The relentless rise of health care costs can really put a strain on your household budget. Even with an insurance plan, health care expenses can add up when you consider most people still have to pay deductibles, copayments and other items not covered by insurance.
A great way to offset these rising costs is through the use of flexible spending accounts (or FSAs). FSAs are employer-sponsored accounts that allow employees to make pre-tax contributions. FSAs provide tax savings that help offset health care and dependent day care expenses.
Any contributions you make to your FSA can be used to pay for out-of-pocket medical expenses that are not covered by your health insurance plan - so by taking advantage of FSAs you are, in essence, allowing the government to subsidize a portion of your unreimbursed medical expenses.
How FSAs Work
Let's say after sitting down and thinking it over, you estimate all of your unreimbursed medical expenses for the coming year will be $1000. At enrollment time, you instruct your employer that you wish to put $1000 in your FSA. Your employer will then deduct a portion of that amount from your paycheck each week (in this case, $19.23) before taxes.
At anytime during the year, you can tap the money in your FSA to cover your qualifying unreimbursed medical expenses, even if your account isn't yet "fully funded." In other words, if your FSA contribution for 2010 is $1000, you can withdraw all $1000 to pay for qualifying unreimbursed expenses incurred during the first week of January, even though you've only contributed $19.23 into the account.
How do you "tap" the money? I pay the fees in advance and then submit the receipts to my plan administrator who then issues me a check. But I also have the option of using a special FSA debit card as well that will make the payments in real time.
The higher your marginal tax rate, and the more you put in your FSA, the more money you'll save. Somebody that puts $3000 into an FSA and sits in a 25% tax bracket is essentially saving themselves $750 every year.
That's $750 of free money - so why would anybody pass that up?
Fear is a Lame Excuse for Leaving Free Money on the Table
As this New York Times article shows, most people fail to take advantage of FSAs because employee contributions to an FSA are "use-it-or-lose-it. What that means is if you fail to spend the money in the account before the coverage period ends, any unused funds are lost.
What a lame excuse.
Actually, it's a pitiful excuse - but a lot of people use it anyway. The Times article notes that although 85 percent of companies offer FSAs, only 22 percent of employees take advantage of them.
How sad.
I can understand being afraid of leaving free money on a table if it is being guarded by an angry rattlesnake. But to throw away free money simply because you're afraid you might not meet some silly little requirement is really inexcusable - especially when you consider all it takes for most folks to avoid that scenario is 30 minutes of their time so they can plan out and estimate in advance their unreimbursed medical expenses for the following year.
With two kids currently wearing dental braces, my unreimbursed orthodontia bills more than cover my $3000 annual FSA maximum limit imposed by my employer. But even when the kids weren't in the midst of their current orthodontia program, we had little trouble covering the maximum. When you consider eye glasses, contact lenses, saline solution, dentist and doctor copays, unreimbursed prescriptions, cold and other off-the-shelf medicines, band aids, and other qualifying expenses for a family of four, it didn't take much effort to get there.
Coverage periods depend on your employers specific plan, although most plans follow the calendar year. My company's plan even offers a very generous three-month grace period for filing claims.
If you are still worried about losing money, I would recommend you start slowly and gradually increase your FSA limit each year until you feel more comfortable with the process.
That's what I did.
The first year I took advantage of an FSA I only signed up for $500. That year I had reached $500 in unreimbursed expenses by June and I remember wishing I had signed-up to put more in my account. The following year I upped my contribution to $1000. By the third year, I doubled it again. I am now contributing $3000 to my FSA and it is a very important benefit I count on every year to help me save money.
Another benefit of the FSA is it acts as a quasi-savings device. We usually compile all of our receipts in a special file and then request our entire reimbursement check all at once sometime in the latter-half of the year. The $3000 check makes for a nice "windfall bonus" that we use to pay for big purchases.
What Are Qualifying Expenses?
