Are Flexible Spending Accounts worth it?

[usregimechange]

They pay co-pays and we read day care. But if you don't use it in a year, you don't get your money back. It is non-tax deductible, which saves money. So, do you just buy a whole bunch of stuff at the end of the year or lose the money?

[Left Is Write]

1. I used to use one years ago to pay for a pair of glasses every year.

The trick is to figure out what you will need to pay for and set aside only enough to cover those costs.

When you say "non-tax deductible", did you mean it's non-taxable?

[usregimechange]

3. "did you mean it's non-taxable?" Oh, yes, I did, thanks.

[Generic Brad]

2. It depends on the individual

I did it in years past and found it a total pain in the ass getting receipts from the daycare provider. It works incredibly well for some people. I personally do not like the idea of having to forfeit money I earned because life dealt me an unexpected curve ball during the year.

[lizziegrace]

4. I used them

When Lelapin was little, I saved more by using the FSA than the Child care tax deduction (this was years ago...) because the deduction was based on income - more income, less deduction. On the medical side, every dollar I had withheld pre-tax netted 70 cents less in my paycheck. I also was never able to make the medical deduction on the schedule A because at the time I didn't itemize.

It varies by situation. For me, it was foolish not to take advantage of the option.

[Ptah]

7. That accountant talk is somehow exciting.

:blush:

[lizziegrace]

8. Ya wanna talk

deductions?

:evilgrin:



:hug:

[Ptah]

9. I can't talk it, but I sure like to hear it.

:hi: :hug:

[Gormy Cuss]

5. The trick to Flex Spending Accounts is to allocate only what you know you'll spend.

For example, if you know that there will be two pairs of eyeglasses with about $100 of out of pocket cost for each, and at least $100 in co-pays for dentists and doctors, then you know that you will use at least $300 from a Flex account and you can set it up that way.

Since without the account that $300 comes out of your pocket after taxes, it's actually costing you more than $300 to pay those little expenses, so as long as you have eligible expenses for the whole amount you will come out ahead.

Most people I know with eligible dependent care costs make out nicely with Flex accounts. Child care costs are pretty easy to ballpark.

The other thing to consider is that if you do overestimate, most Flex accounts let you use the balance for expenses in the first quarter of the next year. Check with your employer.

[Rabrrrrrr]

6. Only if you actually know what you will spend

If you know for sure that you will spend every dollar you put in, you're damned right it's worth it.

If you aren't sure, though, you could get screwed by not using it up - or, if you wear glasses, it will at least give you a good reason to buy those extra pair(s) of designer frames at the end of the year...

[MaggieSwanson]

10. I've used one the past 2 years.

My insurance policy has a $300 family deductible before the co-pays kick in, so I put $300 on it every year. It comes in handy if, like me, you sometimes don't have enough in the bank account to cover the cost of an unexpected prescription.

I know some people who appropriate more money towards their FSA, but frankly I'm too worried about losing my job to risk putting too much in.

[Connonym]

11. It's a good deal but you have to use it wisely

Try not to grossly overestimate how much you spend but remember that you can be reimbursed for prescriptions, deductables, dental, contact lens supplies, a lot of over the counter meds in addition to the stuff you mentioned. My pharmacy indicates on every receipt whether an item is eligble for FSA. That makes it pretty easy and it can add up quickly. My advice would be to try it, start out with a low estimate and keep track of all your spending. Don't forget to send in the receipts! Reevaluate next year if you think it was worth the trouble.

[seemunkee]

12. We've used them

for day care when the kids were little and for medical expenses.
Yesterday my wife went in for a crown and will submit the bill for payback from my flex plan.

If you know what you've spent on average over the last couple of years you can get an idea as to how much to put in the account. We've never had to rush fill prescriptions or make any unnecessary trips to the doctor to meet the amount we set aside.