As we approach the end of the year, retirees with Flexible Spending Accounts (FSAs) must review their balances. An FSA is a pre-tax fund designated for healthcare expenses, offering a smart way to manage medical costs. However, unlike Health Savings Accounts (HSAs), most FSA funds don’t roll over to the following year, meaning you could lose unspent money.
Understanding FSA Rollover Rules
Some FSAs offer a grace period of up to 2.5 months or allow some funds to roll over. For 2024, the maximum carryover is $610. Despite these provisions, many people still leave money unspent. An Employee Benefit Research Institute study revealed that nearly half of FSA accounts had leftover funds at year’s end.
The Financial Advantage of FSAs
Even if you don’t spend every dollar in your FSA, you’re still ahead financially. These are pre-tax dollars, boosting your spending power. For instance, contributing $2,000 to an FSA at a 25% tax rate can save you $500.
Innovative Ways to Spend Your FSA Funds
As the year winds down, consider these options to utilize your FSA money effectively:
- COVID-19 Tests: These are FSA-eligible, and they’re a wise investment with the ongoing pandemic.
- Contact Lenses: If you’re a lens wearer, stock up using your FSA funds.
- Pain Relievers: With cold and flu season upon us, over-the-counter medications are a practical choice.
- Unpaid Medical Bills: Review any outstanding copays or bills; your FSA can cover these.
- Dental Visits: Regular dental check-ups are essential; your FSA can help cover the costs.
- Yoga or Fitness Classes: With a doctor’s authorization, these may be covered by your FSA.
- Air Purifiers: This could be a viable option if you have a medical condition that benefits from cleaner air.
- Ancestry Kits: Some genetic testing costs might be covered by your FSA.
- Health Trackers: Devices like the Oura Ring monitor various health metrics and can be a smart buy.
- Massage Guns: Consider investing in a therapeutic massage gun for pain relief and muscle recovery.
As retirees, it’s essential to make the most of every financial resource available, including FSAs. By understanding the rules and exploring various spending options, you can ensure that your hard-earned money works effectively for your health and well-being. Remember, it’s not just about spending; it’s about investing in your health and maximizing your financial benefits.