Don't Let FSA Funds Go to Waste -- Why December Is Decision Month

Even with good insurance, not all of your medical care costs will be covered during the year. In fact, you may have copays and deductibles, and your insurance plan may entirely exclude certain kinds of expenses, such as vision or dental care.

If your employer offers a Flexible Spending Account (FSA), then you can and should consider contributing to it to pay for healthcare expenses with pre-tax dollars. If you've made your contributions, though, you should know that December is a critical month when it comes to your FSA.

Here's why you may need to make some big decisions in December if you've been putting money into your FSA throughout the year.

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Why December is a key month for FSA participants

Flexible spending accounts are well worth contributing to. The tax savings on medical services can help keep average monthly household expenses down, thanks to the government not charging you tax on the money you pay for them.

This is a pretty big subsidy. For example, if you're in the 22% tax bracket, you could save up to 22% on the costs of qualifying purchases since you aren't taxed on the money used to make them.

However, FSAs are different from HSAs and most other tax-advantaged accounts. With other accounts you make pre-tax contributions to, like your 401(k) or HSA, you get to invest the funds and grow the money year after year. And when you invest HSA funds or 401(k) funds, you don't have to take the money out in the same years or risk losing it.

With an FSA, on the other hand, contributions typically have to be spent by the end of the plan year. This means that if you contributed for 2025, you have to spend the money by Dec. 31, 2025, or you'll risk losing any remaining contributions.

Some plans offer a little more flexibility. You may be able to carry over part of the funds or take advantage of a short grace period that allows you to spend unused FSA money next year. But not all plans have these options. Plus, the options may give you the chance to spend some unused FSA contributions, but not necessarily every dollar you put in.

Sadly, any money that's still left over is gone for good. The hard-earned cash you tried to contribute to save your family money on healthcare will end up disappearing.

What can you do in December to save your FSA funds?

Let's say it's December and you check your FSA plan, and you have a ton of money left in it. What can you do to avoid losing that cash for good?

Fortunately, you have a lot of things to spend it on. Of course, if you have the time or the need, you can go get some last-minute medical, dental, or vision care. If you've been waiting to get a hearing aid or a new pair of glasses, for example, now is the time. If you want help covering copays for your preventative exam, then swift action to get it done by December is smart.

You can also use the leftover money to buy many different kinds of products you'll use during the year. This can include things like over-the-counter medications, antibiotic ointments, feminine products, and first aid items.

FSA Feds has a long list of different kinds of products that are considered FSA eligible that you can buy, so check it out ASAP. You will need to spend the money before Dec. 31 unless your plan allows a carryover or grace period to give you a little more flexibility.

Don't wait to start shopping for medical services or products and risk losing the money you contributed to your FSA.

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