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Flexible Spending Accounts (FSA)

A flexible spending account (FSA) is a type of tax-advantaged financial account that is usually set up through an employer. The most common form of FSA is the medical expense account. Many times the FSA is offered in addition to traditional types of health insurance and can cover various items and procedures, such as cosmetic surgery, acupuncture, dental expenses, vision care and other items, that standard health insurance will not touch.

FSA plans likely cover anything that improves overall quality of health, including over-the-counter medications, gym memberships or yoga classes. The majority of FSA plans offer a credit card that allows the cardholder to pay for the goods immediately and electronically pass on their purchase information directly to the company, doing away with paperwork. Flexible spending accounts (FSA) usually have a five-thousand dollar limit, and some plans allow you to cover your children or spouse.

One of the major advantages of the FSA is the nifty tax break that it bestows upon the account holder. Usually FSA payments are withdrawn straight from a paycheck, but they are withdrawn before taxes are taken out. This allows a shrewd investor to pay into his or her flexible spending account (FSA) with their pre-tax salary, reducing the cost of that payment and lessening the amount of taxes the investor pays overall.

The major disadvantage is that, like some cell phone companies, you can’t roll an FSA over. The investor, as the saying goes, either uses it or loses it. This, however, can also be seen as a benefit.

Instead of waiting around to get sick, the account holder has an excuse to take a proactive approach to his or her own health. Towards the end of the coverage cycle, a person may have x dollars left unspent in the FSA. It is at this time of year that a wise investor may want to look at making expensive health care decisions. Beside stockpiling aspirin, the flexible spending account holder might want to research the various elective procedures that are available and use their FSA money there.

Many people use their abundance of health care dollars for laser eye surgeries such as LASIK, SBK or PRK. These surgeries usually cost below the FSA account limit of five-thousand dollars. They typically land somewhere between the two-thousand to four-thousand dollar range. An account holder saddled with vision problems may want to think about getting refractive surgery. Not only do the results last for years, possibly a lifetime, but the savings on eyeglasses and contact lenses in the upcoming coverage cycles can allow the next stockpile of FSA dollars go towards that therapeutic Whirlpool spa that you‘ve had your eye on.

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