FSA Explained: How a Flexible Spending Account Works

A flexible spending account, or FSA, lets you set aside pre-tax dollars for qualified medical expenses, which means every dollar you put in stretches further than one that gets taxed first. In this episode, Ryan follows up the prior HSA episode by walking through how FSAs work, the three types available (healthcare, limited-purpose, and dependent care), and the annual contribution limit set by the IRS.The key difference from an HSA is the use-it-or-lose-it rule. FSA funds do not roll over indefinitely, and you cannot invest them, so planning how much to contribute each year matters. Ryan also clarifies why you generally cannot have both an HSA and an FSA at the same time and explains the small carryover and grace-period exceptions. FSA rules are set by your employer plan; check with your benefits administrator for the specifics of your account.Find "Your Fiscal Physical" the book on AmazonIf you have suggestions or feedback, please email us at: [email protected], as always, Stay the Course!