Chapter 06: Using a Budget Template

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There are a myriad of different tools that you can use to create a budget, but in this chapter, we’ll be going over how to use a budget template. A budget template is a customizable worksheet that can help you manage your budget by keeping track of all your living expenses.

A budget template is an easy way to calculate your finances to see if you’re on track with your spending. But rather than having to create an entire budget yourself, a budget template gives you the outline and all you have to do is fill in the blanks with your budget specifications.

In this series, we’ve been going over everything there is to know about budgeting, like what to include in a budget and how to use Mint to create your budget, but this chapter will focus mainly on how to use a budget sheet template.

In this chapter, we’ll discuss the different types of budget templates, what the benefits of using a budget template are, when you should start using a budget template, and more. To learn more about how a personal budget template can simplify your budgeting, continue reading the chapter or use the links below to skip to a section of your choice.

What Is a Budget Template?

A budget template is a customizable worksheet where you can input your own budget information to suit your personal financial needs. It’s a very helpful tool and can be used to get your finances together and stay on top of your spending to avoid landing in a budget deficit.

With a budget template, you’ll insert your total income and list out all of your expenses, like how much you spend on rent, groceries, and other necessities for living. You’ll then subtract the expenses from your total income.

You may be left with some discretionary income, which is basically how much money you have left over, which you can put in savings or use it towards additional expenses, like if you want to buy a new car or save for a house.

Types of Budget Templates

Depending on what phase of life you’re in, you’ll want to use a budget template that’s catered to your situation. For instance, college students may have a completely different budget than a newly married couple.

Click below for the free budget template that matches your lifestyle

Click here to download the XLS file free budget template.xls.

There are a variety of free budget templates available to suit your needs, whether it’s for college students, parents with children in daycare, single-income households, and so forth. Choosing the one that fits your lifestyle is crucial to help you develop a clear understanding of how your take-home pay covers all your expenses.

Benefits of Using a Budget Template

Creating a budget might not exactly sound like the most enjoyable task in the world, but it’s a necessary part of keeping your finances in order, and keeping you out of mounting debt. There are many benefits of using a simple template for budgeting, such as:

  • You know how you’re spending your money: Rather than swiping your credit card and not giving that charge a second thought, a budget template helps to make you more aware of how you’re spending your money so you can see if/where you need to cut back. You can also use a budget to make a financial plan so you can stay on top of your goals.
  • It helps you stay organized: It’s easy to get overwhelmed when it comes to finances, but a budget template is a great way to keep your finances in one place. With a personal budget template, you know exactly where your expenses are listed, which makes it easier to do things like budget for groceries.
  • You have a plan for the month: A budget template is a great way to help you create a plan for the month before it even starts. Maybe you have a trip coming up that you need to put aside some extra money for. A budget template will make it obvious where you can cut back on so that you have enough to cover your anticipated travel expenses for the month.
  • It makes creating a budget easier: Rather than having to make a budget from scratch each month, a budget template does the hard part for you. With a budget sheet template, all you have to do is fill in your personal information and you’ll be on your way to tracking your spending.

Learning how to budget can be hard, but using a budget template makes the process a whole lot easier. Once you get the hang of using a budget template, it’ll become second nature to you, and you’ll have no problem filling out your budget at the start of each month.

Preparing to Use Your Budget Template

If you’ve already tried starting a budget and keep running into obstacles, perhaps it’s time to start looking at the fundamentals. It only takes a misstep or two to turn your detailed budget into a total mess. Below are some helpful budgeting tips to help you come up with a functional budget to keep your finances healthy:

Know Exactly How Much You Really Bring in

The answer here isn’t simply your annual salary, nor dividing that number by 12 equal parts for each month. What you should really be basing your budget on is your actual take-home pay each month.

For instance, if you make $50,000 annually as a salar –or around $4,200 per month–you need to take into account your income tax, benefits, pension plan, and other costs that you’re paying that get docked off your monthly checks.

Because of all these other hidden expenses, using $4,200 as a basis for your budget really isn’t accurate. It’s probably closer to $3,000, and maybe even less. It’s crucial that you know exactly how much is coming in every month, because that’s the figure you’ll be basing your budget around.

Using a free budget template can help you easily keep tabs on your finances.

Get a Handle on Accurate Numbers When it Comes to Monthly Spending

It’s best to work with real numbers when coming up with a solid budgeting plan. This involves keeping every receipt after every purchase, and tallying up how much you’re really spending. Your first budget essentially reflects how much you’re spending on average every month.

In addition to regular bills, don’t forget to include all your irregular spending too, such as:

  • Driver’s license renewals
  • Property taxes
  • Car registration
  • Property insurance

These bills should really be planned for throughout the year, and not necessarily considered ‘surprise’ expenses.

Make Sure You Have Some Wiggle Room for Surprise Expenses

Life happens–and when life happens, you can get hit with a lot of unexpected expenses. Maybe you need to add on a new monthly expense to your budget, maybe you’re moving and you need to adjust your cost of living, or maybe you need to account for an emergency.

Whatever the situation may be, it’s imperative to have some wiggle room in your budget in the case of a surprise expense. You don’t ever want to cut it too close so that if something happens, you have to dip into your savings to pay for it. It’s important to try to leave some extra room in your budget for the unexpected.

