HSA vs FSA: I Picked Wrong for 3 Years and Lost Over $2,000

Every fall during open enrollment, I’d click the same button: FSA. $2,000. Done. Move on with my life. I did this for three years without really understanding what I was choosing.

Then in December of year three, I realized I had $847 left in my FSA that was about to vanish. Just… poof. Gone. Because I hadn’t bought enough eligible stuff. So I panic-bought prescription sunglasses I didn’t really need and a weird foot massager from Amazon that claimed to be FSA-eligible.

And that’s when my coworker—bless her—said “why don’t you just do an HSA?”

I stared at her like she’d spoken another language. Because honestly? I had no idea what the difference was. Six years in the insurance industry adjusting claims, and I somehow never learned the basics of my own benefits. Embarrassing but also… weirdly common? I’ve since learned most people are confused about this.

The Biggest Difference (That No One Explains Clearly)

Here’s the thing though: the fundamental difference is actually really simple once someone explains it right.

FSA: Use it or lose it. The money expires. At the end of the year (or sometimes there’s a small grace period or $610 rollover, but don’t count on that), your leftover money disappears. It’s like a Cinderella situation—at midnight, your healthcare pumpkin vanishes.

HSA: It’s forever money. Whatever you put in stays yours. It rolls over. It follows you if you change jobs. It can grow tax-free if you invest it. You can use it at age 65 for retirement. It’s basically a magical healthcare piggy bank.

According to the IRS Publication 969, an HSA is a tax-advantaged account specifically for people with High Deductible Health Plans. And here’s where it gets good—it has a triple tax advantage: tax-deductible contributions, tax-free growth, and tax-free withdrawals for medical expenses. Nothing else in the tax code works like this.

The Catch (Because There’s Always a Catch)

So why doesn’t everyone just do HSAs? Here’s the catch: you can only contribute to an HSA if you have a qualifying High Deductible Health Plan (HDHP).

For 2025, according to the IRS, that means:

• Minimum deductible of $1,650 for individual coverage ($3,300 for family)
• Maximum out-of-pocket of $8,300 for individual ($16,600 for family)

If your employer offers a PPO with a $500 deductible that you love? Sorry, no HSA for you. You’re stuck with the FSA.

But if you’re young-ish and healthy-ish like I was, switching to the HDHP and maxing an HSA is often the financially smarter move. Even though the deductible is scary-high, the premium savings plus the HSA tax benefits usually work out better—especially if you don’t use a lot of healthcare.

The Numbers That Made Me Switch

Real talk: let me show you my actual math from when I switched.

My old plan (PPO with FSA):

• Premium: $310/month ($3,720/year)
• Deductible: $750
• FSA contribution: $2,000 (use it or lose it)
• Total annual cost: $5,720 + whatever I spent on care

My new plan (HDHP with HSA):

• Premium: $185/month ($2,220/year)
• Deductible: $2,000
• HSA contribution: $2,000 (BUT IT STAYS MINE FOREVER)
• My employer HSA contribution: $500 (free money!)
• Total annual cost: $4,220 + whatever I spend on care

So I saved $1,500/year in premiums. Plus I got $500 in free employer money. Plus my $2,000 contribution doesn’t disappear anymore. Plus everything in the HSA is invested and growing tax-free.

In the three years since I switched, my HSA balance is over $9,000 (contributions plus growth). That’s $9,000 I own forever. Under my old FSA setup, I would have $0 from those contributions. Well, actually I’d have those prescription sunglasses that give me a headache and a foot massager that Collision the chicken has claimed as her roosting spot.

2025 HSA Contribution Limits (Since I Know You’ll Ask)

For 2025, you can contribute:

• Individual coverage: $4,300
• Family coverage: $8,550
• Catch-up contribution (age 55+): Additional $1,000

Your employer contributions count toward these limits. So if your employer puts in $1,000 for family coverage, you can contribute up to $7,550 yourself.

