How to Use Health Savings & Flexible Spending Accounts Safely
Learn how HSAs and FSAs can ease costs of in-home dementia care, giving families peace of mind and better financial control over health expenses.
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Tendly Home Key Takeaways
Learn how Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) can support in-home dementia care and provide greater financial control:
- 🧾 Use HSA and FSA funds to cover eligible in-home dementia care expenses, including caregiver support, medical supplies, and certain home modifications.
- 🧠 These accounts offer tax advantages, helping families reduce out-of-pocket costs while managing the ongoing needs of a loved one with dementia.
- 💳 Track receipts and stay informed about qualified medical expenses, as improper use may lead to penalties or additional taxes.
- 🏠 In-home care services must often be prescribed by a doctor to qualify for reimbursement under FSAs and HSAs.
- 💼 Plan contributions thoughtfully, as FSAs are typically "use-it-or-lose-it" while HSAs roll over and can be invested for future medical costs.
Navigating the maze of health care costs can feel overwhelming—especially for families juggling medical appointments, prescriptions, and unexpected emergencies. Between rising premiums and confusing insurance jargon, it’s easy to miss out on options that could ease the financial burden. That’s where Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) come in. These powerful tools can help you take control of your money and your health, allowing you to save smartly while supporting your family’s well-being.
But understanding how to fully use HSAs and FSAs isn’t always straightforward. Questions like “Which one do I qualify for?” or “What happens if I don’t use all the money?” often get in the way. This guide will break down how each account works, who they’re for, and the best strategies to make them work for you. Let’s unlock the potential of your health care dollars—your future self will thank you.
Before diving into strategy, it’s important to understand the foundational differences between Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs). While both allow you to set aside pre-tax dollars for medical expenses, the rules, benefits, and limitations vary significantly.
A Health Savings Account (HSA) is available only to individuals enrolled in a high-deductible health plan (HDHP). Contributions to an HSA are tax-deductible, grow tax-free, and can be withdrawn tax-free when used for qualified medical expenses. Importantly, you own the HSA, and the money rolls over year after year—there’s no “use it or lose it” clause. In fact, many people treat HSAs as a hybrid of a medical savings account and a retirement fund because, after age 65, you can withdraw money for any reason without penalty (though ordinary income tax applies).
Flexible Spending Accounts (FSAs), on the other hand, are usually offered through your employer. Like HSAs, they let you pay for qualified medical expenses using untaxed dollars. However, FSAs have a “use it or lose it” rule—typically, any unused funds at the end of the plan year are forfeited (though employers can allow up to $640 to roll over in 2024 or provide a 2.5-month grace period). FSAs must be set up each year during your open enrollment period, and the maximum contribution for 2024 is $3,200.
So how do you choose? If you’re self-employed or have a high-deductible health plan, an HSA might be your best bet—it offers more long-term flexibility. If you’re employed and want to lock in savings on routine medical expenses, the FSA provides a great opportunity to reduce your taxable income for the year.
Understanding these differences lays the groundwork for using HSAs and FSAs wisely. The better you grasp the terms and limits, the more empowered you’ll be to make confident, cost-saving choices throughout the year.
Health Savings Accounts aren’t just for short-term savings—they can be a powerful long-term investment strategy. The triple tax advantage—tax-deductible contributions, tax-free growth, and tax-free withdrawals for medical expenses—makes HSAs one of the most advantageous savings vehicles available.
Imagine this: You contribute $3,850 (the 2024 individual cap) each year for 10 years and invest those funds in a low-fee index fund. If you average a 7% annual return, your HSA could grow to over $55,000—entirely tax-free if used for medical expenses. That money can cover everything from doctor’s visits and medications to long-term care premiums later in life.
To use an HSA effectively, start by funding it regularly, even if only a small amount each paycheck. If your employer offers contributions, that’s free money—always take it. Next, save your medical receipts instead of dipping into your HSA right away. You can reimburse yourself years later, allowing the funds to grow untouched in the meantime.
Another smart move? Use your HSA to cover expenses Medicare won’t pay for when you retire. Dental work, vision care, and hearing aids often come with out-of-pocket costs for seniors. Your HSA can stretch your retirement savings further by covering these gaps tax-free.
