Asked and Answered: How should I handle my FSA when going through life and career changes?
A little-known fact: Your entire year's worth of allocated FSA funds is available to you on the first day of the plan year. So, even if you've only contributed a few paychecks' worth so far, if you need to use the funds for a larger qualified expense, you're able to do so -- you'll just "pay back" the account over the rest of the year through your already planned payroll deductions.
This is a great perk for those situations. But, life isn't a straight line, and sometimes things happen -- unexpected expenses, relocation, etc. -- that can get in the way of your planning and budgeting. If your life doesn't always stay on the straight and narrow, check out these tips to stay on target.
Consider lifestyle changes
If you're relocating to a larger, more-expensive city, you want to take into account a higher cost of living. For instance, let's say you're uprooting from Springfield, Missouri, to Brooklyn, NY. As the cost of living is nearly double in the Big Apple, you'd need to increase your salary two-fold to enjoy the same standard of living. Even if you're getting a bump in pay, you'll want to create a spending plan accordingly.
(Please note: If you switch jobs -- and health coverage -- your FSA stays with your employer. Any expenses you had prior to leaving are fine, but these funds aren't transferable, and don't "come with you" if you switch jobs.)
If you're expecting a lifestyle change like a move, you might want to use the funds in the FSA to help pay for out-of-pocket medical expenses. This way, more of your take-home pay can go toward your living expenses. Need to spend more on rent, bills, transportation and food? Then use the money in your FSA toward qualified medical supplies and other out-of-pocket health care costs.
Stay on top of eligibility
It's always good to know what's eligible -- and it changes pretty often (our "New Arrivals" section is a pretty good barometer for what's up). Just because something isn't considered preventive medicine last year doesn't mean it doesn't fall under preventative medicine this time around. By knowing exactly what's eligible, you can put the money that would otherwise be sitting in your FSA to good use.
Divvy up your funds
Figure out what your medical expenses might be for you and your family for the rest of the year. Then allocate the money in your FSA accordingly. How you want to divvy up the funds is based on your personal situation and different needs for each season. For instance, when will you need to buy supplies for medical conditions, or over-the-counter medication during flu season?
"End-load" your spending
If you're unsure of how much you'll need to spend on medical expenses throughout the year, figure out ways to spend whatever's remaining in your FSA in the last months. The max your employer can contribute is $2,700 within a plan year. So, since you'll have access to the full year's allocation at the beginning of the plan year, you'll want to figure out how much you can reasonably spend through each month.
Remember: if you don't use it, you'll lose it. If it's deemed necessary, get Lasik, pick up new prescription sunglasses, or be prepared with necessary health-related supplies and equipment. The beauty of online shopping is you can figure out what your grand total is before you check out. Whereas if you shop in a brick-and-mortar drugstore, you can only best guess how much you'll be spending. It'll keep you within budget, and prevent you from going over your limit.
If your life is prone to change, take full advantage of the fact that the FSA funds provided by your current employer are made available from the start of the year. When life throws you a curveball, knowing what's eligible, assessing any changes in your financial needs and living situation, and creating a spending plan will ensure you spend all the money before the end of the year.
From FSA basics to the most specific account details, in our weekly Asked and Answered column, our team gets to the bottom of your most-pressing flex spending questions. It appears every Wednesday, exclusively on the FSAstore.com Learning Center. And for the latest info about your health and financial wellness, be sure to follow us on Facebook, Instagram and Twitter.