Whether your workplace offers its employees a top-notch or so-so healthcare plan, one thing is certain: Not all of your annual medical needs are going to be covered. So consider yourself lucky if you’re in an organization that offers a Flexible Spending Account (or FSA) benefit, and take advantage of this valuable benefit.


FSA: What Is It?

Simply put, a Flexible Savings Account (sometimes called a Flexible Savings Arrangement) is a special account into which you can contribute a portion of your paycheck for those out-of-pocket medical costs not covered by insurance. You don’t pay taxes on this money.


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5 Advantages of Signing Up:

1.) Money is taken out before taxes 

So your taxable income is lowered. This can simultaneously reduce the amount of taxes you’re required to pay and can increase your take-home dollars. Note: You can’t write off these medical expenses if you use your FSA to pay them.

2.) Medical costs

2.) Medical costs not usually covered by health insurance can be paid via your FSA, such as for co-payments, deductibles, medical equipment, preventative tests, prescriptions, dental costs, eye-care costs (including laser eye surgery), chiropractic visits, and travel vaccines.

3.)The beginning of the year contribution 

While you pledge how much you’d like to contribute at the beginning of each year during open enrollment ($2,600 is the maximum; both spouses in a marriage can pledge this) and contribute toward it from each paycheck, the full pledge amount is available to you immediately. However, there are two things to keep in mind about the FSA … 1. Lose your job, lose your benefits (your employer owns your account). 2. If you don’t lose your job, but don’t spend what you have contributed, you’ll lose your contribution. Some employers have grace periods and carry-over allowances, but they aren’t required to. Check with your plan to understand how it works.

4.) Convenience and organization

Most FSA's are connected to debit cards so you can pay for your medical costs directly from your account.

5.) Dependent Care FSA 

Can be used to cover eligible expenses for children, disabled spouses, and elderly parents.



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So, How Much Should I Pledge?

You’ll need to do some calculations, but know that the most common, uncovered medical expenses that qualify are:


  • Dental co-pays
  • Prescription drug co-pays
  • Prescription eyeglasses, sunglasses, or contact lenses
  • Eye exams or their co-pays
  • Orthodontics
  • Chiropractics


If you have a family, consider the annual costs of these things plus some extra for emergencies. If you have special medical needs that you know exceed the maximum annual contribution allowed, it’s probably best to max out your FSA.