Spending accounts – the smart way to save

How much should I be saving for health care?

Choosing a health insurance plan can be stressful. In addition to navigating all the jargon and trying to understand the tradeoffs of each plan option – you have to somehow try to predict what your out-of-pocket costs will be.

And, the reality is, no matter which plan you pick, there will be out-of-pocket costs – in the form of deductibles, copays, coinsurance, prescriptions, and more.

Tax-advantaged benefit accounts, like Flexible Spending Accounts and Health Savings Accounts, can help you save an average of 30% on out of pocket healthcare expenses if you are enrolled in a program that allows you to pay with pre-tax dollars. But even when you know you want to enroll in an account, you are faced with yet another important question - How much should you actually be contributing to cover your costs this year? Or into the future? Here are ten tips to help you determine the right savings strategy.

1. Know your budget and your financial goals. Your healthcare account contributions need to fit into your overall budget. How much can you afford? If you can only afford to contribute $20 per month, then contribute $20 per month. You have to start somewhere.

2. Know your health insurance coverage. Make sure you understand the cost levers of your insurance plan—including deductibles, copays, and coinsurance. How much will you have to pay out-of-pocket before your coverage kicks in? What are the costs for doctor visits or prescriptions – or other services your family will need this year?

3. Understand your healthcare account. Each account type has different contribution limits and different rules. How much are you allowed to contribute? What expenses are eligible? What happens to unused funds at the end of the plan year? What happens if you leave the company? If you don’t know the answer to these questions, you may be leaving money on the table.

4. Review last year’s costs. Take a look back at how much you spent on healthcare last year—it may give you a good idea about how much you will spend this year. How will your family’s consumption change this year? Consider office visits, prescriptions, specialists, labs, and other needs.

5. Factor in major purchases. Sometimes we know in advance that bigger expenses are coming—such as child birth, major surgeries, or elective procedures like laser eye surgery. Factor those costs into your savings plan.

6. Build an emergency buffer. Life happens. We can’t always predict our healthcare spending down to the dollar, so consider adding a small buffer of added dollars to prepare for when the unexpected happens.

7. Plan beyond the current year. Healthcare will continue to be a significant expense, even into retirement. Fidelity Investments estimates that the average couple will need $260,000 at age 65 to cover healthcare costs in retirement. So it’s never too early to save for the future.

8. Use pre-tax dollars for everything you can. Don’t leave money on the table because you didn’t realize certain expenses were eligible. Benefit accounts cover a broad range of expenses beyond office visits, labs and prescriptions. Vision, dental, mental health, and even some over-the-counter medicines with a prescription can be covered.

9. Use the tools available to you. Between your employer’s resources and the information available to you on the web, there’s plenty of information to get you started on the path to saving. Your employer may even offer calculators or other tools to help you estimate how much you need to save for healthcare.

10. Be your own advocate. Take the time to answer these questions, and don’t just do what you did last year. Make an educated, purposeful decision. And don’t be afraid to ask for help if you need it.

Even though out-of-pocket healthcare costs are unavoidable, there are tools and strategies available to you to help you plan and save effectively – both for now and for the future.

How much should I be saving for health care?

Choosing a health insurance plan can be stressful. In addition to navigating all the jargon and trying to understand the tradeoffs of each plan option – you have to somehow try to predict what your out-of-pocket costs will be.

And, the reality is, no matter which plan you pick, there will be out-of-pocket costs – in the form of deductibles, copays, coinsurance, prescriptions, and more.

Tax-advantaged benefit accounts, like Flexible Spending Accounts and Health Savings Accounts, can help you save an average of 30% on out of pocket healthcare expenses if you are enrolled in a program that allows you to pay with pre-tax dollars. But even when you know you want to enroll in an account, you are faced with yet another important question - How much should you actually be contributing to cover your costs this year? Or into the future? Here are ten tips to help you determine the right savings strategy.

1. Know your budget and your financial goals. Your healthcare account contributions need to fit into your overall budget. How much can you afford? If you can only afford to contribute $20 per month, then contribute $20 per month. You have to start somewhere.

2. Know your health insurance coverage. Make sure you understand the cost levers of your insurance plan—including deductibles, copays, and coinsurance. How much will you have to pay out-of-pocket before your coverage kicks in? What are the costs for doctor visits or prescriptions – or other services your family will need this year?

3. Understand your healthcare account. Each account type has different contribution limits and different rules. How much are you allowed to contribute? What expenses are eligible? What happens to unused funds at the end of the plan year? What happens if you leave the company? If you don’t know the answer to these questions, you may be leaving money on the table.