Have an Easy-To-Use Budgeting Tool on Hand

If you’re starting off your budget it’s good to know that there are a myriad of options available, like envelope budgeting or a budgeting app.

All of these options will cause you to more than likely throw in the towel when it comes to keeping up with your budget. Your first budget should really be easy to manage and keep up with to help you get a handle on your finances.

Using a simple, free budget template is recommended, which is basically like an online version of the paper-and-pencil type. While there are a number of great options out there, many of them can become too complicated–the more confused you are about the tool you’re using, the less likely you’ll keep up with your budget because it’s “just too complicated.” Don’t let this happen to you. Instead, stick to simple tools, especially when you’re just starting out.

When Should You Start Using a Budgeting Template?

A budgeting template can benefit anyone, and it’s never too early to start using one. The sooner you start to use a budget, the easier it’ll be to manage your monthly finances, plan for the future, and pay yourself first.

So what are you waiting for? Start using a monthly budget template today and improve your financial health now and in the future.

A Free Budget Template Awaits You at

For help setting up a budget to track your spending, makes it easy for you. This online tool offers a number of budget templates to suit your lifestyle, and gathers all your financing accounts into one convenient place. It even allows you to streamline your budgeting efforts, giving you total visibility of your income and spending so you can easily and quickly see exactly what’s happening in all areas of your finances. The best part? It’s completely FREE! Visit to get started budgeting your finances today!

In the previous chapters in the series, we discussed various personal financial tips and how you can stay on top of your finances by budgeting. We’re familiar with some of the budgeting tools you can use to create a budget, like with a budgeting app or a free budget template, but in the next chapter in the series, we’ll be going over the 50/30/20 budgeting rule, which is another helpful tactic for you to organize your finances.

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Chapter 07: Using the 50-30-20 Rule to Budget

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So far in this series, we’ve answered important questions about budgeting, such as “What is a budget?” and “Why is budgeting beneficial?” This series has been focusing on how using a budget can help you keep your spending in check and ensure your savings goals are on track.

One way to do that is using Mint’s free 50/30/20 calculator to budget.

The 50/30/20 rule (also referred to as the 50/20/30 rule) is one method of budgeting that can help you keep your spending in alignment with your savings goals. Budgets should be about more than just paying your bills on time—the right budget can help you determine how much you should be spending, and on what.

The 50/30/20 rule can serve as a great tool to help you diversify your financial profile, reach dynamic savings goals, and foster overall financial health.

In this post, we’re taking you through the steps of budgeting using the 50/30/20 approach so that you can learn how to set up a budget that’s sustainable, effective, and simple. Use the links below to navigate or read all the way through to absorb all of our tips on how to budget using the 50/30/20 method:

In the previous chapters, we discussed what to include in a budget and the various ways you can create your own budget, like with a budget template. If you haven’t read through them already, we highly recommend going through them to get a comprehensive overview of budgeting.

What is the 50/30/20 Budgeting Rule?

The 50/30/20 budgeting rule–also referred to as the 50/20/30 budgeting rule–divides after-tax income into three different buckets:

  • Essentials (50%)
  • Wants (30%)
  • Savings (20%)

Essentials: 50% of your income

To begin abiding by this rule, set aside no more than half of your income for the absolute necessities in your life. This might seem like a high percentage (and, at 50%, it is), but once you consider everything that falls into this category it begins to make a bit more sense.

This will include your living expenses each month, which are essential expenses that you would almost certainly have to pay, regardless of where you lived, where you worked, or what your future plans happen to include. In general, these expenses are nearly the same for everyone and include:

  • Housing
  • Food
  • Transportation costs
  • Utility bills

The percentage lets you adjust, while still maintaining a sound, balanced budget. And remember, it’s more about the total sum than individual costs. For instance, some people live in high-rent areas, yet can walk to work, while others enjoy much lower housing costs, but transportation is far more expensive.

How much your essential expenses cost will differ for each person depending on where they live and what their lifestyle is. If you’re thinking of relocating to a different part of the country, it’s a good idea to calculate your cost of living beforehand so you can know if you can realistically afford to live in that area based on your current total income.

Wants: 30% of your income

The second category, and the one that can make the most difference in your budget, is unnecessary expenses that enhance your lifestyle. Some financial experts consider this category completely discretionary, but in modern society, many of these so-called luxuries have taken on more of a mandatory status. It all depends on what you want out of life and what you’re willing to sacrifice.

These personal lifestyle expenses include items such as:

  • Your cell phone plan
  • Cable bill
  • Trips to the coffee shop
  • Savings for travel
  • Gym memberships
  • Weekend trips
  • Dining out

If you travel extensively or work on-the-go, your cell phone plan is probably more of a necessity than a luxury. However, you have some wiggle room since you can decide upon the tier of the service you’re paying for.

Only you can decide which of your expenses can be designated as “personal,” and which ones are truly obligatory. Similar to how no more than 50 percent of your income should go toward essential expenses, 30 percent is the maximum amount you should spend on personal choices. The fewer costs you have in this category, the more progress you’ll make paying down debt and securing your future.

