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Living your best financial life: Employer programs can increase savings

Blog Post created by communitymanager Moderator on Mar 2, 2020

If you’re not taking advantage of savings programs offered by your employer, you may be leaving money on the table. Plus, the earlier you participate, the more time your money has to grow before you need it for college tuition, healthcare expenses or retirement.

 

It’s always a great time to learn more about the financial programs offered by your employer, which might include:

 

  • 401(k) and 403(b) plans – One of the most popular employer programs, these retirement-based programs help build up a retirement fund at any stage in your career. In 2020, you can contribute up to $19,500, before taxes, through a 401(k) or 403(b) plan (for non-profit companies). Your employer can match up to six percent of your contribution – think of it as “free” money. Your savings grow tax-free until you start taking distributions. 
  • Dependent Care Flexible Spending Account (DCFSA) – If you’re paying for daycare, preschool, summer camps or adult care for a dependent, a DCFSA allows a tax-free reimbursement for eligible expenses. Experts predict this could save an average of 30 percent in taxes every year. Ask your employer if they offer DCFSAs and when you can enroll.
  • Flexible Spending Account (FSA) – This is another great way to save money. With an FSA, you set aside funds to pay for out-of-pocket health care costs during your plan’s program year. You are not required to pay taxes on the funds in your FSA account. In addition, some employers make contributions to employee accounts. If your employer offers FSA accounts, they will be happy to provide details about their FSA program, including timing of when funds must be used.
  • Health Savings Account (HSA) – With an HSA, you can save money to pay for medical expenses and reduce your taxable income. You must be enrolled in a high-deductible health insurance plan to open an HSA. Like an FSA, some employers make contributions to employee accounts. Otherwise, for 2020 individuals can contribute up to $3,350, while families can contribute up to $7,100 annually. Plus, you never lose HSA funds – it’s a savings account that stays with employees with contributions being invested over time.

 

If you think you’re missing out on “free” money or tax breaks, ask your employer how to participate in these programs to optimize your savings.

 

Living your best financial life starts with understanding how to maximize savings opportunities. The earlier you start, the longer your wealth has time to increase.

 

Sources:

Julia Kagan, “401K Plans: The complete guide,” Investopedia, accessed January 2020. https://www.investopedia.com/terms/1/401kplan.asp

“Dependent Care FSA,” FSA Feds, accessed January 2020. https://www.fsafeds.com/explore/dcfsa

“12 things you didn’t know about the Dependent Care FSA,” Employee Benefits Corporation, accessed January 2020. https://www.ebcflex.com/Education/NewsCenter/tabid/1142/ArticleID/413/12-Things-You-Didn’t-Know-About-the-Dependent-Care-FSA.aspx

“Using a Flexible Spending account (FSA),” HealthCare.gov, accessed January 2020. https://www.healthcare.gov/have-job-based-coverage/flexible-spending-accounts/

Liz Davidson, “Considering a financial wellness program for your employees: Make sure you ask these questions first,” Forbes, accessed January 2020. https://www.forbes.com/sites/financialfinesse/2019/03/03/considering-a-financial-wellness-program-for-your-employees-make-sure-you-ask-these-questions-first/#5e3094602f3b

Brianna McGurran, “How to build financial literacy–and why,” Experian, accessed January 2020. https://www.experian.com/blogs/ask-experian/what-is-financial-literacy-and-why-is-it-important/

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