Saving by spending on year-end medical costs

Consumer spending may be down this holiday season, but if you have money left over in your company's flexible spending account, it's time to go on a spree.

The flex plan allows you to defer from your gross pay, tax-free, to use toward medical expenses not covered by insurance. At a federal tax rate of 28 percent, for instance, deferring $5,000 can save you $1,400 per year. But generally, if you don't spend all that you've deferred by year-end, you lose that money for good. (Some employers allow for a 2 1/2-month grace period.) You have until March 31, 2009 to submit your receipts for reimbursement.

So this is a great time to get those designer glasses you've been coveting, or to buy a couple years' supply of hearing-aid batteries. Many flex plans also reimburse for over-the-counter medications and first-aid supplies, so you may be able to stock up on bandages, allergy medicines, sleep aids, and cotton swabs. Here's a sample list of eligible expenses from SHPS, which administers flex plans. Before you run to the pharmacy, though, check with your company's specific flex plan to make sure your purchases are eligible.

You can forget about that Botox party, however. Cosmetic work typically isn't covered.—Tobie Stanger