Although there are exceptions, the list of qualifying expenses is usually big enough to drive an ambulance through. For a complete list of deductible medical expenses, check out IRS Publication 502. But, as cited in that Times article, here is an example of how varied the expenses are:
- Over-the-counter medicines of all types
- Cough drops
- Calamine lotion
- Mental health therapy
- Lab tests
- Dental braces
- Lasik surgery
- Aids to help you stop smoking
Just keep in mind that, as of 2011, over-the-counter medications must accompany a note from your doctor to qualify as an allowable expense.
Keep in Mind Your Employer Can Make Exceptions!
It is important to know that employers are free to choose what their FSAs will cover. The Times notes that while the vast majority of firms simply follow the IRS rules, some do make exclusions, so check with your employer's benefits department to see how your company varies from the IRS list of approved expenses.
In Conclusion...
FSAs are something to be embraced, not feared. They not only reduce your tax liability, they also can act as a de facto quasi-savings plan. Yes, if you fail to plan, you may end up losing a portion of your contribution - but that is a poor excuse for passing up one of the more valuable benefits that your employer provides to you.
All it takes is a small amount of planning on your part. :-)
Hey! If you liked this article, please be sure to subscribe to my RSS feed! ...
Continue reading Flexible Spending Accounts Provide Free Money. Why Pass It Up?
Itâs Time Unemployed People Start Working For Free
Okay, not all unemployed people, but definitely some of them. Let me explain.
Last month the U.S. House of Representatives passed another 13-week extension of unemployment benefits on top of the current California maximum of 79 weeks. And just last week, Senate Majority Leader Harry Reid (DâNevada) introduced a proposal to extend unemployment insurance by up to 14 additional weeks for jobless workers in all 50 states. The proposal would also extend benefits for an extra 6 weeks in high unemployment states.
Assuming these provisions survive and eventually get signed into law by President Obama, it means qualifying individuals in California will be eligible to receive unemployment benefits for up to 99 weeks. (UPDATE: In April 2010, President Obama signed the bill into law after the Democratic majority in Congress passed the legislation on what was essentially a party-line vote in both the House 289-112 and Senate 59-38.)
The cost of this extension is estimated to be on the order of $70 billion. Of course, U.S. lawmakers have not figured out whether or how to pay for that, so they'll just cover it in a manner that requires the least amount of political courage. That is, they'll just print more money - damn the torpedoes and thank you very much.
That being said, for now let's forget about the financial impacts and just focus on the magnitude of time, shall we?
Ninety-nine weeks.
If we're going to talk about the length of time that certain people should be getting paid unemployment benefits, I have to insist on raising a bit of a stink. Come on, that's almost two whole years.
Hey, I have nothing against the number 99 per se.
Ninety-nine is a terrific number if you're the greatest hockey player who ever lived. Or a secret agent.
But 99 is a ridiculous number when it comes to the number of weeks the government allots some people to find a job while enjoying the luxury of a safety net. To be more specific, I have no doubt this is a big reason there are now a growing number of people who characterize themselves as being happily "funemployed."
According to this expose by the Los Angeles Times, the funemployed are "usually single, in their 20s and 30s and find that life without work agrees with them."
This story by CBS News asks, "If the economy is so dismal, why are victims of the recession smiling?"
I'll tell you why: Because a lot of people are collecting $475 per week in California or $900 per week in Massachusetts for doing absolutely nothing!
Most of those smiling people are single, under 35 and either have a low mortgage payment or are renting an apartment.
One of my coworkers was telling me about a friend of his who fits that profile who absolutely refuses to look for a job until his jobless benefits run out. He's having a blast and the Unemployment Office isn't paying enough attention to notice that he isn't really looking for work anyway.
And who can blame the guy? Why work for $10 bucks an hour stacking boxes when you earn $11.88 per hour sitting at the beach or skiing at Mammoth Mountain?
If the government is going to continue to extend unemployment benefits, then the state unemployment offices need to do a better job policing those who are receiving them.