Savings: 20% of your income

The next step is to dedicate 20% of your take-home pay toward savings. This is essentially how much you should set aside from your paycheck each month for savings. This can include different types of savings like:

  • Savings plans
  • Retirement accounts
  • Debt payments
  • Rainy-day funds

These are all things you should add to, but which wouldn’t endanger your life or leave you homeless if you didn’t. That’s a bit of an oversimplification, but hopefully you get the gist. This category of expenses should only be paid after your essentials are already taken care of and before you even think about anything in the last category of personal spending.

Think of this as your “get ahead” category where you can challenge yourself to save. Whereas 50%(or less) of your income is the goal for essentials, 20%—or more—should be your goal as far as obligations are concerned. You’ll pay off debt quicker and make more significant strides toward a frustration-free future by devoting as much of your income as you can to this category.

The term “retirement” might not carry a sense of urgency when you’re only 24 years old, but it certainly will become more pressing in decades to come. Just keep in mind the advantage of starting early is you will earn compounding interest the longer you let this fund grow.

You don’t want to cash out your 401k to be able to pay off debt. The more you put towards savings now, the quicker you can pay off your debt and achieve financial stability.

Use our compound interest calculator to see how your money can grow over time.

Establishing good habits will last a lifetime. You don’t need a higher paying job to follow the tenets of the 50/30/20 rule; anyone can do it. Since this is a percentage-based system, the same proportions apply whether you’re earning an entry-level salary and living in a studio apartment, or if you’re years into your career and about to buy your first home.

A note of caution, though: Try not to take this rule too literally. The proportions are sound, but your life is unlike anyone else’s. What this plan does is provide a framework for you to work within. Once you review your income and expenses and determine what’s essential and what’s not, only then you can create a budget that helps you make the most of your money. Years from now, you can still fall back on the same guidelines to help your budget evolve as your life does.

Give our 50/30/20 budgeting calculator a try to see how this budgeting method works:

50/30/20 Budget Calculator

Here’s how much you have for:




Ask Yourself: Why is a 50/30/20 Budget Necessary?

According to, there are plenty of different reasons why people start a budget:

  • To save up for a large expense such as a house, car, or vacation
  • Put a security deposit on an apartment
  • To reduce spending habits
  • To improve their credit score
  • To eliminate debt
  • To break the paycheck to paycheck cycle

Identifying the reason why you’re budgeting with the 50/30/20 method can help you stay motivated and create a better plan to reach your goal. It’s kind of like the “eye on the prize” mentality. If you’re tempted to splurge, you can use your overarching goal to bring you back to your saving senses. So ask yourself: why am I starting to budget? What do I want to achieve?

Additionally, if you’re saving up for something specific, try to determine an exact number so that you can regularly evaluate whether or not your budget is on track throughout the week, month, or year.

How to Budget with the 50/30/20 Rule

To make the most of this budgeting method, consider following the steps below:

Deep Dive Into Your Current Spending Habits

Before implementing a 50/30/20 budget, take a long, hard look in the mirror (or maybe your wallet, rather). We’re talking about analyzing your spending habits. Think about whether you tend to overspend on:

  • Clothes
  • Shoes
  • Food
  • Drinks

Figuring out your spending vices from the very beginning will help you learn how to use a 50/30/20 budget that effectively cuts spending where you need it most.

Take a look at your bank and credit card statements over the last few months and see if you can find any common trends. If you find that you’re overspending on going out for food and drinks, come up with a plan for how you can avoid this scenario.

There are plenty of ways to budget and save money without compromising your social life, such as:

  • Cook dinner at home before you go out
  • Have a potluck with friends
  • Find happy hour specials around town.

You can also try budgeting for groceries to make sure your eyes aren’t bigger than your stomach and you don’t overspend every time you step foot into the grocery store. The 50/30/20 budget rule is a good way to figure out exactly how much you have to spend on certain expenses.

Pro Tip: Using Mint’s easy budget categorization, you can identify where you can cut back on unnecessary expenses.

Identify Irregular Large Ticket Expenses in the “Wants” Category

Of course, there are expenses in life that we simply can’t avoid. Maybe you need to make a repair on your vehicle, or perhaps you’re putting a down payment on a house in the next six months. Oftentimes these bills are necessary expenses, so you’ll have to factor them into your budget.

When you’re coming up with your 50/30/20 budget, take a moment to look at your calendar so that you can plan for these expenses and adjust your spending in the time before and after you incur the expense.

Add Up All Income

Totaling your income is an important first step when learning how to budget your money using the 50/30/20 rule, but it’s not always as simple as it sounds. Depending on your job, you might have a relatively steady paycheck or one that fluctuates from month to month. If the latter is the case, collect your paychecks from the last six months and find the average income between them.

The last thing you want to happen is to end up in a budget deficit, which is when your spending is greater than your income. If you’re finding that you’re not able to meet that 20% for savings each month, that might mean it’s time to make some changes.

There are various ways you can increase your savings each month, such as:

  • Consider a minimalist lifestyle to cut back on some of your expenses
  • Increase your income with an additional stream of income
  • Negotiate your salary with your current employer

If you want an additional stream of income, but don’t want to leave the house to do so, you should look into how you can make money at home.

What Are the Benefits of the 50/30/20 Rule?