4. Review last year’s costs. Take a look back at how much you spent on healthcare last year—it may give you a good idea about how much you will spend this year. How will your family’s consumption change this year? Consider office visits, prescriptions, specialists, labs, and other needs.

5. Factor in major purchases. Sometimes we know in advance that bigger expenses are coming—such as child birth, major surgeries, or elective procedures like laser eye surgery. Factor those costs into your savings plan.

6. Build an emergency buffer. Life happens. We can’t always predict our healthcare spending down to the dollar, so consider adding a small buffer of added dollars to prepare for when the unexpected happens.

7. Plan beyond the current year. Healthcare will continue to be a significant expense, even into retirement. Fidelity Investments estimates that the average couple will need $260,000 at age 65 to cover healthcare costs in retirement. So it’s never too early to save for the future.

8. Use pre-tax dollars for everything you can. Don’t leave money on the table because you didn’t realize certain expenses were eligible. Benefit accounts cover a broad range of expenses beyond office visits, labs and prescriptions. Vision, dental, mental health, and even some over-the-counter medicines with a prescription can be covered.

9. Use the tools available to you. Between your employer’s resources and the information available to you on the web, there’s plenty of information to get you started on the path to saving. Your employer may even offer calculators or other tools to help you estimate how much you need to save for healthcare.

10. Be your own advocate. Take the time to answer these questions, and don’t just do what you did last year. Make an educated, purposeful decision. And don’t be afraid to ask for help if you need it.

Even though out-of-pocket healthcare costs are unavoidable, there are tools and strategies available to you to help you plan and save effectively – both for now and for the future.

How much should I be saving for health care?

Choosing a health insurance plan can be stressful. In addition to navigating all the jargon and trying to understand the tradeoffs of each plan option – you have to somehow try to predict what your out-of-pocket costs will be.

And, the reality is, no matter which plan you pick, there will be out-of-pocket costs – in the form of deductibles, copays, coinsurance, prescriptions, and more.

Tax-advantaged benefit accounts, like Flexible Spending Accounts and Health Savings Accounts, can help you save an average of 30% on out of pocket healthcare expenses if you are enrolled in a program that allows you to pay with pre-tax dollars. But even when you know you want to enroll in an account, you are faced with yet another important question - How much should you actually be contributing to cover your costs this year? Or into the future? Here are ten tips to help you determine the right savings strategy.

1. Know your budget and your financial goals. Your healthcare account contributions need to fit into your overall budget. How much can you afford? If you can only afford to contribute $20 per month, then contribute $20 per month. You have to start somewhere.

2. Know your health insurance coverage. Make sure you understand the cost levers of your insurance plan—including deductibles, copays, and coinsurance. How much will you have to pay out-of-pocket before your coverage kicks in? What are the costs for doctor visits or prescriptions – or other services your family will need this year?

3. Understand your healthcare account. Each account type has different contribution limits and different rules. How much are you allowed to contribute? What expenses are eligible? What happens to unused funds at the end of the plan year? What happens if you leave the company? If you don’t know the answer to these questions, you may be leaving money on the table.

4. Review last year’s costs. Take a look back at how much you spent on healthcare last year—it may give you a good idea about how much you will spend this year. How will your family’s consumption change this year? Consider office visits, prescriptions, specialists, labs, and other needs.

5. Factor in major purchases. Sometimes we know in advance that bigger expenses are coming—such as child birth, major surgeries, or elective procedures like laser eye surgery. Factor those costs into your savings plan.

6. Build an emergency buffer. Life happens. We can’t always predict our healthcare spending down to the dollar, so consider adding a small buffer of added dollars to prepare for when the unexpected happens.

7. Plan beyond the current year. Healthcare will continue to be a significant expense, even into retirement. Fidelity Investments estimates that the average couple will need $260,000 at age 65 to cover healthcare costs in retirement. So it’s never too early to save for the future.

8. Use pre-tax dollars for everything you can. Don’t leave money on the table because you didn’t realize certain expenses were eligible. Benefit accounts cover a broad range of expenses beyond office visits, labs and prescriptions. Vision, dental, mental health, and even some over-the-counter medicines with a prescription can be covered.

9. Use the tools available to you. Between your employer’s resources and the information available to you on the web, there’s plenty of information to get you started on the path to saving. Your employer may even offer calculators or other tools to help you estimate how much you need to save for healthcare.

10. Be your own advocate. Take the time to answer these questions, and don’t just do what you did last year. Make an educated, purposeful decision. And don’t be afraid to ask for help if you need it.

Even though out-of-pocket healthcare costs are unavoidable, there are tools and strategies available to you to help you plan and save effectively – both for now and for the future.