It’s July, and here’s a question for you.
Do you remember what you elected for your FSA or HSA at the beginning of the year?
If you’re like most people, you made that decision during open enrollment in November, picked some number that sounded reasonable, and haven’t thought about it since.
But here’s the problem. July is the perfect time to check in on your healthcare savings accounts because you’re exactly halfway through the year. And if you’re on track to either max out too early or leave money on the table, you still have time to adjust.
Let’s talk about how to optimize your FSA and HSA strategy for the second half of 2026.
FSA vs. HSA: Let’s Clear Up the Confusion
First, let’s make sure we’re on the same page about what these accounts actually are.
Flexible Spending Account (FSA)
An FSA is a pre-tax account that you can use for eligible medical expenses. You decide how much to contribute during open enrollment (up to $3,200 for 2026), and that amount is deducted from your paycheck throughout the year.
The big catch: FSAs are “use it or lose it.” If you don’t spend the money by the end of the year (or by the grace period, if your employer offers one), you forfeit it.
Health Savings Account (HSA)
An HSA is a triple-tax-advantaged account available only if you have a high-deductible health plan (HDHP). You can contribute up to $4,300 for individual coverage or $8,550 for family coverage in 2026 (add $1,000 if you’re 55 or older).
Unlike an FSA, HSA funds roll over year to year. You never lose the money. And here’s the kicker: if you invest your HSA funds and use them for qualified medical expenses in retirement, they’re completely tax-free.
Can you have both?
It depends. If you have an HSA, you generally can’t have a healthcare FSA. But you can have a Limited Purpose FSA (which only covers dental and vision expenses) alongside your HSA.
Mid-Year FSA Check-In: Are You On Track?
If you have an FSA, pull up your account and see how much you’ve spent so far this year.
Let’s say you elected $2,400 for the year. That’s $200 per month. If it’s July and you’ve only spent $600, you’re way behind pace. You have $1,800 left to spend in six months, which is $300 per month.
Can you realistically spend that much on healthcare? If not, you might be on track to forfeit some of your FSA balance.
Here are some strategies to use up your FSA before year-end.
Stock Up on Eligible Expenses
FSAs cover way more than you think. In addition to doctor visits and prescriptions, you can use FSA funds for:
- Prescription sunglasses and contact lenses
- Over-the-counter medications (pain relievers, allergy meds, cold medicine)
- First aid supplies
- Sunscreen (SPF 15 or higher)
- Feminine hygiene products
- Dental and vision expenses
If you’ve been putting off getting new glasses or stocking up on ibuprofen, now’s the time.
Schedule Preventive Care
Have you had your annual physical? Dental cleaning? Eye exam? If not, schedule them before the end of the year and use your FSA to cover any copays or uncovered expenses.
Plan for Recurring Expenses
If you have regular medical expenses (monthly prescriptions, physical therapy, etc.), make sure those are being paid with your FSA card. Don’t leave money in your FSA while paying out of pocket for covered expenses.
HSA Strategy: Save for Now or Invest for Later?
If you have an HSA, you’ve got more flexibility because the money doesn’t expire. But that also means you have a strategic decision to make.
Do you want to use your HSA to pay for current medical expenses? Or do you want to max it out, invest it, and save it for healthcare costs in retirement?
Option One: Use Your HSA for Current Medical Expenses
This is the simplest approach. You contribute to your HSA, and you use those funds to pay for doctor visits, prescriptions, and other qualified medical expenses as they come up.
This is a good strategy if:
- You have significant healthcare costs this year
- You’re not able to max out retirement accounts yet and you need the cash flow
- You want the simplicity of using pre-tax money for current expenses
Option Two: Max Out Your HSA and Invest It for the Future
This is the power move. If you can afford to pay for current medical expenses out of pocket, you can max out your HSA contributions, invest the money, and let it grow tax-free for decades.
Then, in retirement, you can use those funds (and all the growth) to pay for healthcare costs completely tax-free.
This is a good strategy if:
- You’re already maxing out your 401(k) and IRA
- You have extra cash flow to cover current medical expenses
- You want to build a tax-free pot of money for retirement healthcare
Here’s a mind-blowing fact: you don’t have to reimburse yourself from your HSA in the same year you incur the medical expense. You can pay out of pocket now, save the receipts, and reimburse yourself decades later.
