A Flexible Spending Account (FSA) is an account that anyone who is under the age of 65 and employed can use to save on taxes and pay for qualified expenses. Some important things to know about FSAs are that your employer provides and owns the account and only you and your employer can put money into an FSA, with a limit set each year by the IRS. Keep in mind FSAs are a “use it or lose it” account and your employer can keep funds you haven’t used by the end of the year.

You usually sign up for an FSA once a year during open enrollment. This is when you estimate your expenses for the upcoming year, see if your employer is contributing any money to the FSA and then decide on the total amount you want to put in the account.

A Health Savings Account (HSA) is a savings account that helps you save and pay for healthcare expenses tax-free. HSAs can help you save for retirement by allowing you to use the funds to pay for general living expenses without penalty and can provide some major tax advantages. In many cases, you can invest a portion of your HSA balance if you maintain a $1,000 balance in your account and the money invested can continue to grow tax-free. An HSA is only available with a health plan that has a high deductible.

A big differentiator between FSAs and HSAs is that your HSA balance rolls over year-to-year and is always yours to spend, save and invest. At age 65, you can use your HSA funds for any purpose without a penalty and the money you take out to pay for eligible healthcare expenses continues to be tax-free.