There are many benefits of using the 50/30/20 rule to budget:

  • It can help you get on top of your finances: The 50/30/20 rule is a simple way to get on top of your finances so you make sure you’re not spending beyond your means.
  • It can help you make a financial plan: Everyone’s financial plan looks different, but using the 50/30/20 rule is a great way to outline your finances so that you can figure out exactly what you need to do to achieve your goals. For example, if your goal is to invest more, the 50/30/20 rule will help you figure out exactly how much you need to put towards investments.
  • It’s easier to use than some other budgeting tools: There are a myriad of different budgeting tools and methods out there. Some people use financial calculators to calculate their budget, some people use a journal to write down all their expenses. But the 50/30/20 budget rule is often much easier to use than most other budgeting tools. It clearly outlines your expenses and savings so you can figure out if you’re staying on track with your finances.

Is the 50/30/20 Budget Right for You?

The 50/30/20 budget isn’t the only option. Other popular methods include:

  • Zero-sum: The principle of the zero-sum budget is that you must allocate each and every dollar you earn toward a specific expense, savings account, debt, or disposable income account. This style can help deter unnecessary spending because you’ll know exactly how much you have to spend on what items.
  • Envelope budgeting: Swiping your card left and right is easy—but the envelope method doesn’t let you succumb to this temptation. Rather than using your card to spend, you use a predetermined amount of cash as your spending pool, nothing more.

Choosing a budgeting style that works for you depends on a variety of factors; there’s no one-size-fits-all approach to budgeting and saving money. That said, the 50/30/20 tends to be a simple yet effective option for getting started on your budgeting journey.

Main Takeaways: How to Budget Using the 50/30/20 Rule

Here are the key tenets of the 50/30/20 rule of budgeting:

  • This budget rule is a simple method that can help you reach your financial goals.
  • This budgeting method stipulates that you spend no more than 50% of your after-tax income on needs.
  • The remaining after-tax income should be split up between 30% wants or “lifestyle” purchases, and 20% to savings or debt repayment.
  • This style of budgeting is a good way to save up for larger expenses, reduce your spending habits, and break the paycheck-to-paycheck cycle.
  • The 50/30/20 budget rule is a much more straightforward budgeting method than some of the other common strategies.

Try the 50/30/20 Budgeting Rule & Take Control of Your Finances

Mint offers budgeting software and a helpful budgeting calculator that makes it easy to live in accordance with the 50/30/20 rule (or any budget that suits your lifestyle) so that you can live life to its fullest. After spending just a little bit of time determining which of your expenses fall into which category, you can create your very first budget and keep track of it every day. And when your situation undoubtedly changes, Mint lets you adjust, so your budget can change with you.

Sign up for your free account today, build your 50/30/20 budget, and make this the year you build a strong foundation for your future.

Now that you know what the 50/30/20 budget rule is and how you can use Mint to make a budget, you can move onto the next chapter in the series, which covers zero-based budgeting. Continue reading our series to learn more about how budgeting can help you reach your goals and achieve financial stability.

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Chapter 09: Managing Your Money with a Budget

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So far in this series, we’ve discussed what a budget is, what you should include in a budget, and the various ways you can make a budget–including zero-based budgeting, which we covered in Chapter 8. Now that you have all the budgeting basics, we’ll cover how you can manage your budget.

Making your budget is crucial, but managing your budget is arguably even more important. You can’t just make a budget at the beginning of the month and never look at it again. You have to continuously manage your money with a budget in order to keep track of your finances for the month and plan for your long-term goals.

In this chapter, we’ll give an overview of how you can manage your money and how having a budget can help you do that. We’ll discuss why managing money is important, tips for how to manage your money, how you can improve your money management, and more. Keep reading or use the links below to go straight to a specific topic.

What Is Money Management?

Money management is essentially the process of keeping track of your finances. This can include your:

  • Spending
  • Savings
  • Budgeting
  • Investing

Money management is key so that you can save enough money to accomplish your personal and professional goals. Everyone manages their money differently, so it’s important to find a management technique that works for you.

Why Is Money Management Important?

There are many reasons why managing money is important. It can help you:

  • Stay on top of your finances: If you don’t manage your money, there’s no way you would be able to tell if you’re overspending before you get hit with the overdraft fees. Money management can help you stay on top of your finances so you don’t accidentally rack up a credit card bill that you simply can’t afford.
  • Plan for the future: Whether you want to save for a down payment on a house or save for a wedding, money management can help you plan for your future. Managing your money can help you figure out how much you need to save to accomplish your goals and how you can go about saving it.
  • Keep track of your expenses: Money management helps you keep track of your expenses, like how much you spend on rent and groceries, so that you can figure out if you need to cut back on some costs.
  • Feel more secure: There’s nothing worse than feeling overwhelmed when it comes to your finances. You don’t know if you’re going to be able to pay off that next bill, and every morning you wake up with a feeling of overwhelming dread.

But money management can put an end to this feeling. Money management can help you feel more secure and in control of your finances because you’ll know exactly where your money is going each month.

5 Tips for Managing Your Money with a Budget

The best way to manage money is with a budget. It’s crucial to learn how to budget, like with the 50/30/20 budgeting rule. We discussed this technique in Chapter 7, so you can go back and reread that if you need a refresher.