Here’s the caveat: You must stay enrolled in a high-deductible health plan to contribute. And if you withdraw funds for non-qualified expenses before age 65, you’ll face both taxes and a 20% penalty.
Still, HSA flexibility makes it a standout. Planning for a new baby in a few years? Building HSA funds now could ease future delivery and pediatric care costs. Preparing for the unknown—say, an unexpected surgery or chronic condition? Your HSA can act as a “rainy day fund” specific to your health needs.
HSAs reward thoughtful, forward-looking financial planning. By treating your health care savings like an extension of your retirement strategy, you turn today’s smart decisions into tomorrow’s stability.
While FSAs don’t have the buzz of investment potential, they shine when it comes to immediate, everyday medical savings. Think of your FSA as your yearly health care discount card: you’re already spending money on health expenses—why not do it tax-free?
The average American family can expect to spend thousands on out-of-pocket health care costs each year. Copays, medications, therapy appointments, allergy treatments, dental care, and even eyeglasses can add up quickly. FSAs let you pay for all these expenses with pre-tax dollars, effectively giving you a 20–30% discount depending on your tax bracket.
To make the most of your FSA, start planning before open enrollment. Review your expenses from the past year—what did you spend on prescriptions, specialist visits, or kids’ medical needs? Estimate a realistic amount you’ll likely spend in the upcoming year and contribute accordingly. The 2024 FSA cap is $3,200, so there’s flexibility to accommodate most families' predictable needs.
It’s also helpful to know what's eligible. Beyond the basics, FSAs can cover items like sunscreen, menstrual products, breast pumps, chiropractic care, and even sleep aids with a doctor’s note. Many retailers now tag FSA-eligible products online, making it easy to shop confidently.
One of the often-misunderstood aspects of FSAs is the grace period. If your employer offers it, you may have until mid-March of the following year to use any unspent funds. Some companies allow a rollover of up to $640 instead. If you’re unsure, ask HR so you’re not scrambling to spend money in December.
Looking for smart ways to use your FSA before the year ends? Stock up on essentials like contact lenses, replacement glasses, first-aid kits, or over-the-counter medications. Schedule overdue dental cleanings or that eye exam you’ve been postponing.
Finally, don’t forget about dependent care FSAs. These accounts allow you to save up to $5,000 tax-free for child care or elder care expenses. That means day cares, after-school programs, and adult day care centers are all potential savings opportunities for caregiving families.
The FSA offers immediate, tangible savings on everyday health needs. By planning ahead and keeping your receipts organized, you can maximize value—and keep more money in your pocket where it belongs.
Picking between an HSA and an FSA isn’t always straightforward—especially when you have health care needs to consider for both adults and children. While each account offers distinct benefits, understanding your family’s insurance plan and lifestyle can guide your decision.
Start by evaluating your insurance. Only individuals with high-deductible health plans can contribute to HSAs. These plans often have lower premiums but higher out-of-pocket costs. If your family is generally healthy and you’re comfortable managing higher deductibles in exchange for premium savings and long-term rewards, an HSA could be ideal.
For families with frequent doctor visits, young children, or ongoing prescription needs, an FSA may better match your cash flow. FSAs offer upfront access to your full election amount at the beginning of the year—helpful when costs come early, such as surgery or new braces.
Think about flexibility: With an HSA, unused funds roll over year after year. There’s no pressure to “spend it down,” and contributions can grow with you into retirement. Conversely, FSAs are spend-it-or-lose-it accounts; they demand more planning and regular use throughout the year to avoid waste.
One limiting factor: you generally can’t have both an HSA and a regular medical FSA. However, you can have an HSA plus a limited-purpose FSA (LPFSA), which only covers dental and vision expenses. This combination is particularly helpful if you want to maximize tax savings while still getting support for common out-of-pocket services.
For growing families, consider this scenario: Perhaps you’re healthy adults with high-deductible insurance and want to save for the future. An HSA serves as a safety net for major expenses—now and down the road. Meanwhile, your children have predictable needs (like orthodontics or therapy), making a dependent-care FSA a valuable tool to reduce taxes and schedule care without financial strain.
