If You Don’t Use Your FSA, You Are Missing Out on a Big Investment.
Flexible expense accounts (or FSA) are one of the most obscure perks your employer has to offer that you might not be looking at. However, if you haven’t looked, you are missing out on an amazing way to stretch your money.
As the personal finance blog One Cent at a Time notes, many people don’t bother learning about the FSA or how it works. Here’s a very simple breakdown: FSA allows you to set aside a portion of your annual salary for health care costs before taxes. So, if you save $ 1,000 and your tax rate is 20%, you get the entire $ 1,000. If you waited to receive this money, you would only receive $ 800. Try to get this kind of return on the stock market:
Let’s say I give you $ 2,550 in savings account, stock market, or FSA for one year. Depending on your tax category, the FSA guarantees a 20% to 40% refund. If you can guarantee it on Wall Street, you are likely to have tons of wealthy clients willing to invest with you.
And let’s not even mention how it hits miserable savings account interest rates these days. So, let’s say your tax category is 30% of your income. If you list a maximum of $ 2,550 on your FSA and spend it all on qualified expenses, you will receive $ 765 in income this year.
Most people do not consider the FSA to be an investment because of the use-or-lose policy that takes effect at the end of the year. And this definitely needs to be considered! However, if you have any medical expenses that fit the bill (spoiler alert: yes ), you can at least safely set aside a small amount. Your employer may even take advantage of the new rules that allow you to carry forward up to $ 500 for next year.
4 Common Excuses to Not Register with the FSA | One cent at a time