Managing money may seem overwhelming at first, but you’ll quickly get the hang of it. Below are some tips for how you can successfully manage your money with a budget:

  1. Take Stock of Your Financial Health

First things first: You need to take a deep dive into your financial health. This includes doing things like:

  • Reviewing your credit score and history
  • Looking at how much you have saved for retirement
  • Reviewing what your financial goals are and how far away you are from them
  • Figuring out your total income, including income from your salary as well as additional income sources
  • Reviewing your spending to see if and where you can cut back on expenses
  1. Make a Realistic Budget

Once you have a better idea of your financial health, then you can actually make a budget for yourself. There are various ways you can make a realistic budget:

Just figure out a system that works for you and stick with it.

You also need to figure out what to include in your budget, such as:

  • Rent
  • Utilities
  • Food and groceries
  • Daily incidentals
  • Subscriptions
  • Transportation

These are just some of the many expenses that you’ll want to put in your budget. Everyone’s budget looks different and will vary depending on where they live and what their personal situation is.

If you aren’t sure where to start with your budget, it might be a good idea to calculate your cost of living so you can get an idea of how much it costs to live in your city. That way, you can figure out your rent budget and estimate for other expenses so you don’t spend beyond your means.

Your budget will also most likely look different each month. For instance, if you have a vacation coming up, you’ll need to include how much you’re planning to spend on travel for that month. To make up for those expenses, you may have to cut back on other areas, like the amount of times you go out to eat.

  1. Figure Out Your Financial Priorities

Once you have your budget created, you’ll then be able to see where you’re succeeding and failing financially, and from there, you can figure out your financial priorities.

After you have your priorities figured out, you should then set goals. These can be personal or professional goals, like buying a new house or increasing your salary.

It’s also important to think of ways how you can achieve these goals. For example, if you want to buy a house, you need to figure out how much you need to save from each paycheck so that you can afford a down payment. If you want to increase your income, it’s a good idea to think about negotiating your salary with your employer so you can figure out an amount that you’re more comfortable with.

First, figure out your goals. Then, create a path to achieve them.

  1. Use Tools to Track Your Budget

The easiest way to keep track of your budget with a budgeting tool. A budgeting tool will help you monitor your spending and savings so you can stay on top of your finances.This can be with an app, a spreadsheet, or a planner.

You can also create a budget using Mint. Mint’s budgeting app is one of the best ways to track your budget for various reasons, such as:

  • It’s easy to use
  • It keeps everything in one place
  • It’s accessible 24/7
  • It automates a lot of the budgeting process
  • It’s free

  1. Revisit & Revise Your Budget Regularly

So, you’ve chosen a system to create and track your budget, but your budgeting journey isn’t over quite yet. You now need to revisit and revise your budget regularly.

You should be revisiting your budget at least once a month to see if it still suits your goals/current financial circumstances. If not, you can update and edit your budget as often as you like!

That’s the best part about having your own budget– it’s curated to your unique situation. Remember, your budget should work for you, not the other way around.

How Do I Improve My Money Management?

Using a budget is hands down the best way to manage money, but there are some other ways you can try to improve your finances, like by:

  • Building up your savings
  • Paying your bills on time each month
  • Cutting back on recurring charges
  • Figuring out an investment strategy
  • Staying on top of financial statistics

Doing one or all of the above is a good start to moving your financial health in the right direction.

Key Takeaways: Managing a Budget

  • Money management is the process of keeping track of your finances, including your spending, saving, budgeting, and investing.
  • Money management helps you stay on top of your finances and helps you plan for the future.
  • The best way to manage your money is with a budget.
  • It’s important to figure out your financial priorities so you can set goals.
  • The easiest way to keep track of your budget with a budgeting tool.
  • You will need to revisit and revise your budget regularly.

Don’t Underestimate the Power of a Good Budget

A good budget can completely transform your financial situation and make you feel like you’re finally on top of your finances. It’s never too early to start budgeting. The sooner you start budgeting, the closer you’ll get to achieving your long-term goals.

After reading the previous chapters in the series, you should now have a much better understanding of what budgeting is and why managing money is important. To finish off the series and complete your knowledge of budgeting, make sure to read the next and final chapter in the series, where we’ll talk about how to set up your goals using Mint.

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How Does Working Longer Affect Your Social Security Benefits?

If you’re like many seniors, Social Security benefits will make up the majority of your income during retirement. According to the Center on Budget and Policy Priorities, half of older Americans rely on Social Security for at least 50% of their income, and 25% rely on it for 90% of their income.

You may be working longer, too. U.S. workers between 62 and 65 are working at the highest rates since data began being recorded in the 1960s. And those over 65 are about twice as likely to be working today as those in 1985, with around 20% still in the workforce (though there was a slight downturn during the pandemic).

To me, the first set of statistics highlights the importance of Social Security benefits to your retirement life — and the need to maximize those benefits. The number of Americans working longer tells me that a lot of you may want to know how working longer can affect your benefits, and how you can make the most of those earning years.

Social Security & Working Past ‘Retirement’

Some people who work longer delay receiving Social Security benefits so those benefits can grow. As you probably know, you can increase your Social Security benefits by delaying the date at which you begin receiving them. In other words, the longer you wait to collect your benefits, the bigger your benefit (until age 70, at which point they stop growing). You can use the Social Security Administration (SSA)’s calculator to figure out how much you could earn by waiting.

