This is the time of year for open enrollment at many companies. It is a great time to consider setting up flexible spending accounts in order to save money. A flexible spending account allows you to save money for health care and dependent care expenses. This money is taken out of your pretax pay, and can lower the amount of taxes, which you pay. This can save you money. If you plan carefully you will be able to save a significant amount in taxes for those out-of-pocket expenses.
The dependent care expenses can be used to pay childcare or adult dependent care expenses. In most cases you will pay the money out of pocket and be reimbursed by your employer, after handing in the receipts. This money does not roll over into a new account. However, you should easily be able to use it even if you only have one child. You will just need to make sure you plan for the right amount to be deducted each month.
The health care expenses account can be used to pay for out-of-pocket expenses, such as co-payments and deductibles. This money can also be used to pay for prescriptions, over-the counter medications, childbirth classes, dental care (excluding cosmetic work), and qualified medical equipment. Your employer sets the maximum that you can contribute; it may be a dollar amount or a percentage of your income. However you need to plan carefully, because if you do not use all of the money each year you will lose it.
You can adjust the amount withheld for these different accounts during open enrollment. Once you have set the amount it will last you through the year. If you know that you are going to have an expensive year medically, such as a new baby you may want to increase your contributions for a year. You can adjust them for the next year.
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