Which account is associated with the "use it or lose it" rule?

The correct answer is associated with a Flexible Savings Account (FSA), which operates under the "use it or lose it" rule. This means that funds contributed to an FSA must be used within the plan year; otherwise, any unused amounts typically become forfeited at the end of that period.

This characteristic encourages participants to estimate their healthcare expenses prudently to maximize the benefits of the account. On the other hand, health savings accounts (HSAs) allow for the carryover of unused funds, giving individuals the flexibility to save for future medical expenses without the pressure of losing contributed amounts.

Retirement savings accounts, such as IRAs or 401(k)s, also do not have a "use it or lose it" feature, as contributions can grow tax-deferred over time and can be accessed later in life, often with penalties for early withdrawal but not with a strict expiry on contributions. A standard checking account has no such constraints; funds can be deposited and withdrawn at any time without the limitation of losing funds after a specific period.