How Much Should You Contribute to Your FSA?
A flexible expense account (FSA) can be a great way to cover your personal medical expenses with pre-tax money – which means you can save money by simply setting aside for medical expenses not covered by insurance. But if you have never had one before, you may not know how much money to deposit.
If you don’t deposit enough money, you will quickly use up your cash and end up covering the rest of your expenses for the year with after tax dollars. Add too much and you could lose your balance at the end of the year.
To figure out how much you owe to your FSA, think about the costs you know you will face in the next year, advised Miles Ma, a health expert at policygenius insurance comparison site . Make a list of doctor and therapist visits, prescriptions, copayments for dental visits, doctor visits, eyeglasses, contact lenses, “and any other health-related items you know you will need in 2020,” Ma said.
If you haven’t tracked how much you spent in these categories this year, you might want to think about the basics you’ll need next year. This could mean a routine check-up, a doctor’s appointment for a prolonged cold, two toothbrushes, and a new pair of glasses. If your medical needs are more complex, you can add some other costs that you can use your FSA remedies for: pain relievers, sunscreen, allergy medications, and over-the-counter medications to name just a few.
If you want to enter your expected medical or dependent care costs, I love the Cigna calculator, which walks you through these estimates to help you figure out a solid amount for your contribution.
Ma says that if you have a deductible in your health plan, you must have enough funds between the savings and the FSA to cover that amount. But don’t overload your FSA with a worst-case scenario. “Make sure you don’t invest more in your FSA than you can reasonably spend, or you’ll be struggling to buy hundreds of dollars worth of bandages at the end of the year,” he said. “Unlike HSA , FSA funds are not usually carried over at the end of the calendar year.” Ma said that overpaying without a plan to spend that money on covered expenses is the biggest mistake with having an FSA.
The maximum contribution to your FSA is $ 2,750 (or $ 5,000 in dependent care costs), so while you may not be overly excited or crazy about your contributions, it can still be a lot if you’re not sure predict your eligibility for assistance. expenses for the year. Keep in mind that some employers, but not all, allow you to save up to $ 500 next year, or give you a 2.5 month grace period to spend the rest.