Start with your expected out-of-pocket healthcare costs

The amount you set aside in a Flexible Spending Account depends on what you actually spend on may be able to access medical expenses in a typical year. Look back at the last 12 months: add up what you paid out of pocket for copays, coinsurance, deductibles, prescriptions, dental work, vision care, and other may have access to expenses that your insurance didn't cover. That total is your realistic starting point.

Most people contribute between $500 and $2,500 annually, but your number might be higher or lower depending on your health, your family size, and your insurance plan's deductible and copay structure. If you have a high-deductible health plan, you'll likely spend more out of pocket before insurance kicks in. If you have a low deductible and good coverage, your number will be smaller.

Key Takeaways

  • Base your FSA contribution on what you actually spent on may be able to access medical expenses in the past year, not on a guess or what others contribute.
  • The IRS sets an annual contribution limit (which changes yearly), so you cannot set aside more than that amount regardless of your expected costs.
  • FSA money is use-it-or-lose-it: anything you don't spend by the end of the plan year or grace period is forfeited, so underestimate rather than overestimate.
  • Recurring expenses like monthly prescriptions, regular copays, and annual dental cleanings are easier to predict than one-time medical events.
  • You can change your FSA contribution only during open enrollment or after a may have access to life event like a birth, marriage, or job change.

Account for predictable recurring expenses first

Start by listing the medical costs you know will happen. If you take a prescription medication every month, multiply the copay by 12. If you see a therapist weekly, calculate the annual copay. If your family gets dental cleanings twice a year, add those copays. These predictable expenses should form the foundation of your contribution amount because you can count on them.

Then add in the less frequent but still likely costs: annual eye exams and new glasses or contacts, routine dental work like fillings, allergy medications, over-the-counter pain relievers and cold medicine, and any ongoing physical therapy or specialist visits. Be realistic about what your household actually uses, not what you think you should use.

Know the IRS contribution limit for your plan year

The IRS sets a maximum amount you can contribute to an FSA each year. This limit changes annually and is adjusted for inflation. For 2024, the limit is $3,300; for 2025, it is $3,300 as well. Your employer's plan documents will state the current limit, and your HR or benefits department can confirm it.

You cannot contribute more than this limit, even if you expect to spend more on medical care. If your anticipated costs exceed the limit, you'll need to pay the difference out of pocket or use other savings vehicles like a Health Savings Account (HSA) if you're enrolled in a high-deductible health plan.

Subtract what you'll cover with other accounts or insurance

If you have access to a Health Savings Account (HSA) through a high-deductible health plan, you can use that account for medical expenses too. Some people split their anticipated costs between an FSA and an HSA, or they use the HSA for larger expenses and the FSA for smaller recurring ones. Think through which account makes sense for which expenses based on your plan's rules.

Also consider what your insurance will cover directly. If your plan covers preventive care at no cost, don't count that in your FSA calculation. If you have a spouse with their own FSA through their employer, coordinate so you're not both setting aside money for the same household expenses.

Understand the use-it-or-lose-it rule and grace periods

FSA money that you don't spend by the end of the plan year is forfeited — you lose it. This is the biggest reason to be conservative with your contribution. Some employers offer a grace period (usually 2.5 months into the next year) during which you can still spend the previous year's FSA funds, which gives you a little more flexibility. Check your plan documents to see if your employer offers this.

Because of this rule, it's better to set aside less than you think you'll spend and pay some expenses out of pocket than to overestimate and lose money. If you're unsure, start with a lower amount and increase it next year if you find you're running out of funds.

Plan for one-time or irregular medical expenses

Some medical costs are harder to predict: a root canal, new glasses after your prescription changes, an unexpected specialist visit, or a planned surgery. If you know a major expense is coming in the next plan year, factor it into your contribution. If you're unsure whether something will happen, leave it out and use out-of-pocket savings if it does occur.

Dental and vision work are common one-time expenses that people underestimate. If you haven't had dental work done in several years, budget for a cleaning and exam at minimum. If your vision has changed or your contacts prescription is expiring, plan for an eye exam and new glasses or contacts.

Adjust your contribution during open enrollment

You can only change your FSA contribution during your employer's open enrollment period (usually once a year in the fall) or within 30 to 60 days of a may have access to life event. may have access to events include marriage, divorce, birth or adoption of a child, loss of other health coverage, or a significant change in your spouse's benefits.

If you set your contribution too high and realize partway through the year that you won't spend it all, you're stuck with that amount unless a may have access to event occurs. This is another reason to be cautious: it's easier to spend a little extra out of pocket than to lose FSA money you've already contributed.

Frequently Asked Questions

What happens to FSA money I don't spend?

Money left in your FSA at the end of the plan year is forfeited and goes back to your employer. Some plans offer a grace period (usually 2.5 months) to spend remaining funds. Check your plan documents to see if yours does. This is why setting aside less rather than more is the safer choice.

Can I use my FSA for my spouse or children?

Yes, you can use your FSA for may be able to access medical expenses for your spouse and dependents, even if they're not covered under your health insurance plan. Their expenses count toward your annual limit, so factor in their copays, prescriptions, and dental or vision costs when deciding how much to contribute.

Should I contribute the maximum amount to be safe?

No. Contributing the maximum is risky because you forfeit anything you don't spend. It's better to estimate conservatively based on your actual spending history and pay some expenses out of pocket than to lose money. You can always increase your contribution next year if you find you're running short.

What if my health situation changes during the year?

A significant change in your health or medical needs may count as a may have access to life event, allowing you to adjust your FSA contribution outside of open enrollment. Examples include a new diagnosis, a change in medication, or a planned surgery. Contact your HR department to ask whether your situation qualifies.

Can I use my FSA for over-the-counter medications?

Yes, over-the-counter medications like pain relievers, cold medicine, allergy pills, and antacids are may be able to access FSA expenses. You don't need a prescription. Include these in your annual cost estimate if your household regularly buys them, as they add up over the year.