I say that before anybody receives a single cent of extended unemployment benefits resulting from the Federal Emergency Unemployment Compensation program, they should have to prove they are making a good-faith effort at finding a job. After 52 weeks, and until they can show otherwise, people that have failed to meet such a modest requirement should be required to do community service for 20 hours per week in order to continue to receive further unemployment benefits.
After 72 weeks, the community service requirement for failing to demonstrate a good-faith effort to find a job should increase to 40 hours per week.
No community service, no check.
If you want to stay "funemployed," be my guest, Skippy - just don't expect the taxpayers to subsidize you.
Hey! If you liked this article, please be sure to subscribe to my RSS feed! ...
Continue reading Itâs Time Unemployed People Start Working For Free
The 10 Most Overpaid Jobs
Oh, am I going to make some enemies today. ;-)
Last week I did a very well-received article on the 10 most underpaid jobs. Today I tackle the other, more controversial, side of the coin - the 10 most overpaid jobs.
First I want to apologize ...
Continue reading The 10 Most Overpaid Jobs
The 10 Most Underpaid Jobs
Most everybody thinks they're underpaid for what they do. But in reality, there are a handful of select jobs where this claim is especially true. Here's my take on the 10 most underpaid jobs. Unless otherwise noted, annual income figures are based on data from the U.S. Bureau of Labor Statistics.
After reading this list, if you think I've overlooked a particular job (like yours), please leave a comment and let me have it with both barrels. Just keep the profanity and ad hominems to a minimum.
10. Janitor
Average Annual Income: $23,500
Annual Income If It Were Up to Me: $45,000
Appreciation Meter: Office outcasts rarely invited to workplace birthday celebrations and promotion parties.
Why They're Underpaid: In office buildings and schools all over the world, janitors quietly go about their job of picking up everybody's mess. Their work is usually done behind the scenes, so it's easy to overlook the fact that they often have to deal with some really messy clean-ups like throw-up and excrement. When they leave work the place is spotless. They do this knowing the next day they'll just have to it clean up all over again. Talk about a Sisyphean challenge.
9. Youth Sports Referee/Umpire
Average Annual Income: $28,330
Annual Income If It Were Up to Me: $50,000
Public Appreciation Meter: Slightly above the small pox virus, but one notch below dog poop. Okay, okay -- two notches.
Why They're Underpaid: Without these extremely tolerant men and women, there would be no organized sports leagues for our kids. Despite that fact, the next time you want to pick-up a few fresh insult lines that would make a sailor blush, stop by your local park and take in a youth sports competition. When you consider all the abuse that these referees and umpires take on a daily basis, it is a wonder that anybody actually aspires to be in such a position in the first place.
8. Little League President / Board Member
Average Annual Income: $0
Annual Income If It Were Up to Me: $35,000
Public Appreciation Meter: More likely to be approached by folks carrying pitchforks & torches than "thank you" letters.
Why They're Underpaid: I was a Little League President for two years, so I know what I am talking about here. For a volunteer, the hours are extremely long - upwards of 40 per week. Everybody is always upset at you, calling at all hours of the night to complain about trivial things. And when you're not acting as the League's pin cushion you're playing psychologist, soothing the bruised egos of parents who all think their kid is the second coming of Derek Jeter. Good times.
7. Nurse
Average Annual Income: $65,130
Annual Income If It Were Up to Me: $150,000
Public Appreciation Meter: Not too bad, actually.
Why They're Underpaid: This job often requires a cast-iron stomach and entails very long hours with sometimes-grumpy and uncooperative patients. I say anybody who has to assist with surgeries, change bedpans, insert catheters, give injections and sponge baths, and provide other general care and comfort to the sick and injured on a daily basis is almost by definition, underpaid.
6. Exterminator
Average Annual Income: $31,210
Annual Income If It Were Up to Me: $125,000
Public Appreciation Meter: Exterminated.