I think there’s another, unsung perk to working longer: You could increase your benefits by delaying credits and by bumping up the earnings numbers used to calculate those benefits. Social Security calculates your monthly benefit by using your 35 highest-earning years (until age 70). As long as you keep working and paying into Social Security, your earnings record will keep being updated. If the money you make in later years outweighs what you made earlier, your benefits will increase accordingly.

Some Pros to Working Longer (And a Few Heads-Up)

Working past the more traditional retirement age of 65 may boost more than your Social Security benefits.

  • Any future spousal benefits would increase, too.
  • You may stay sharper. Several studies show that people demonstrate higher mental acuity if they continue to work. These studies show it’s likely due to the social networks and mental challenges of work.
  • You may save money by sticking with your employer’s healthcare instead of using Medicare, especially if your spouse is covered by your plan and not eligible for Medicare. The rules around signing up for Medicare can be complicated, but says, “Generally if you have job-based health insurance through your (or your spouse’s) current job, you don’t have to sign up for Medicare while you (or your spouse) are still working. You can wait to sign up until you (or your spouse) stop working, or you lose your health insurance (whichever comes first).” There are exceptions, though, and you may want to consider delaying Part B but sign up for Part A because it’s free. Be aware: If you enroll in Medicare, even just Part A, you can’t contribute to a health savings account.

A Few Additional Heads-Up

If you have traditional retirement accounts, you may run into some required minimum distribution (RMD) issues. Thanks to the 2019 SECURE Act, you don’t have to begin withdrawing RMDs until April 1 of the year after you reach 72, but if you’re still working at that point, your RMD income could bump you into a higher income tax bracket.

You’ll have to pay taxes on your Social Security benefits if your total income is over $25,000 if filing as a single person or $32,000 if you’re married and filing a joint return. Your annual income (including any income from RMDs) will determine the percentage of your Social Security benefits that are subject to income tax.

In addition, higher earners might pay more for Medicare Parts B and D. As mentioned earlier, you could stick with your employer’s healthcare plan to avoid this issue.

Another thing to think about: You can “unretire” after signing up for Social Security, within limits. Changed your mind and want to delay retirement benefits and earn credits instead? If you change your mind within 12 months of taking your benefits, you can request a withdrawal of benefits and take them later when you qualify for a larger benefit. There’s a caveat though — you’ll have to repay all the benefits you and any family members received. If it’s been longer than a year since you started receiving your benefits, you’ll have to wait until your full retirement age to ask for a suspension of benefits.

Should You Work Longer?

When making this decision, I suggest you consider not just your financial situation, but also:

  • Health: Think about your health — and that of your spouse — and your healthcare needs. As mentioned earlier, working later in life can be beneficial to your mental health, but how does it affect your physical health? And how is your spouse’s health? Do they need more help around the house? Do you need to continue working to help pay for medical treatments? Don’t forget to consider the fact that time spent at work is time away from your family.
  • Longevity: Do you come from a long-lived family? Working longer and delaying taking Social Security will both boost your retirement income, which is extra important for those with long life expectancies ahead of them. I suggest you plan to make your money last as long as you do.
  • Your job: Do you like it? Does it make you feel younger?

And of course, take your salary into account. Though ageism in the workplace can be a problem, it may not be an issue for everyone. Some companies may value the experience and wisdom of older workers. In fact, the median earnings of working Americans ages 62 to 65 exceed those of younger workers.

All expressions of opinion reflect the judgment of the author, Ken Moraif, as of the date of publication and are subject to change. Ken Moraif is a controlling owner and investment adviser representative of MMWKM Advisors, LLC, doing business as Retirement Planners of America (RPOA), which is an SEC registered investment adviser. Registration as an investment adviser is not an endorsement by securities regulators and does not imply that RPOA has attained a certain level of skill, training, or ability. Ken Moraif has worked in the financial services industry since 1988 and has been a CERTIFIED FINANCIAL PLANNER™ professional since 1998. Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, Certified Financial Planner™ and federally registered CFP in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements. Readers should not rely on this content as the sole basis for any Social Security, financial planning, investment, or related decisions. A professional adviser should be consulted and/or independent due diligence should be conducted before implementing any of the options directly or indirectly referenced. This article should not be construed as a solicitation to render personalized investment advice. Retirement Planners of America makes no warranty, express or implied, for any decision taken by any party in reliance upon the information discussed. While information presented is believed to be factual and up-to-date, Retirement Planners of America does not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed.

CEO and Senior Adviser, Retirement Planners of America

Ken Moraif, CFP, is CEO and senior adviser at Retirement Planners of America, a Dallas-based wealth management and investment firm with over $4.3 billion in AUM and serving over 8,000 households (as of May 2019). He is also the host of the radio show “Money Matters with Ken Moraif,” which has offered listeners retirement, investing and personal finance advice since 1996.


20 Great Jobs For Retirees for Flexibility and Extra Cash

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Who even knows what “retired’’ means anymore?

You might have left the career you had in the 40-hour-a-week workforce. But now you don’t exactly want to be glued to your couch watching puppy videos. You want to be active, you want to work, and you want to make a little money to support your fun retirement plans.

While “retirement income’’ or “retirement job” might seem like oxymorons, they are a more reasonable pursuit today than in years past due to advancing life expectancies and improved health among older citizens.

