Friday, November 09, 2007

Why flexible spending accounts are worth it

It is open enrollment time! We did the paperwork this week at my husband's work for 2008. One of the things we started last year was a flexible spending account for health care. We did $2000 for 2007 and needed to decide what to do for this year . Bankrate shares tips for making the most of your Healthcare flexible spending account.

1. Review the past year's costs.
We have used $1700 so far and I have just over $300 of dental work being done in the next 6 weeks. This worked out perfect for us and was a typical year.

2. Set aside money for major work.
My oldest son had some major work this past spring and I had to get new glasses. This worked perfect since I was able to submit these expenses right away. Having $76 dollars out of each paycheck makes it easier to do this!

3. Save all receipts.

Put all receipts in safe place because you will need to send them in. I do it once a month and send my receipts in. We got several prescriptions a month and all this goes into a shoe box that I have in my home office.

4. Know the rules.

Know what is covered! Not only are doctor appointments covered but dental, eye glasses are too!

5. Buy medicines with leftover funds.

If you have extra near the end, stock on on medcine for the year!

6. Don't be afraid to 'lose' it.

This was one of the reasons I was always afraid to start one of these accounts. However after having it one year, it was a very smart decision for my family.

The biggest potential drawback of opening a flexible spending account is the risk that you will have to forfeit funds at the end of the plan year. But this fear can be misguided.
"One of the big hesitations people have about FSAs is they're worried about losing the money in their account if they don't spend it in time," says Dippel. "But even if you don't use it -- say you only spend 80 percent of what's in the account -- you're still coming out ahead because of the tax savings."