Why They're Underpaid: Exterminators often have to work in dark and tight places. They're often required to work with hazardous chemicals too. The worst part though is they're constantly at risk of being bit or stung, or contracting rabies, hepatitis, or other diseases from vermin that most of us would just as soon never even have to look at: poisonous snakes, rats, black widow spiders, rabid raccoons, skunks, bats, gators, bees, mice, cockroaches, and rats. "Uh, Len, you said 'rats' twice." I know - that's because I really hate rats.
5. Septic Tank Servicer
Average Annual Income: $35,550
Annual Income If It Were Up to Me: $135,000
Public Appreciation Meter: "You mean somebody actually has to clean those things out?"
Why They're Underpaid: Their job description stinks - and I mean literally: Clean and repair septic tanks, sewer lines, or related structures. Clean and disinfect domestic basements and other areas flooded by sewer stoppages. Withdraw cables from pipes and examine them for evidence of mud, roots, grease, and other deposits indicating broken or clogged sewer lines. By the way, I'll give you two guesses what "other deposits" could be, and the first one doesn't count.
4. Embalmer
Average Annual Income: $39,320
Annual Income If It Were Up to Me: $150,000
Public Appreciation Meter: Better than some professions, but not as good as most.
Why They're Underpaid: When I was growing up I lived next door to a mortician. I still remember the empty industrial-sized containers of embalming powder he kept in his garage to store everyday stuff. My family became close with his and we did a lot of things together. Uncle Chuck was such a funny and easy going guy, which always amazed me considering his very somber duties at the mortuary, stories of which he shared freely with us kids as we became teenagers. One of his duties was embalming; it is a difficult and surprisingly physically demanding job. To this day I still remain amazed at how Uncle Chuck could be so easy going and carefree at home considering all the sadness and heartache he encountered on a daily basis at work.
3. Lineman
Average Annual Income: $54,300
Annual Income If It Were Up to Me: $200,000
Public Appreciation Meter: Only when the local power goes out.
Why They're Underpaid: Not too surprisingly, this job regularly ranks among those with the ten highest fatality rates. This job is much worse than that of a professional tight-rope walker, as it combines nerve-wracking heights with extremely high electrical currents. If that doesn't convince you, maybe this will. And if you have a few extra minutes, maybe even this.
2. Trauma Scene Clean-up Worker
Average Annual Income: $35,000 (according to answerbag.com)
Annual Income If It Were Up to Me: $250,000
Public Appreciation Meter: Dead on arrival.
Why They're Underpaid: Did you ever wonder who goes in and cleans up the blood, guts and random body parts after major car accidents, homicides and other similar tragedies? I don't think most people do -- they just figure a site magically cleans itself up after the authorities leave the scene. I once spoke to a guy who used to do this for a living and he said the job is absolutely horrific and often requires superhuman intestinal fortitude and emotional control. Here's a chilling job description that warns potential job applicants what to expect and here are some common tools of their trade.
1. Military Soldier/Sailor
Average Annual Income: $16,794 (First-year, enlisted)
Annual Income If It Were Up to Me: $1,000,000
Public Appreciation Meter: Getting better, but still not enough.
Why They're Underpaid: The job of a soldier is, without a doubt, the most underpaid job in the world. In addition to being charged with putting their lives on the line on a daily basis in order to protect us and our way of life, the soldier's job description also entails many of the difficult jobs previously mentioned. On top of that, they often have to do their jobs with minimal sleep, rations, and almost impossible living conditions. The freshest US recruits have to do all that for a base salary of just over $16,000 per year -- and after their military taxes are deducted it's even less. We should all keep that in mind the next time we think we're underpaid for what we do.
So there you have it: the 10 most underpaid jobs. If you're interested, you might also want to check out my list of the 10 most overpaid jobs -- I'm sure that'll ruffle a few feathers out there. ...
Continue reading The 10 Most Underpaid Jobs
- « Previous Page
- 1
- âŠ
- 7
- 8
- 9