A flexible spending account (also known as flex account or flex spending) is an account that people specifically use to put money that can be used for certain out-of-pocket health care costs. The account can be funded from pre-tax and money from your paycheck every month, eventually adding up to quite a bit of money saved. But deciding how much you should put into your account can be difficult, especially if you live paycheck-to-paycheck. Here’s a quick rundown of what you should take into consideration before deciding how much you should contribute.
1. They Have A Use It Or Lose It Policy
Usually, a person’s payroll funds their flex account, so many people don’t take the time to sit down and really understand the process and how much money could be saved in the long-term. You should decide on the amount you would like to put into your account depending on the type of account you have. Usually, flex accounts come with use it or lose it policies, which basically mean that if a person doesn’t use the money saved by the end of the year, they will lose all of those funds.
2. Make Decisions That Will Protect You From Losing Money
Because the possibility of losing money at the end of the year could be significant, you have to be careful about the amount of money you put into your flex account every month. It’s indeed almost an impossible task to figure out how much you’ll need every year, but with some pre-planning, it’s possible to make an informed guess. To figure out the exact or approximate numbers, consider each of the following options.
3. Start With Making A List Of Every Anticipated Health Care Need You Can Think Of
To estimate how much you should put towards your flex account, start by making a list of every single one of your health care costs. Include doctor visits that you can anticipate, check-ups, prescriptions, chronic medication (if relevant), and any other special appointments such as to an eye doctor, to a dermatologist, or physical therapy. If you have children, you might want to double that number and to include an emergency room visit.
4. Look At Your Insurer’s Website
If you feel completely lost when it comes to the numbers you should be writing down, a good tip is to simply take a look at your most trusted insurer’s website. There, you should be able to find some numbers to take as a base. Another thing you can do is schedule a meeting with your human resources department to specifically ask them about these numbers. Also, if you know you have some sort of procedure or surgery coming up, make sure to get the estimated costs for it ahead of time. If you’re pregnant and planning for childbirth, there are financial counselors you can meet with in order to get an idea of the costs you should expect.
5. Understand Your Deductibles
With deductibles always on the rise in the US, almost every insured person has them. A deductible is an amount a person pays out of pocket when they make a claim. While they can sometimes be a specific amount, they can also consist of the percentage of the total amount of insurance in a person’s specific policy. In the US, a study conducted by the Kaiser Family Foundation has found that deductibles are rising faster than the average American income.
6. Aim To Be As Close As You Can
When it comes to your flex account, it would be ideal if everyone could simply put their deductible amount away in their account, but unfortunately, that is not always realistic. So to stay safe, aim to get as close as you can if you’re almost sure that you will meet your deductible. Lastly, if you do get to the end of the year and you haven’t used up your savings, there are usually several other things you could put that money into, such as acupuncture, cosmetic dentistry, and others.