So you could spend $5,000 on medical expenses in 2026, pay for them with your checking account, and then reimburse yourself from your HSA in 2050 when the balance has grown to $50,000. As long as you have the receipts, that withdrawal is tax-free.
Are You Maxing Out Your HSA?
If you’re eligible for an HSA, this is one of the best tax-advantaged accounts you have access to. And most people are not maxing it out.
For 2026, the contribution limit is $4,300 for individual coverage or $8,550 for family coverage (add $1,000 if you’re 55 or older).
If you’re not on track to max out by December, you can increase your payroll contributions for the rest of the year. And unlike 401(k)s, you can also make direct contributions to your HSA outside of payroll if you want to catch up.
Choosing Between an FSA and an HDHP with HSA
If you’re in open enrollment mode (or thinking ahead to next year’s benefits choices), you might be trying to decide between a traditional health plan with an FSA or a high-deductible plan with an HSA.
Here’s how to think about it.
When an FSA (with a Traditional Health Plan) Makes Sense
Choose an FSA if:
- You have high, predictable medical expenses (chronic conditions, regular prescriptions, planned surgeries)
- You prefer lower deductibles and copays
- You don’t have the cash flow to cover a high deductible out of pocket
Traditional plans with FSAs are good for people who use a lot of healthcare and want the insurance to cover more upfront.
When an HSA (with a High-Deductible Plan) Makes Sense
Choose an HSA if:
- You’re generally healthy and don’t expect high medical expenses
- You can afford to cover the higher deductible if something unexpected happens
- You want to use the HSA as a long-term investment vehicle for retirement
HDHPs with HSAs are great for people who want to minimize premiums, maximize tax savings, and build a healthcare nest egg for the future.
The Dependent Care FSA: Don’t Forget This One
If you have kids in daycare, preschool, or after-school care, you might also have access to a Dependent Care FSA.
For 2026, you can contribute up to $5,000 per year (or $2,500 if married filing separately). These contributions are pre-tax, which can save you a significant amount of money.
If you elected a Dependent Care FSA at the beginning of the year, check your balance. Are you on track to use it all? If your childcare costs have gone down (maybe your kid started kindergarten mid-year), you might need to adjust your expectations.
Unfortunately, Dependent Care FSAs are also “use it or lose it,” so you can’t carry the balance into next year.
Mid-Year Action Plan for FSA and HSA Optimization
Here’s what you should do in the next 30 days.
If You Have an FSA:
- Check your current balance and calculate how much you need to spend per month to use it all
- Schedule any preventive care appointments you’ve been putting off
- Stock up on eligible OTC medications and supplies
- Review your employer’s FSA rollover or grace period policy
If You Have an HSA:
- Check your contribution rate and make sure you’re on track to max it out ($4,300 individual, $8,550 family)
- If you have extra cash flow, consider investing your HSA balance instead of leaving it in cash
- Save receipts for all out-of-pocket medical expenses (even if you don’t reimburse yourself now)
- Research HSA investment options through your HSA provider
If You’re Deciding for Next Year:
- Estimate your expected medical expenses for 2027
- Compare the total cost of a traditional plan with FSA vs. HDHP with HSA
- Consider your risk tolerance for covering a high deductible
- Factor in the long-term investment potential of an HSA
The Values-Based Angle: Healthcare Costs and Financial Security
One of the things I talk about with clients is how healthcare costs fit into their overall values-based financial plan.
Nobody wants to spend money on medical expenses. But healthcare is one of the biggest expenses you’ll face in retirement. Having a plan for it now, whether that’s through smart FSA use or aggressive HSA investing, is about more than just saving on taxes.
It’s about building financial security so that a medical emergency doesn’t derail your life. It’s about having options. It’s about peace of mind.
If you’re maxing out your HSA and investing it for the future, you’re building a tax-free safety net for healthcare costs that will absolutely come up later in life. That’s values-based financial planning in action.
Let’s Make Sure You’re Optimizing Every Dollar
If you’re not sure whether you’re using your FSA and HSA effectively, or you want help thinking through your benefits strategy, let’s talk.
Schedule a consultation at wovencapital.net/schedule and we’ll review your healthcare benefits, model different scenarios, and make sure you’re maximizing every available tax advantage.
Because small optimizations (like maxing out an HSA or using up your FSA) can add up to tens of thousands of dollars over a career.