Happy New Year! I wanted to start the new year off right with a few tips and reminders that can help you save big in 2018.
Stay informed.Tax-advantaged accounts have been around for a very long time, as part of employers’ Consumer Directed Benefit (CDB) or Consumer Directed Healthcare (CDH) offering. These programs range from Flexible Spend Accounts (FSA), Dependent Care Accounts (DCAP), Health Savings Accounts (HSA), Commuter programs, and other lifestyle benefits. The challenge is not everyone understands the benefits of these programs, what they entail, and how they can benefit the employer and their family. In the new year, visit your HR representative to get a list of CDB benefits offering by your employer. While it may be too late to sign up for some plans outside of the open enrollment period, you can sign up for others, like commuter, throughout the year. These programs have the potential to save you $10s-$100s in your paycheck—calculate the savings!
Understand plan benefits. Now that you understand what plans are being offered by your employer, you now need to determine which plans fit within your and your family’s lifestyle. For instance, if you live in a large metropolitan area and frequently utilize car services such as UberPool and LyftRide to get you to and from work, you would love the ability to leverage pretax dollars set aside in your commuter account versus paying post tax out of pocket. This service also works for Metro train tickets and in some instances parking. In a similar fashion, if you have children or adult-dependents in daycare, aftercare, or summer camp programs, you would save hundreds of dollars per year by placing those dollars pretax into a DCAP account. The same holds true by pairing an FSA or HSA account with the elected medical plan offered by your employer. You just need to ensure you are picking the plans that compliment your lifestyle and needs.
Maximize your contribution.Once you have identified accounts that fit with your lifestyle and medical plan, understand the contribution options. You can do this by first educating yourself on what the pretax cap is set each year by the Government, and balancing this number against your actual expenses. For instance, if the maximum Government allowance for FSA accounts is $2,650, but you only spend $1,500 each year on medical expenses, you would be best to only elect to set aside $1,500 since this is a use-it or lose-it account, unless your employer offers roll-over. However, if your medical plan is HSA eligible, and the maximum family contribution is $6,900 you could still set aside the full amount even with a $1,500 yearly medical spend average as these funds roll over year over year. The goal is to understand the maximum contribution limits and compare it to your lifestyle expenses to make an educated contribution decision, and it is always good to talk to a financial advisor for advice tailored to your situation.
Be proactive. There is nothing worse than finding an expired coupon or expired store credit that you forgot (especially around the holidays). Once you enroll in your account, stay organized on the go! Good mobile apps today are able to keep you informed anytime, from anywhere, from any device, and they have the ability for you to smartly submit claims and ask for reimbursements of expenses so you can take care of business real time and not try to remember after the fact. And if you have funds leftover towards the end of the year that could get forfeited, figure out where to spend them to cover items you could even use in the next year. Life gets busy, papers get shuffled, leverage the mobile applications to get stuff done on the go, and maximize spend, so you don’t get left out with expired credits, or worse yet, forfeited pretax account funds.
Make investments. Remember how we were discussing earlier maximizing your contributions? If you do elect an HSA account that carries over year after year, you may find yourself with a nice balance that you will want to treat as part of your retirement savings. This is part of your health care stack, and you will want to make sure that the funds are readily accessible in case you need them to cover medical expenses, but also growing if you don’t need them until further down the road. Talk to a financial advisor to give you a full assessment of your situation, and understand how you could be best investing these funds.
There are lots of ways to save in 2018 and beyond. The resolution is to make each dollar count!