A lot of people tend to over look Health Care Reimbursement Accounts (HRA) that are offered as a benefit by their employers.
How this works, is pre-tax money is taken out of your paycheck and placed into an account. As you incur health care related costs, you can then remove the money from this account. The free money effect here is that you have now just avoided paying taxes on that money. You should note that the money in the HRA can only be used for healthcare related items. But that includes, aspirin, cold medicine, copays, band-aids, condoms, etc, so you can go on a Costco shopping spree at the and of the year to make sure you deplete the account by the Dec 31st.
I had never really looked into opening one of these until end of last year when my employer had an info session on how it worked. I was sold. I started out small since I never really tracked how much out of pocket money I spent on health care over 1 year. I started out with $1000. Meaning that $41.66 (thats pretax dollars, so the actual effect on your paycheck is much smaller) would be taken out of my bi-monthly paycheck. I have completely used the $1000 as of last week (11/3/07). But here's the thing, I am in the 23% tax bracket, so on that $1000, I saved $230 in taxes. Not bad huh? Try getting that return in the stock market.
Yes I know this money is spread out over the year, but its free! So put that $1000 into a savings account as you get reimbured and guess what, you just saved some money, which you probably would have spent anyway!!
HRA accounts are not for everyone, but if you tend to have a lot of healthcare expenses, copays, etc, you could end up saving some money. I definitely think you should ask your employer about it!
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