Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) both let you set aside pre-tax money for medical expenses. But the similarities end there. The differences in rollover rules, portability, and long-term value are significant — and picking the wrong one can cost you thousands over time.
The Core Difference
An HSA is yours. You own it, you control it, and it follows you from job to job. An FSA is tied to your employer. When you leave, the money is typically gone.
Side-by-Side Comparison
- Rollover: HSA funds roll over indefinitely — there is no "use it or lose it" rule. FSA funds generally expire at the end of the plan year, though some employers offer a $640 carryover or a 2.5-month grace period.
- Portability: Your HSA stays with you regardless of employment. FSAs are employer-sponsored and do not transfer.
- Contribution limits (2026): HSA limits are $4,300 for individuals and $8,550 for families. The FSA limit is $3,300 per employee.
- Eligibility: You need a High Deductible Health Plan (HDHP) to open an HSA. FSAs are available with any employer-sponsored health plan.
- Investment options: Most HSA providers let you invest your balance in mutual funds or ETFs once you exceed a cash threshold. FSAs cannot be invested.
- Tax advantage: HSAs have a triple tax advantage (deductible contributions, tax-free growth, tax-free qualified withdrawals). FSAs only offer tax-free contributions and withdrawals — no investment growth.
When an HSA Wins
If you are eligible for an HSA, it is almost always the better choice for long-term wealth building. The combination of indefinite rollover, portability, and investment growth makes it uniquely powerful. Young, healthy individuals benefit the most because they can contribute for decades before drawing down.
The shoebox strategy — paying out of pocket and letting your HSA grow — turns the account into a stealth retirement fund. No other tax-advantaged account offers this flexibility.
When an FSA Wins
FSAs make sense in a few specific situations:
- You are not eligible for an HSA. If your employer does not offer an HDHP, an FSA is your only pre-tax medical spending option.
- You have predictable, high medical costs. If you know you will spend the full FSA amount this year (braces, planned surgery, ongoing prescriptions), the use-it-or-lose-it risk is low.
- You want day-one access. FSA funds are available in full on January 1, even if you have not contributed yet. HSA funds are only available as you contribute them.
Can You Have Both?
Generally, you cannot have a traditional FSA and an HSA at the same time. However, you can pair an HSA with a Limited Purpose FSA (LPFSA), which covers only dental and vision expenses. This combination lets you maximize tax savings on both fronts.
The Bottom Line
If you qualify for an HSA, choose it. The portability, rollover, and investment growth make it objectively more valuable over time. Use an FSA only when an HSA is not available to you, or pair a Limited Purpose FSA with your HSA for maximum benefit.
Whichever account you use, track every receipt. Lost documentation means lost tax savings.