Why use a Flexible Spending Account?
“Why should I use a Flexible Spending Account if I’ve already got a savings account?” I’ve heard this question many times from my clients who want to stretch their income as far as it will go. If you’re looking for some ways to make your income go further and expect to have medical expenses in the next year, Flexible Spending Accounts, or FSA’s, are a great tool to consider.
FSA’s allow users to funnel part of their income from their paycheck directly into the account BEFORE taxes are taken out. As the account grows over time, the user can spend those funds on approved medical expenses and pay less in taxes.
If you expect some medical expenses in the next year, you can set aside some of your income specifically for those costs, and avoid paying taxes on that portion of your income. Depending on how much you contribute, this can add up to a significant savings.
One thing that is important to understand – the funds a person puts in an FSA expires after one year. These accounts are not meant for dodging taxes indefinitely. If you are thinking about using an FSA, be sure that you understand the benefits and the limitations of each product you consider.
There are many different products available in the healthcare marketplace, and they change often. If you have any questions or begin to feel overwhelmed by the options, you can always reach out to me for more information.
