Have you been contributing to a flexible spending account through your employer this year? If you have, now is the time to start thinking about how you want to spend that extra money. When December 31st rolls around, and we all know the holiday season comes and goes quickly, you will be out of luck and money.
What is a flexible spending account?
A flexible spending account can be provided by your employer as a part of a benefits program. A fixed amount of money is contributed from your paycheck to cover out-of-pocket medical, dental, and vision expenses that could include any of the following, depending on your insurance carrier:
If you are diagnosed by a M.D. you can also use your flexible spending account for the following additional products/services:
What are the benefits of having a flexible spending account?
The fixed amount of money deducted from each paycheck is deposited into a flex account that is exempt from federal, state, and payroll taxes. This means you are benefiting from using “pre-tax” dollars which can ultimately reduce your overall medical costs as much as 30%. An example of this would be if you deduct $100 per pay period—your check amount may only reduce by $75, due to less tax being withheld.
Another benefit of investing in a flexible spending account is that if you need to withdraw from your flexible savings account ahead of the time it will be available and can still be issued to you immediately. For example, if you decide to contribute $3,600 annually ($300 per month for twelve months) and you need to pay $1,100 in approved medical expenses during month three, you are able to pay the expenses in full as long as it does not surpass the annual pledged amount of $3,600. Flexible spending accounts also allow you to determine, at the beginning of the year, how much or how little you would like to contribute each pay period.
I have extra money in my flexible savings account—now what?
Whether you are looking to take extra precautions when it comes to medical expenses, or are just looking to save money on routine expenses, a flexible spending account allows significant savings and added support. It is important to note that you can only use the money in your flexible spending account within the same year that you contributed the money. This means you must use the money that has been set aside by December 31st of the same year.
Have you thought about what you want to use your money for? If you are not planning on using the money remaining in your flexible spending account for the remainder of your routine expenses this year, note that many choose to take advantage of cosmetic medical treatments that can be approved by a doctor. It is important that you take advantage of the money you have worked hard to save over this past year.
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