Some of my coworkers think that I’m crazy to use a Flexible Spending Account (FSA), but I think it’s awesome. Some people complain about the “use it or lose it” feature, but I think that they’re just not planning well enough.
At the beginning of the plan year, I write down all of my anticipated medical expenses for the year with a description and the amount before the health insurance does its work:
- each prescription that I plan to fill
- each doctor’s visit that I plan on
- each specialist’s visit that I plan on
I put this into my spreadsheet which tells me how much of these amounts will come out of my employer’s contribution, how much I have to pay cash for (my part of the deductible), and how much I will pay coinsurance on (10% of all amounts once I’ve reached the deductible). Then I ask my employer to put the sum of the last two amounts into my FSA for the year.
This means that each paycheck I pay the following amounts:
- health insurance premium
- dental insurance premium
- FSA contribution
But, I can use the FSA funds at any point in the year, no matter if I haven’t put them all in yet or not. I’ve now used up my entire FSA contribution for the year, even though I have 6 more months of contributions to go.
I calculated that I will spend about $54.86 more out of pocket now that I’ve exhausted my FSA contributions, which I’ve added to my budget for the next 6 months.
In my opinion, the FSA is a great way to budget/plan for health insurance costs beyond your monthly premiums because you can use the funds at any point in your plan year, even if you haven’t contributed all of the funds yet. I only put about $500 in it this year, so I’m not seeing a huge tax break, but it certainly makes my health insurance costs more convenient. If you’re putting in larger amounts, the tax break would probably be much higher. I don’t even calculate what it is – it’s useful to me for other reasons.