Remember: open enrollment is your window to evaluate these options each year. Lives change—new family members, health diagnoses, or job shifts can all alter your needs. Staying flexible and informed can turn your health benefits from a “set-it-and-forget-it” policy into a dynamic, money-saving system that adapts as your life evolves.
Managing health care expenses doesn’t have to mean sacrificing financial peace of mind. Health Savings Accounts and Flexible Spending Accounts empower you to turn everyday medical needs into opportunities for savings, resilience, and future security. Whether you’re saving for a rainy day or stretching your paycheck to care for the people you love, these tools offer a practical, proactive way to take control.
Start small. Reflect on your family’s health expenses, talk to your HR rep or insurance advisor, and map out which account aligns with your current and future goals. The decisions you make today could translate into thousands of dollars saved—and peace of mind when it matters most.
You work hard to care for your family. Let your money work hard for you in return. Open the door to smarter spending, healthier living, and a future full of financial confidence—one health care choice at a time.
Frequently Asked Questions
You can use your Health Savings Account (HSA) or Flexible Spending Account (FSA) to pay for a wide range of qualified medical expenses. These include copayments, prescription medications, dental and vision care, mental health services, and certain over-the-counter items. The IRS maintains a list of eligible expenses that can help you determine how best to use your funds. Be sure to save your receipts as proof in case your plan administrator or the IRS needs documentation.
The main difference lies in eligibility and ownership. HSAs are available only to those with a high-deductible health plan (HDHP) and are owned by the individual, meaning unused funds roll over each year and stay with you even if you change jobs. FSAs are employer-owned, and while some have a small carryover or grace period, most funds are typically forfeited at year end. HSAs also offer investment opportunities and potential tax-free growth over time, while FSAs must be used within a set timeframe.
An HSA is a tax-advantaged savings account available if you have a High-Deductible Health Plan (HDHP). It allows you to save and invest money for qualified medical expenses, with unused funds rolling over year to year. An FSA is similar but typically must be used within the same plan year or a short grace period. FSAs are owned by your employer, while HSAs are owned by you and are more portable if you change jobs. Both offer tax savings, but their rules and flexibility differ.
You can use HSA and FSA funds for a wide range of qualified medical expenses, including doctor visits, prescription medications, medical equipment, vision care, dental treatments, and even some over-the-counter items like pain relievers or allergy medicine. Always check IRS Publication 502 or your plan’s list of eligible expenses to confirm what qualifies before making a purchase.
For 2024, HSA contribution limits are $4,150 for individuals and $8,300 for families, with an additional $1,000 catch-up contribution allowed if you're age 55 or older. FSA contribution limits are $3,050 per employee. These limits are determined annually by the IRS, so it’s important to check current figures before making contributions.
Typically, you can't contribute to both a standard HSA and a standard healthcare FSA in the same year. However, you may be able to use a Limited Purpose FSA (LPFSA) alongside an HSA. The LPFSA can only be used for vision and dental expenses, preserving your HSA for broader medical use. Always consult your plan administrator to understand your options and compliance requirements.
Unused HSA funds roll over year to year and remain yours, even if you change jobs or retire. They can even grow over time if invested. For FSAs, it depends on your plan—many offer a grace period or allow a limited carryover (up to $610 in 2024), but unused funds are generally forfeited. Knowing your deadlines can help you make the most of your account.
Dr. Alan Lee is a board-certified geriatrician specializing in neurodegenerative conditions including Alzheimer’s disease, Parkinson’s, and Lewy Body dementia. With more than two decades in clinical practice and research, Dr. Lee is a trusted authority in personalized care planning for aging adults. He serves as a medical reviewer for several national caregiving organizations and frequently lectures on aging in place and ethical dementia care.
Emily Sanders is a Dementia Practitioner and educator who trains in-home caregivers and family members in person-centered dementia care. With a background in occupational therapy and caregiver training, Emily creates practical tools and care plans that improve everyday life for people living with Alzheimer’s and related conditions. She is passionate about preserving identity, dignity, and connection in home-based settings.
Maria Torres is a social worker with a focus on elder care, family systems, and caregiver mental health. She has worked in both hospice and community health settings and currently supports family caregivers navigating long-term care decisions. Maria brings an empathetic lens to her writing and advocates for proactive planning, emotional resilience, and equitable access to home care resources.
