Author Topic: 401k vs Dependent Care FSA Contribution  (Read 1684 times)

njmoney

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401k vs Dependent Care FSA Contribution
« on: January 02, 2018, 06:44:06 PM »
The benefits where my wife currently works are about to change.  In 2017 she was able to contribute to a Dependent Care FSA and was putting in $5,000.  With her new benefits, the dependent care fsa will no longer be available.  However, until now she has only been putting $10,000 into her 401k annually (I know, I know, should have been maxing it out!).  Any financial downside to her now shifting the $5k that would have gone into the Dependent Care FSA over to her 401k in 2018?  On the surface it seems like it's a wash but wanted to see if there was something I'm missing.

boarder42

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Re: 401k vs Dependent Care FSA Contribution
« Reply #1 on: January 02, 2018, 06:57:49 PM »
You'll have less money at your disposal. The FSA funds were going to pay for 5k in child care. If you put them in the 401k you will have to come up with another 5k to pay for that childcare. Which if you can do that why weren't you maxing last year.

Mariposa

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Re: 401k vs Dependent Care FSA Contribution
« Reply #2 on: January 02, 2018, 08:13:57 PM »
Also, the dependent care FSA is exempt from FICA taxes (7.65 percent employee share). FICA taxes are taken out of 401k contributions.

Proud Foot

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Re: 401k vs Dependent Care FSA Contribution
« Reply #3 on: January 03, 2018, 10:47:54 AM »
I agree with boarder42 and Mariposa. You are putting in 5k into your Dep Care FSA and then (I hope) getting reimbursed for your daycare expenses. Unless your dependents no longer need care then do not put it into the 401k. Why did her employer decide not to offer the Dependent Care FSA any longer? 

I'm a red panda

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Re: 401k vs Dependent Care FSA Contribution
« Reply #4 on: January 03, 2018, 11:25:38 AM »
My dependent care FSA gets reimbursed basically as soon as it is withdrawn from my paycheck.  If you move that money to your 401k, what will you use to pay the $5k you were paying for childcare? It seems like if anything, you will need to come up with MORE money, not less, in your take home pay to make up the difference, now that you will have to pay taxes on the $5k.

boarder42

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Re: 401k vs Dependent Care FSA Contribution
« Reply #5 on: January 03, 2018, 11:33:20 AM »
also if she didnt change companies thats extremely dumb on the part of her company to stop doing the FSA they save FICA on it.

Bourbon

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Re: 401k vs Dependent Care FSA Contribution
« Reply #6 on: January 03, 2018, 11:35:07 AM »
Are you able to contribute to a dep FSA at your employer?