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FSA vs. HSA: Which Is Right for You?

Couple Reading Letter In Respect Of Husband's Neck Injury

If you’re in the position of having both a Flexible Spending Account (FSA) and a Health Savings Account (HSA) available to you, you might be wondering which way you should go.

Most consumers don’t totally understand account-based health plans, including HSAs and FSAs, according to a survey by health care and benefit payment firm Alegeus Technologies. Case in point: Only half of FSA holders passed an FSA proficiency quiz, and just 30% of HSA holders passed an HSA proficiency quiz.

If you aren’t sure which account is the best pick — or even what they can do for you — here’s a breakdown of your options.

What’s a Health FSA?

A health Flexible Spending Account is an employer-sponsored medical savings account into which you can contribute pre-tax dollars that you can use toward qualified health care expenses. This generally includes deductibles, copayments and qualified medical expenses that your insurance doesn’t cover, such as prescription medication, contraceptives and orthodontia.

In 2016, you can contribute as much as $2,550 to an FSA.

FSA Pros:

If your employer offers an FSA — and a majority do — signing up during open enrollment (usually in the fall) is easy, and setting aside funds pre-tax lowers your taxable income, which means you pay less in taxes overall.

FSA Cons:

The money you contribute to an FSA must be used by December 31 of the contribution year, unless your employer offers either a grace period (in which case you must use all funds by March 15 of the following year) or a $500 carryover option, in which you can roll over up to $500 in unused funds to the next FSA year. Otherwise, the unused funds are forfeited to your employer.

This means you must be fairly accurate at guessing what your healthcare expenses will be in the future, which isn’t always so easy. And you can only change how much you contribute to your FSA during open enrollment, or after a life change (such as a marriage or birth of a baby) or change in employment.

FSAs are employer-specific. If you change jobs, you’ll generally lose your FSA.

What’s an HSA?

A Health Savings Account is a medical savings account into which you can deposit pre-tax money, available to consumers enrolled in an HSA-qualified high-deductible health plan. Like an FSA, the funds can be put toward out-of-pocket health care expenses.

In 2016, the contribution limits for HSAs are $3,350 for individuals and $6,750 for families.

HSA Pros:

The money you put into an HSA can stay there until you use it — no end-of-year deadline. You can save now and pay for medical costs in 20 years if you wish. To make high-deductible health plans (and accompanying HSAs) more enticing to employees, many employers sweeten the deal by contributing some amount to the HSA annually — an average of $515 per employee in 2014, according to United Benefit Advisors.

You also have the ability to invest the funds in your HSA, ostensibly giving you another way to grow your savings. You won’t be taxed on any earnings or distributions from the account.

You can change your HSA contribution amount at any point during the calendar year. Had an unexpected medical expense? Put pre-tax money into your HSA to cover it.

HSAs are not employer-specific, so you can take your HSA with you even if you change jobs.

HSA Cons:

Not everyone is eligible for an HSA. You must be enrolled in a qualified high-deductible health plan (HDHP), so if you aren’t, an HSA isn’t an option for you.

For 2016, an HDHP would be self-only health insurance with a deductible of $1,300 or more or family health insurance with a deductible of $2,600 or more. To have an HSA, your HDHP would have to be your only plan, you shouldn’t be Medicare-eligible, and you can’t be claimed as a dependent on anyone else’s taxes.

The Bottom Line

So which should you choose? That depends on your circumstances. If you’re eligible for both, an HSA has more advantages in terms of flexibility, the ability to roll it over year after year, and the chance to invest the funds.

If you’re not eligible for an HSA, and your employer offers an FSA, the choice is easy: Sign up for the FSA.

You can’t have both accounts at once unless your employer offers a limited purpose FSA that could be used to pay for out-of-pocket dental and vision expenses. Your benefits department should be able to tell you whether that’s the case.

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9 Ways to Keep from Getting Scammed

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Even the word scam sounds sneaky. Unfortunately, it’s still incredibly easy for you to become a victim of a fraudster, because there are more ways to get scammed lately, now that so much money changes hands online and people use smartphones for virtually everything. Shopping online can leave you open to phishing sites and theft your online info.

So how can you stay safe and financially sound? Here are some tips:

1. Go straight to the source for gift cards

If you’ve ever browsed a giant display of store gift cards, you may not realize how easy it is for thieves to steal this information, since they can easily write down the cards’ numbers and check them periodically online to see if they’ve been activated. Once you activate the card, boom, your balance is drained. You’re better off getting a gift card directly from a retailer and not from a display rack.

2. Verify charities

Many scam sites come with names that are very similar to legitimate organizations—or they simply sound authentic. Check with sites like Charity Navigator or the BBB Wise Giving Alliance to make sure it’s a real thing. (For more on making sure your charity dollars go to the right source, read this piece.)

3. Use your credit cards

Many shoppers still swipe (or input) their debit cards, but credit cards offer better fraud and theft protection, and if someone accesses your credit card info, it will be a pain in the neck, but they won’t be able to drain your bank account. That’s a plus. (For more on the differences between credit and debit card use, check out this piece.)

