Flexible Spending Accounts (FSAs)
November 30, 2023
We want to bring your attention to a valuable tool that can help you manage healthcare expenses in retirement: Flexible Spending Accounts (FSAs). For those of you who already have an FSA, remember that December 31st is the deadline for spending the funds within that account. For those of you who don’t, read more on these types of accounts below:
What are Flexible Spending Accounts (FSAs)?
FSAs are tax-advantaged savings accounts that allow you to set aside pre-tax dollars to cover qualified healthcare expenses. They can be a game-changer for pre-retirees and retirees looking to manage medical costs efficiently.
Key Benefits of FSAs:
- Tax Savings: The contributions you make to your FSA are tax-deductible, reducing your taxable income.
- Pre-Tax Healthcare Expenses: You can use FSA funds to cover a wide range of medical expenses, including deductibles, copayments, prescriptions, and certain over-the-counter items.
- Healthcare Budgeting: FSAs help you budget for expected medical expenses and reduce the financial burden of healthcare costs in retirement.
How to Optimize Your FSA
- Contribute Strategically: Estimate your annual healthcare expenses and contribute an amount that covers these costs. Be mindful of the “use it or lose it” rule – you generally need to spend your FSA funds within the plan year.
- Plan for Retirement: If you’re approaching retirement, consider optimizing your FSA contributions in your last working years. This can help you build a reserve for medical expenses during retirement.
- Understand Eligible Expenses: Familiarize yourself with what expenses qualify for FSA reimbursement. Keep your receipts and records to ensure compliance with IRS regulations.
If you have any questions about FSAs or need assistance in managing your healthcare expenses in retirement, please do not hesitate to reach out. We are here to help you make informed financial decisions. Please contact us to schedule your time to speak with a financial professional today!