Many people reach so-called retirement age and are in no way done with being productive. Many continue in freelance jobs and part-time gigs, whether in a brick-and mortar setting, from home, or even outdoors.

There are plenty of ways to bring in some extra money to augment pension, social security, or other retirement funds. We’ve rounded up 18 ideas for good jobs for retirees that offer part-time opportunities, flexible hours, or both.

20 Part-time Jobs for Retirees

Most of the examples here require your physical presence on-site, but there are remote jobs, too, such as virtual assistant and customer service work that can be done from the comfort of your home.

As you browse these possible jobs for retirees, keep in mind one warning: If you are collecting Social Security, you can only earn a certain amount each month before your benefits are reduced.

So let’s get to work, shall we?

1. Substitute Teacher

Substitute teachers have never been more valuable than today. Covid has increased the chances that a teacher might be out of the classroom either awaiting test results or recuperating. When that happens, their students need someone to teach — and that could be you.

Most school districts have lenient requirements for substitute teachers, often requiring just a bachelor’s degree with no teaching experience.

To be successful, you need to be ready to deal with a room full of 20 or so children of varying ages. But it could pay off. School districts in Chicago, for example, pay as much as $200 a day for a full day of work.

If you have an advanced degree, you may also qualify to be an adjunct instructor at a community college or four-year university.

2. School Support Worker

Most schools are always looking for crossing guards, recess supervisors and other positions. A call to your local elementary, middle or high school could lead you to a good retirement job that would fit your schedule. Even better is searching online for jobs at your school district. This will give you a range of what’s out there.

This is a classic retirement job that gets you out of the house, allows you to have contact with neighbors, and lets you provide security and safety with another set of adult eyes on the children.

3. Tutor

There are hundreds of tutoring companies in the U.S. who work with kids of all ages to enhance their school education or prepare for college entrance exams. If you sign up with one, they’ll match you with work and you won’t need to market yourself as a tutor.

The hourly pay for these companies ranges from about $13 to $25. Requirements often are limited to a bachelor’s degree, although exam-prep work might require a recent ACT or SAT test score, or might require you to retake the exam for verbal or math instruction.

If you are interested in online tutoring, there are many good paying gigs out there. Match your skills to the openings.

A senior woman drives a school bus.
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4. School Bus Driver

School bus drivers can earn up to $20 per hour. They have regular hours with the opportunity to earn extra for field trips or outings. Some states require a specific license (a commercial drivers license, or CDL, for example) or require you to pass a driving test to qualify.

Recent news reports indicate there are many job openings for school bus drivers.

The job is likely to include more than just driving, however. You may be asked to supervise students on the bus, and you may be called upon to discipline rowdy students or those who are making the trip unsafe. A tolerance for children of all ages is probably an important requirement.

5. Shuttle Bus Driver

There are dozens of different types of shuttle bus driver jobs. Most hotels have shuttles to and from airports. Senior citizen homes, churches and community centers often offer shuttles to shopping areas or grocery stores. Hourly pay for shuttle bus drivers can average above $13 per hour, and that’s not including tips from satisfied riders. Like school bus drivers, shuttle bus drivers have regular hours.

Depending on the particulars of the job, a commercial driver’s license might be required.

There are different state laws regarding licensing for shuttle bus drivers. A specialized license might be required if the bus holds a certain number of people or is a particular size. Your state motor vehicle website will tell you what’s required in your state, and any potential employer will know, too.

6. Tour Conductor

Tour guide is one of those jobs that, when you see someone doing it, you think, “Well, I could do that too!”

Businesses, organizations and sites that host tours come in many shapes and sizes, from historical sites to museums, from outdoor walking tours to behind-the-scenes workplace tours. They can be an everyday part of a business or scheduled by appointment. What do they all have in common? A tour leader.

These jobs require knowledge about the subject and the ability to tell a good story — often while walking backwards.

Tour guides make an average base salary of $20 per hour. Plus, they are often offered tips by tour participants.

This could be a dream job for someone who knows the topic well and likes to retell stories about history, natural science or architecture (among many other possibilities).

If this appeals to you, don’t overlook a special area of knowledge you’ve developed during all those years in the workplace. Know a lot about the manufacturing industry? Maybe you’re just the person to lead tours at a cheese factory.

Looking for a fun part-time side gig? Here’s how you can earn money visiting theme parks as a Disney nanny.

7. Patient Advocate

The job of a patient advocate is to assist someone who is struggling to cope with the healthcare system. A patient advocate deals with paperwork and appointments, and communicates with healthcare providers to get information on diagnosis, treatment and followup procedures.

Advocates might also be asked to work with insurance companies to understand coverage and costs. Many are asked to help a client obtain assistance with financial or legal issues. The range of duties can be as varied as the patient’s needs.

Being a patient advocate does not require any particular educational degree, but it is possible to become certified in this role.

These positions can be part- or full-time, and they pay well, averaging $18 an hour. So if you plan to collect Social Security benefits, make sure to check how your wage impacts your benefits.

A senior citizen plays with two children outside that she's babysitting. They are chasing each other with water guns.
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8. Child Care Provider

Child care might be a bit of a political football these days, but rarely has it been more necessary. Single parents or two-parent families that require or want two incomes are likely to need child care, and that could take the form of a nanny or frequent babysitter.

