Health care is an unavoidable expense that can eat up a large chunk of our income. That’s why it pays to take advantage of a Flexible Spending Account (FSA) if your employer makes one available to you.
With an FSA, you allocate a certain amount of money (up to an annual limit that can change from year to year) for medical expenses that you expect to incur over the course of a year. Your FSA is then funded with pre-tax dollars, which are deducted from your earnings, saving you money in the process by not paying tax on a portion of your earnings.
The difficulty with FSAs, however, is that they require you to estimate your future medical expenses in advance. Once you have decided on the amount of money to fund your FSA for the year, you cannot change that amount unless you experience a qualifying event such as the birth of a child. If you overestimate your health spending needs, you could lose unused money from your FSA.
Many FSAs have a grace period, so if you don’t use up your balance by the end of the year, you have more time to use it. If your plan has a similar feature, you may still have some time to spend the rest of your 2021 FSA funds.
But don’t wait; many FSA grace periods expire on March 15, which means you only have a short time to use up your balance – or risk losing it forever.
Don’t let that money go to waste
FSAstore.com estimates that savers could lose up to $1 billion in 2022 due to lost FSA funds. And you don’t want to be part of it.
If you’re sitting on money left in your 2021 FSA, it’s important to check your grace period deadline. Chances are it’s March 15, in which case you have little time to deplete your balance.
That said, a temporary rule allowed employers to extend the grace period for using 2021 FSA funds until December 31, 2022. Not all companies have embraced this change, but if yours has, you have more time to spend last year’s balance. However, if your business hasn’t adopted this change but has a grace period, chances are you need to spend your money before March 15th.
How to use your FSA
At this point, you may only have a few days to spend your remaining FSA balance. And that means it may be too late to schedule appointments or medical procedures.
But what are you can do is try to refill some prescriptions sooner, if your health insurance plan allows it. Another option is to stock up on FSA-eligible over-the-counter supplies. These include things like thermometers, bandages, ointments, and even sunscreen.
Also, if you wear glasses or contact lenses and have a valid prescription, you can restock your lenses or order a spare pair of glasses. FSA funds can also be used to buy prescription sunglasses.
FSAs are a useful tool. They allow you to benefit from tax savings and can facilitate the management of health expenses. After all, if you regularly fund an FSA, it means you may not have to dip into your regular savings account in the event of a larger medical bill. But the downside of FSAs is that it’s possible to lose money, so pay attention to your plan’s deadline and do your best to use your money before it arrives.
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