Do you think you have your health savings under control? Maybe you think you’re a health insurance pro; but are you confident enough to stake $500 on it? If you’re making these three common health saving mistakes, you could be losing that much or more.
The biggest FSA rule to worry about is “Use It or Lose It.” Statistics from Employers Council on Flexible Compensation say that 40% of people with a flexible spending account forfeit at least $1 at the end of the year, but that 20% forfeit over $500! Any FSA benefits are void if you end up with $500 down the drain!
To get the most out of your flex spending account savings, make sure to use the whole amount by the end of the year. If you’re mindful, that really shouldn’t be hard to do. FSA eligible expenses include acupuncture, birth control methods (including the pricey IUD), orthodontia, and even over-the-counter medications if you get a prescription from your doctor.
If you have a High Deductible Health Plan, then you’re eligible for a Health Savings Account. HSA plans allow you to save money each year to use for health-related expenses. HSA eligible expenses are very similar to the FSA eligible expenses, but the HSA rules also allow for the savings to roll over and eventually be withdrawn, penalty-free to use when you retire!
To be considered an HDHP, your plan must have a deductible of at least $1,250 for an individual. HSA contribution limits don’t kick into effect until you’ve set aside $3,250 in tax-free funds. If you want to maximize your tax-free savings, you’ll have an extra $2,000 each year that you can put toward your retirement. To set up a health savings account, just find a no-fee HSA account. Check with your local banks or your insurance company for more information.
Once you’ve got a system figured out, it’s all-too-easy to just do the same thing year-after-year, but you could miss out on opportunities to maximize your savings. Contribution limits, rules, and eligible expenses are all subject to change year-to-year. Whether the Flexible Spending Accounts will keep the “Use it or Lose it” format is up in the air. It’s also important to review your insurance and saving options if you switch employers.
Forfeiting Money in your Flex Spending Account
Getting Stuck in a Rut