But Wait—When Does an FSA Make Sense?

Look, I’m not gonna say FSAs are always bad. There are scenarios where they make sense:

You have predictable, high medical expenses. If you know you’ll spend $3,000 on prescriptions this year, or you have monthly PT visits, or a planned surgery… an FSA might work fine. You’ll use the money anyway.

Your employer only offers low-deductible plans. No HDHP = no HSA eligibility. FSA is your only option.

You’re bad at saving money. An FSA forces you to spend on healthcare because otherwise you lose it. If you genuinely wouldn’t save that money anyway, at least you’re getting the tax advantage on stuff you need. (Though like… maybe work on the saving thing?)

You want to use pre-tax dollars for dependent care. A Dependent Care FSA (different from a regular health FSA) can save you money on daycare and can’t be replicated by an HSA.

FSA Weird Rules That Trip People Up

If you’re stuck with an FSA, here’s what I learned the hard way:

The grace period isn’t guaranteed. Some employers offer a 2.5-month grace period into the next year. Some offer a $610 rollover. Some offer neither. CHECK YOUR PLAN DOCUMENTS.

You can spend your full election immediately. This is actually cool—if you elect $2,000 for the year, you can spend all $2,000 in January even though you’ve only contributed like $170 from your first paycheck. It’s basically a loan from your employer that gets paid back through your payroll deductions.

If you leave your job, it’s gone. Unlike an HSA, your FSA usually ends when your employment ends. Any remaining balance? Sayonara. (There are exceptions with COBRA but it’s complicated and expensive.)

Eligible expenses are weirdly specific. Sunscreen is FSA-eligible. Regular vitamins usually aren’t (unless prescribed). A breast pump is eligible. A gym membership isn’t. I once spent 45 minutes in a Walgreens aisle comparing products to find stuff I could actually buy.

HSA as a Stealth Retirement Account

And this is where it gets stupid—in a good way.

If you’re young and healthy, you can essentially treat your HSA as a supplemental retirement account. Here’s the strategy:

1. Max out your HSA every year.
2. Pay for medical expenses out of pocket (if you can afford to).
3. Keep your receipts (all of them, forever, digitally).
4. Let the HSA grow tax-free for decades.
5. In retirement, you can either use it for medical expenses OR withdraw it for anything after age 65 (you’ll just pay income tax, like a traditional IRA).

OR—and this is the really clever part—you can reimburse yourself for all those medical expenses from decades ago whenever you want. There’s no time limit. That $200 prescription from 2025? You can reimburse yourself for it in 2055 after it’s been growing tax-free for 30 years.

Some people call this the “HSA millionaire” strategy. I don’t know if I’ll ever be an HSA millionaire, but I’m definitely better off than when I was panic-buying foot massagers every December.

How to Actually Choose During Open Enrollment

Okay, practical advice for when you’re staring at your benefits portal:

1. Check if you’re HSA-eligible. Look at the health plan options. Is there an HDHP? Does it qualify under IRS rules?

2. Calculate the total cost of each option. Premiums + deductible + expected out-of-pocket spending. Don’t just look at premiums.

3. Factor in any employer HSA contributions. This is free money. It matters.

4. Consider your healthcare usage. Young, healthy, rarely go to the doctor? HDHP + HSA probably wins. Chronic conditions, regular prescriptions, frequent specialist visits? Do the actual math—sometimes the lower-deductible plan wins.

5. Don’t forget the long-term value. HSA money is forever. FSA money has an expiration date. That difference compounds over a career.

For help understanding all the health insurance terms and network types, check my other guides. This stuff doesn’t have to be as confusing as the insurance industry wants it to be.

Anyway. If you’re approaching open enrollment and you’ve been defaulting to the same choice every year without thinking… maybe think about it this year. I wish I had those three years of FSA money back. Now excuse me while I go stare at my foot massager and contemplate my financial choices. Comprehensive has made a nest in it.