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Time to determine flexible spending account contributions

Posted by Cheryl Costa  October 27, 2008 10:03 AM

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It's that time of the year again -- time to start seriously thinking about how much you will spend on health care and dependent care expenses in 2009.

"Open Season" will be starting soon and that is the time period towards the end of the year when employers ask employees if they want to participate in flexible spending accounts. I am a huge fan of this employer benefit and it is always disappointing to learn that, on average, only a third of eligible employees sign up when such a plan is offered.

With flexible spending accounts, you can deposit pre-tax money in account that can be used to pay for out-of-pocket healthcare and chilcare expenses. Maximum contribution amounts can vary by employer but most permit contributions of $2,500 to $5,000.

If you are in the 33 percent tax bracket and you contribute $5,000 to a flexible spending account, you will save $1,650 in federal taxes. So, if you are considering laser eye surgery some time in 2009, consider paying for it using a flexible spending account -- its like getting a discount equal to your marginal tax bracket.

The "catch" is that you have to be very careful in estimating your 2009 expensense. You lose any money that you don't spend by December 31, 2009 ( or March 15, 2010 in some plans).

This blog is not written or edited by or the Boston Globe.
The author is solely responsible for the content.

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Local finance professionals share insights and advice on issues such as budgeting, managing debt, and retirement planning.

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D. Abraham Ringer is a CERTIFIED FINANCIAL PLANNER practitioner and a Financial Adviser with Morgan Stanley Global Wealth Management in Boston. He is registered in MA, NH, NY and several other states to which his articles are directed. For more information please visit
Financial Planning Association™ of Massachusetts has 900 members who specialize in the financial planning process. Many of its members engage in philanthropic pro bono work in their communities, recommend legislation, elevate public awareness, promote financial literacy, and advocate for sound economic and tax policies.
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