Flexible Spending Account Review

We have a flexible spending account option through my benefit plan, which allows me to have money deducted throughout the year which can be applied toward out-of-pocket medical costs.  The main benefit with such an account is that the money is deducted pre-tax, so you are avoiding the taxes on the amount you have deducted.  The main risk with such a plan is that it is a use-it-or-lose-it plan, where if you don’t use all of the money in the calendar year, you lose it.

So, as you can tell, coming up with an accurate estimate is important.  If you budget too little, you’ll end up with out-of-pocket costs that miss the tax benefits.  If you budget too much, you’ve wasted money.

I thought it would be worthwhile to do a quick review to see where we stand for the year.

Original Budget

The original budget was done last October  / November.  All of the categories are pretty straightforward, except for the ‘Surgery’ category.  When Baby Beagle was born, they told us that he had a very minor issue which would require surgery, and that having the surgery as a baby was the recommended course of action.  The underlying condition was not life-threatening, but still one that needed to be corrected.  As such, we knew that there would be some costs associated with this procedure (and I’m happy to say it went great!).

I’ll also comment up front on the dermatology costs, which might seem high.  Both my wife and I have minor skin conditions, so knowing that regular visits are required, I used previous years costs as an estimate.  Some of the medications we require can be costly, so that’s why the pharmacy costs seem rather high.

Surgery: $500
Doctor Visits: $75
Dermatology: $200
Dental: $200
Vision: $200
Prescriptions: $290
Miscellaneous: $35
Total Budget: $1,500

Spending So Far:

Surgery: $607.38
Doctor Visits: $15
Dermatology: $117.35
Dental: $85.92
Prescriptions: $228.20
Vision: $98.00
Miscellaneous: $51.46
Total Spent to Date: $1,203.31

At first glance, it looks like we’re in trouble as we’ve spent 80% of our budget, but actually we’re in pretty good shape.  The surgery is done and over.  Between my wife and I, we’ve had most of our preventative dental work done for the year.  We switched dermatologist offices and are all going less than we had anticipated, and my wife is the only one who will probably need glasses, so the bulk of the vision costs are done.

Revised Remaining Budget:

Surgery: $0
Doctor Visits: $85
Dermatology: $45
Dental: $30
Pharmacy: $60
Vision: $50
Miscellaneous: $30
Total Remaining Costs (estimate): $300

If this were to hold true, we would be within $3.31 of our budget, which would be pretty cool.  In looking at our revised estimates, the doctor visits category got bumped up because my wife and I need physicals, and lab testing is recommended, which can add a few bucks.  We also have some anticipated visits for Little Boy Beagle, as he’ll most certainly get sick a time or two once the weather cools.  I also have $30 for miscellaneous, which basically covers over the counter medicines, which are currently covered.  This, however, is the last year that this will be the case as part of the ‘health care reform’ (aka Obamacare) is to remove this coverage.

I’m happy with where we’re at, and barring something unexpected, we should be right on track.  If we’re a little bit under, we have the flexibility this year to fill it in by stocking up on some over the counter stuff.  If we’re a little bit over, chances are it will be a very small amount and we’ll still have gained quite a bit of tax savings on the $1,500 we budgeted.

How are you doing on your health care spending for the year?

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3 thoughts on “Flexible Spending Account Review

  1. I had so much money left at the end of last year that I adjusted too much down. I have spent all but $100 which will be used in a month leaving too much year left without this benefit.

  2. @Bucksome, What we do to hedge against that is to earmark the same amount of money towards health care, so even if your pay goes up because you're contributing less, you're putting that differential away in the event that you go over budget. It's a crap shoot either way!

  3. Amazing read. Interesting take on finances. This is a very important aspect of peoples' lives nowadays.

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