4. Be skeptical of contests

Have you gotten any calls recently suggesting that you’ve won a cruise or a luxury trip? Don’t give the caller any personal information, and definitely don’t share your bank account or credit card numbers. This is likely a scam.

5. Use proprietary apps

If you’re using your smartphone to shop, use a store’s official app if you can. Apps usually link directly to your store account, where your credit card information may be stored already. The fewer times you have to type your credit card in, the fewer opportunities there are for it to get pilfered.

6. Don’t use public Wi-Fi to shop

If you need to make purchases or log in to your bank or credit card account, do it at home on your password-protected wireless network. When you’re on free public Wi-Fi, you risk someone stealing your information or keystrokes (such as passwords) over the network. While you’re at it, disable any smartphone option that will automatically connect your device to nearby Wi-Fi networks or Bluetooth devices.

7. Type in site addresses yourself

See that intriguing link on your Facebook feed? Leave it alone. That nifty product or charitable cause could easily be a phishing site that looks like a legitimate website. Click on it and type your credit card information into the boxes and you could be sharing your financials with the wrong people. Want to donate money to UNICEF? Go directly to unicefusa.org.

8. Check the URL

At the very least, make sure the site you’re shopping from starts with an “https” at the beginning of the web address. The extra “s” means the page uses encryption.

9. Be careful what you click on

At various times of year — the holidays being one — scammers will send you emails that attempt to make you click on a link that delivers a virus or sends you to a phishing site. Much like your Facebook feed, be suspicious of any links sent via email. Either verify that the link is real by checking with the sender, or type the URL directly into your browser instead of clicking through.

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I Moved Back in with my Dad – and Paid Off $30,000 in Student Loans

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Sheila Rodriguez is 29 and lives with her father — a fact that has been awkward at times. “It’s so embarrassing to be at family functions, and your cousins have houses, and here I am struggling,” says Rodriguez, who lives in New Rochelle, NY.

It was a necessary move when she went back to graduate school in 2009, because Rodriguez couldn’t afford rent on top of tuition payments. “It was so depressing that my dad came to my room and said, ‘Are you going through a breakup?’” Rodriguez remembers.

But as sad as she was to feel like she was moving backward, Rodriguez wound up using her situation to accomplish something great: She paid off $30,000 in student loans.

Loans on top of loans

When she graduated from college with a degree in Sociology, Rodriguez was earning a low salary as the manager at a movie theater and paying only the interest on her student loans. One day she realized that a coworker — who had been there for 12 years — was earning the same paycheck. “I thought, ‘What am I going to do?’” Rodriguez says. “This isn’t why I went to college.”

So she went back to graduate school to get a masters in communications, adding more debt to her student loan balance along the way. When she graduated, she had about $60,000 in student loans, split into two $30,000 balances, each with a 6.5% interest rate. “Based on the payment plan they had me on, I would be paying about $500 a month for the next 29 years,” she says. “With interest, I would end up paying a total of $120,000 by the time I was done.”

No luck in the job market

Unfortunately, Rodriguez continued to land low-paying jobs for the next few years, even enduring several months of unemployment. She continued paying only the interest on her student loans and putting as much money away as she could.

Then, at the end of 2014, she finally landed a better job doing digital marketing for a technology firm. She knew she could use her bigger paycheck to move out of her father’s house once and for all, but she had other ideas. “Instead, I made a payment plan to kill one of the loans,” she says. “I thought, ‘If I can just knock out one of those loans, I will save about $40,000 in interest.’”

She threw every spare penny at her loans, which were charging her $10 a day in interest. “I didn’t go on vacations,” she says. “I didn’t do anything. I would pay $20 on the loan every single day, and then on Fridays when I got my paycheck I would pay $200 or $400,” Rodriguez says. “I was dropping $1,500 to $2,000 a month on the one loan.”

By July, she’d saved up enough to pay the first loan off completely, which she did. “I clicked ‘Send’ to authorize the payment and I sat there and stared at the screen,” she says. “I couldn’t believe I actually set my mind to a goal and got it done. It was a great day.”

Making more plans

Although she’s paid off one big student loan, she still has the other $30,000 remaining — but she’s not stressed about it. “I’m not making myself a prisoner to that loan,” she says. “I really want to pay more than I should for the month, but now I have to budget for myself. I want an apartment, I want to travel and live, I don’t want to be tied down with these loans.”

For now, she expects to pay the second loan off — her payment is $200 a month — in 15 years. But she’s happy she had a support system that enabled her to ditch the first loan so quickly — and realizes that not everyone has the same goals that she does. “Just because I did it, it doesn’t mean it’s right for somebody else,” she says. “Some people like buying clothes every other day, some people have a kid or two, some people have pets. You have to assess your situation.”

The next goal on her bucket list? Save up for a place of her own again. “I’m 29 and I need an apartment,” she says. “I need to get out of my father’s basement.”

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