSA, or Health Savings Account, is a tax-advantaged savings account for people with a high-deductible health plan (HDHP). You can use it to pay for qualified medical expenses, including doctor visits, dental work, vision care, and even long-term care services.

Unlike FSAs, HSAs belong to you - not your employer - and your funds roll over year after year. Plus, you can invest the money to grow your savings over time.

One of the biggest advantages of an HSA is its triple-tax benefit. Contributions are made pre-tax, the money in the account grows tax-free, and withdrawals for qualified medical expenses are also tax-free. This makes HSAs a powerful long-term savings tool, especially for seniors who want to plan ahead for healthcare costs in retirement.

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Key Takeaways

HSAs provide more flexibility and long-term savings potential, especially for seniors with ongoing healthcare needs.

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Pro Tip

After age 65, you can use HSA funds for non-medical expenses without penalties  - though they’ll be subject to regular income tax.

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FSAs are short-term and employer-based, while HSAs offer long-term control and flexibility.

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Safety Note

You can’t contribute to an HSA if you’re enrolled in Medicare, though you can still use existing funds for qualified medical expenses.

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Which One Is Better for Seniors?

When it comes to FSA vs HSA, the best choice depends on your healthcare needs, insurance type, and retirement plans.

For seniors still working and not yet enrolled in Medicare, HSAs often offer more long-term advantages. The ability to invest funds, roll them over each year, and use them tax-free for qualified expenses can make them a powerful tool for covering future healthcare costs.

On the other hand, FSAs can still be a good fit for short-term needs, especially if your employer offers matching contributions or a small rollover amount.

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Key Takeaways

If you’re still working and have a high-deductible plan, an HSA could be the smarter move. But for predictable yearly expenses, an FSA remains a solid, tax-saving choice.

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Use Both Strategically

Some families may benefit from combining the two if their situation allows it. For example, one spouse may have an FSA through an employer, while the other contributes to an HSA. This can help balance short-term and long-term healthcare planning.

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Safety Note

Always verify IRS rules before opening both accounts at the same time - eligibility can vary depending on your insurance coverage.

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Both FSAs and HSAs can ease the financial burden of medical care. The key lies in understanding how each account works, what your coverage allows, and how your healthcare needs may change over time.

At Pelegon, you can now use your FSA or HSA funds through Truemed. We’ve partnered with Truemed to make it easier for eligible customers to pay with pre-tax dollars and save an average of 30% on health-related products. During checkout, simply select Truemed as your payment option and complete a brief health survey to verify eligibility. Truemed will handle all necessary documentation to ensure compliance, so you can invest in your health with ease and confidence.

What is Truemed? 

Truemed collaborates with health and wellness brands to help eligible customers use pre-tax HSA or FSA funds for their purchases. Through a network of medical practitioners, Truemed facilitates the issuance of Letters of Medical Necessity for qualifying customers, allowing them to apply pre-tax HSA/FSA funds toward medically necessary health and wellness products.