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Ask Dave

Flexible Spending Account

It's better to do the flexible spending account for your doctor and dental bills because it's pretax dollars.

QUESTION: Listener has a flexible spending account with which they pay their doctor and dental bills. Should they keep the flexible spending account next year or just save the money themselves?

ANSWER: Do it with pretax dollars. If $1,000 of your income comes home, it’s worth $700 by the time it gets home. But if you save in the flexible spending account, it’s like Uncle Sam is paying $300 of your medical bills. Be careful not to put too much money in there. Slightly underfund it, because whatever money is left at the end of the year, you lose.