As we near the end of summer, now is the ideal time to conduct a mid-year health account checkup on your FSA and HSA. This proactive step can lead to better financial health and help you plan for future calendar-year expenses. By doing so, you can maximize your tax savings, prepare for unexpected healthcare costs, and end 2024 in a better place financially.

Midyear is also the perfect time to check your medical spending history and categorize your healthcare costs as either routine or unexpected expenses. Routine expenses include regular prescriptions and annual checkups, while unexpected expenses might be emergency room visits or urgent procedures. By placing all expenses in these two categories, you’ll get a better view of planned versus unplanned costs, giving you a roadmap for next year.

But for now, let’s dive into why a checkup is not just a smart move but necessary for your financial health.

How do I know if my FSA and HSA are on Track?

First, let’s look at your Flexible Spending Account (FSA). FSAs are a fantastic tool for managing healthcare costs while saving on taxes. They help offset healthcare expenses throughout the year with prorated payroll deductions, which assist in annual budgeting and ensure that funds are available when you need them. However, they come with their quirks, like the use-it-or-lose-it rule.

To avoid losing funds, check if your FSA plan includes a carryover option, which allows you to roll over a certain amount of unused funds to the following year. If not, your plan might include a grace period, which allows you extra time to use your funds after the plan year ends.

Next, conduct an FSA checkup by calculating your total annual contribution and then determining how much you have spent to date. While you can only change FSA contributions mid-year with a qualifying event (new child, new spouse, etc.), planning your expenses is crucial.

If you think you might have funds leftover and you don’t have a rollover option, now is the time to schedule appointments for medical, dental, and vision services, and/or plan for childcare expenses. This proactive approach will ensure you utilize your FSA funds effectively and avoid losing funds at yearend.

Remember, FSA expenses can include:

  • Dependent Care Plan: childcare, camps, or adult care.
  • Limited Scope Plan: dental and vision expenses
  • Full Medical Plan: medical, dental, and vision expenses

Now let’s look at your Health Spending Account or HSA. Unlike FSAs, HSAs offer more flexibility with contributions and have long-term benefits. HSAs are employee-owned bank accounts that assist with current or future qualified medical expenses. They are particularly beneficial as a retirement savings tool also. Funds in an HSA roll over yearly and can be used for current and future medical costs.

First, check to see if you are contributing the maximum amount. HSAs allow you to adjust your contributions anytime during the year. Contributing the maximum amount increases your tax savings and enhances your long-term healthcare savings. Log into your Flyte Mobile App to contribute more if you haven’t reached the maximum yet.

The 2024 IRS contribution limits for HSAs are:

  • $4,150 for individual coverage
  • $8,300 for family coverage
  • If you’re 55 or older, you can contribute an additional $1,000 as a catch-up contribution.

But HSAs aren’t just savings accounts; they can be powerful investment tools too. If you have extra funds in your HSA, consider investing them. Investing can significantly increase your HSA’s growth potential, offering a better return than a standard savings account. Common HSA investment options include mutual funds, stocks, and bonds. However, it is essential to monitor your investments and adjust your strategy as needed.

If you already have HSA investments, check to see how they’re doing. Are they performing well? Do you need to make any changes? Remember, funds in your HSA grow tax-free and can be a significant part of your retirement strategy.

For long-term planning, use Flyte’s My HSA Planner tool. This online tool can help determine your optimal contribution levels. Once you enter basic information about yourself and your current HSA plan, you’ll receive personalized contribution suggestions and your potential retirement balance projections.

FSA and HSA for the Win

Both FSA and HSA plans provide pre-tax savings, reducing your overall taxable income. These savings are beneficial for employers and employees alike; however, these are not just set-it-and-forget-it plans. You need a strategy to optimize your health accounts. Conducting a mid-year checkup on your FSA and HSA can lead to better budgeting and long-term financial health. So take action today to ensure your accounts are on track for the second half of 2024. Remember, a little strategic planning through your Flyte Benefits App goes a long way in securing a healthier future.