flexible spending account (FSA) ? 401K?

Quote from emelvee : Yes, the FSA is still "use it or lose it." Maximum contribution starting in 2013 will be $2,500/yr. I could use more, since you can use it for health insurance office visits/deductibles/copays/etc; dental care; eyecare; prescription medicine.

Quote from w3kn : FSA is used for medical expenses. It can be used on things like prescriptions, co-pays for doctor and dental visits, glasses, contacts, things like that. It's a pre-tax deduction, so you are basically setting aside money to pay for medical expenses. The only bad thing is it's gone at the end of the year, so it's a use or lose kind of thing. I put $400 in the account every year. It's not a lot, but over 26 paychecks, it's about $15 per check. Not really missing it.

Good point! I can use it toward my glasses and contact

You can also use FSA on many over the counter things like generic brand meds, allergy meds, medicated shampoo, etc. But you're not required to participate...the only benefit here is that the money is being sent into the FSA account via your check pre-tax cut.

I agree with some suggestions here, if you're just newly out of school...most people do not think of 401k off the bat, so going with higher salary is probably going to be ideal.

Different companies also offer different types of 401 accounts so some cannot be easily rolled over into the new company's plan. Some companies also doesn't allow rollovers so you'll have to open an IRA. But I think that's way too much info for your simple questions.

Quote from noungning : You can also use FSA on many over the counter things like generic brand meds, allergy meds, medicated shampoo, etc. But you're not required to participate...the only benefit here is that the money is being sent into the FSA account via your check pre-tax cut. I agree with some suggestions here, if you're just newly out of school...most people do not think of 401k off the bat, so going with higher salary is probably going to be ideal. Different companies also offer different types of 401 accounts so some cannot be easily rolled over into the new company's plan. Some companies also doesn't allow rollovers so you'll have to open an IRA. But I think that's way too much info for your simple questions.

most of the OTC options for FSA went out the window with the affordable care act, check with your plan for details, but for me things like OTC allergy meds, tylenol/advil and the like are no longer covered under my FSA, there are some things that change from plan to plan, but most are all covered under the basic IRS rules in order to be set aside as pre-tax money.

to the OP, if you get an FSA option, put in as much as you know you will spend - enough for contacts/glasses, dentists visits, etc. think of it as a 25% discount on those purchases, since you don't pay income tax.
Check with your plan, the money will need to be used, either by the calendar year, or many plans have a 'grace period' to march 15th of the following year.

the 401(k) thing, that match is fairly low, but that may or may not matter depending on how long you really intend to stay with the company. no matter what you do, make sure you set aside money for retirement right away!!! if you get a match, invest the minimum % of your salary to get the employer match. that's instant return in the long run, no matter how well the market does. Look over the options you have to invest in the 401(k) - generally to start off, make sure you're not too heavy in your own company's stock, and keep as much as you can in low cost, broadly diversified funds. the more you save now, the less you have to save later. Even waiting as little as until you're 30 has huge impacts on how much you need to save for an adequate retirement in your 60s and beyond.

All the OTC stuff is covered as long as you have a prescription for it.

It's also useful for medical devices, as long as you have a medical need for them, like canes, crutches, etc. should you need any of that.

Another useful benefit is that the company preloads the account, so starting on the 1st of the year, you have access to every dollar in it, even though you haven't yet contributed that much to it. You also aren't penalized if you draw out more than you contribute (in the event of a layoff).

Quote from mrlaugh : most of the OTC options for FSA went out the window with the affordable care act, check with your plan for details, but for me things like OTC allergy meds, tylenol/advil and the like are no longer covered under my FSA, there are some things that change from plan to plan, but most are all covered under the basic IRS rules in order to be set aside as pre-tax money. to the OP, if you get an FSA option, put in as much as you know you will spend - enough for contacts/glasses, dentists visits, etc. think of it as a 25% discount on those purchases, since you don't pay income tax. Check with your plan, the money will need to be used, either by the calendar year, or many plans have a 'grace period' to march 15th of the following year. the 401(k) thing, that match is fairly low, but that may or may not matter depending on how long you really intend to stay with the company. no matter what you do, make sure you set aside money for retirement right away!!! if you get a match, invest the minimum % of your salary to get the employer match. that's instant return in the long run, no matter how well the market does. Look over the options you have to invest in the 401(k) - generally to start off, make sure you're not too heavy in your own company's stock, and keep as much as you can in low cost, broadly diversified funds. the more you save now, the less you have to save later. Even waiting as little as until you're 30 has huge impacts on how much you need to save for an adequate retirement in your 60s and beyond.

Quote from noungning : You can also use FSA on many over the counter things like generic brand meds, allergy meds, medicated shampoo, etc. But you're not required to participate...the only benefit here is that the money is being sent into the FSA account via your check pre-tax cut. I agree with some suggestions here, if you're just newly out of school...most people do not think of 401k off the bat, so going with higher salary is probably going to be ideal. Different companies also offer different types of 401 accounts so some cannot be easily rolled over into the new company's plan. Some companies also doesn't allow rollovers so you'll have to open an IRA. But I think that's way too much info for your simple questions.

Thanks for your suggestion! I agree that paying off my student loan is much more important than 401K so definitely go with higher salary.

On the side note, I receive another offer from government with same benefits (or better, they haven't send me the details yet), but with significant less salary (10k difference). Does governmental jobs usually offer less salary than companies, considering the positions are similar?

Quote from xxalanxx : Thanks for your suggestion! I agree that paying off my student loan is much more important than 401K so definitely go with higher salary. On the side note, I receive another offer from government with same benefits (or better, they haven't send me the details yet), but with significant less salary (10k difference). Does governmental jobs usually offer less salary than companies, considering the positions are similar?

In general, government jobs pay less, but the benefits are better.

Quote from xxalanxx : So I have an offer that provides higher matching for 401K but lower salary, but another offer has lower matching but higher salary. Which offer would you consider to accept?

It all depends, but I would probably take the higher salary/lower 401k.. I am assuming "higher salary" means significantly higher, not $200/year.

The reason I say this is because I have been at several companies that have reduced their 401k matching to save costs. So job A might have a 6% match now, but there's no guarantee that next year it will still be 6%.

In general, when you are starting your first job, you'd like to contribute what is needed to get the most the employer will match. I say this because new grads often have debt from college, and need to save for a new car/house/etc. However, if you are not a disciplined saver, it's probably better to contribute more to the 401k (stops you from spending it).

As you get older and build your savings, it's worthwhile to contribute more than the minimum to your 401k. Hopefully when you are older, you will have a higher salary too.

Quote from xxalanxx : Thanks for your reply. Mine says and I quote "Employees that participate will receive a 1% employer match of their salary for the first 5% they contribute." Does it sound like a extremely low matching to you? It also states that 100% vested after 3 years of service, so if I leave the company before 3 years of service, what would happen to the funds in there?

Sounds like if you put in 5%, they put in 1%. Not great, but better than nothing.
If you leave before 3 years, you lose the matching portion.. you still have the money you put in.

401k definitely, at a minimum whatever your company matches

FSA.... we *fully* fund our FSA's (both the health and dep care) but we also know that we'll use them. As a rough calculation, take your effective tax rate and multiply by the FSA withholding amount - that's about what you'll save by participating. Note that FSA's do expire... use or lose, so be careful not to withhold too much.

Quote from damsel. : In general, government jobs pay less, but the benefits are better.

more specifically,

private sector - pay = 2/3 compensation, benefits (health, etc) = 1/3
government - pay and benefits are each 1/2 of compensation

So you may have less take home with a gov't job but higher total compensation.