8/7/2023 0 Comments Flexible expenses![]() ![]() That means employees who qualify for both programs will generally need to decide whether it makes more sense to fund either an FSA or an HSA for 2023. ![]() However, people with HSAs can opt for a slimmed-down version of a Flexible Spending Account, known as a "limited purpose FSA." These accounts can only be used for vision and dental expenses, which shrinks their usefulness. Generally, no, noted Myers of Willis Towers Watson. If you have an HSA available, it really is an attractive option for you," he added. "So that kind of triple-tax savings benefit is really unmatched based on the available types of accounts. "Funds go into this account on a pre-tax basis, they can grow over time, including be invested, and as long as they're eventually used on medical expenses is also tax free," Stephen Durso, associate director of benefit accounts at Willis Towers Watson, told CBS News. And you can change your contributions to your HSA at any time with a FSA, contributions are set during open enrollment. For instance, unused funds roll over each year, unlike with a FSA, where funds are forfeited if not used by your employer's claim deadline. HSAs generally have more flexibility than FSAs. In other words, if you don't use all the money you set aside, you'll lose it - your employer keeps any unused funds. But there are several "gotchas" that workers need to be aware of, especially when it comes to Flexible Spending Accounts, with the foremost being that FSAs are "use-it-or-lose-it" programs. Those increases are helpful at a time when inflation is at it highest in four decades, with consumer prices having jumped more than 8% from a year ago. The IRS just changed its tax brackets.Social Security announces biggest benefit hike since 1981.Meanwhile, single workers who want to fund an HSA can save up to $3,850 next year, a 5.5% increase from 2022, while families can save up to $7,750, up 6.2%. In 2023, employees can put away as much as $3,050 in an FSA, an increase of about 7% from the current tax year's cap of $2,850. ![]() Basically, you save what you would have paid in taxes on money you put in the accounts. ![]() These accounts can save workers a nice chunk of change by allowing them to sock away pre-tax money to pay for medical expenses. This year, there are some changes ahead that could help employees, while also potentially opening up some financial pitfalls.Īmong the biggest changes for 2023 concern two tax-advantaged health savings accounts: Flexible Spending Accounts (FSA) and Health Savings Accounts (HSA). FAQs about fixed vs.Employers typically offer a period of open enrollment in the fall, when their workers are allowed to pick new health plans, enroll in a Flexible Spending Account or make other changes to their benefits. You may have to adjust your savings goals periodically to make sure you can cover essential costs. Then budget your remaining income toward bills, which may include fixed and variable expenses. To set up this type of budget, you would define your goals and how much you want to contribute toward them each month. The “pay yourself first” budget focuses on savings goals, but you’ll still pay fixed and variable expenses each month. This approach involves using cash, but you can adapt it using mobile apps. After deciding how much to spend on each category, put that amount of cash into an envelope and spend no more on that category. Some of the categories may include variable expenses, while others are fixed. With the envelope budgeting system, you’ll divide your income into several categories, such as bills, groceries, gasoline, and entertainment. There may be both variable and fixed costs in each category. Using this approach, you’d spend up to 50% of your income on needs, 30% on nonessentials and 20% on savings and debt repayment. 50/30/20 budgetĪ 50/30/20 budget requires you to split your expenses into three categories: needs, wants, and savings or debts. The variable costs might include expenses but also debt repayments and savings. Although you won’t know how much you’ll spend on variable expenses, allocate a certain budget toward each. Next, list fixed costs and distribute money toward each. To create this type of budget, write down how much you take home each month. The goal is for your income minus expenses to equal zero at the end of the month. With the zero-based budgeting approach, every dollar is allocated toward a purpose. That way you’ll cover all essential bills each month before deciding how much to spend on nonessential variable expenses, such as entertainment and dining out. It can be a good idea to figure out a budgeting system that includes fixed expenses and allows for variable costs, too. ![]()
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