A babysitter sits in a home with a child or children. A nanny is responsible for getting children to day care or other activities; they are a substitute parent in many cases.

Craigslist, Next Door or other neighborhood job sites are great ways to search for these positions, but your best bet is to work with your personal network. Let people know that you would be willing to work as a nanny or frequent babysitter, and, with the proper recommendation, you could have a very gratifying retirement job.

There are no actual nanny or babysitter licenses or certifications in the United States, but many families require that nannies be bonded, which is a guarantee of service. It is a protection against someone failing to show up for work; one such failure forfeits the bond and that area of work is no longer available to that nanny.

Taking classes in CPR or other emergency response techniques, which offer certifications upon completion, can improve your chances of being hired.

Nannies are likely to make $15 an hour on average. Babysitter earnings vary widely by affluence of the neighborhood. Check out The Penny Hoarder’s tips on how to get paid up to $21 an hour babysitting.

9. Virtual Assistant

Virtual assistants are independent contractors who offer business services virtually. Those services can include website management, website design, marketing assistance, social media postings, blog writing, email correspondence or any number of clerical duties that can be carried out with a computer and phone. This kind of work is often well-suited to flexible hours.

As of this writing, ZipRecruiter showed more than 221,000 virtual assistant jobs, suggesting that a virtual assistant could make up to $60,000 a year, depending on the work required.

You are more likely to work on an hourly wage determined by your experience and amount of work you are required to perform. There are also job firms that provide virtual assistants; you can sign on with them and accept work as it is offered to you.

Any task that can be done virtually via computer is likely to be requested by a virtual assistant. Firms would rather pay a freelancer than an employee to do the work.

10. Bookkeeper

You have a good head for numbers. You are in charge of your own finances, and you perhaps worked in an accounting role at a previous job.

Many small or civic organizations cannot afford, nor do they truly need, a full-time bookkeeper or accounting service. They are not in it for the money. Often, they are charitable or non-profit organizations. But they need occasional bookkeeping, often with an eye towards tax advantages.

A part-time bookkeeper job often requires simple financial recordkeeping or upkeep of other financial records. Part-time bookkeepers are usually former accountants or have experience as a bookkeeper. They may be asked to track invoices, but most companies use financial services for paychecks.

The average salary for a part-time bookkeeper is around $20 per hour.

11. Umpire and Referee

This is a perfect retirement job if you have a sports background and the ability to withstand criticism.

Competitive sports programs need officials for their games. Baseball, basketball, soccer and football all have leagues at various ages that need officiating. Depending on where you live, the work can be constant. If you get certified for multiple sports, you can work all weekend long and often during the week.

While high-level programs require officials to get licensed or certified, lower-level and youth group programs require just a basic knowledge of the rules. Look around your community for sports leagues in need of umpires or referees.

Pay is often dependent on the age of the players and the competitive level of the organization, but officials are likely to make at least $25 per game. At higher levels where certification is required, you can earn $100 per game.

A man walks a gaggle of dogs at his dog walking job.
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12. Pet Sitting and Pet Walker

For between $10 and $15 an hour, you can earn money by pet-sitting in a home or, if the pet happens to be a dog, you can walk the animal. Pet-sitting is a good job for retirees who want to work outdoors without a lot of physical requirements other than being able to walk while pulling or being pulled.

Pet sitter/walker is also a good line of work to get into because one job can lead to another. Pet owners tend to concentrate around each other, and they will give recommendations to other pet owners about a reliable person who can watch Fido or Fluffy while they are on vacation.

If you are going to house-sit the animal, you will likely get paid more for also keeping an eye on the property while the owner is away.

13. Freelance Writer

Although freelance writers no longer provide articles — it’s called “content” now — freelance writing is a gig that can offer the freedom to accept the assignments you want. There are firms that will connect freelance writers to people or companies in need of blogs, resumes, cover letters, marketing content and more.

According to Indeed, the average hourly pay for a freelance writer is a bit over $20, but you are often paid by assignment or by word, so the pay varies. If you have knowledge in certain topics like science and medicine, the pay can be higher.

Writing skills rarely diminish, but the requirements for writing change over time. A knowledge of search engine optimization (SEO) is going to open more doors. Many jobs that use job search websites like Indeed ask for candidates to take a writing test, but many of those are simple grammar or proofreading tests.

While there are occasional situations where someone needs a one-off writing assignment, freelance writer jobs often offer consistent, if sporadic, work. A retiree who can write could have a client for years. Check out this Penny Hoarder article on places hiring freelance writers.

14. Call Center Employee

Just to be clear, we are talking about taking calls from customers, not making calls. A call center representative answers incoming calls from customers or potential customers and either answers questions or sends the caller to someone else who can answer.

As much as this is a remote job, it is definitely a people-person retirement job. You are likely to be talking to someone who is upset or unhappy, and you are the first line of communication for the company you are representing. You need to be capable of being friendly and helpful in the face of unpleasant conversation.

As such, typical hourly pay is $15 as a call center representative.

15. Freelance Bartender

Freelance bartending doesn’t require bartending school and can earn you good money working at large events or small, private parties. Hourly pay for freelance bartenders can be anywhere from $20 to $50 even before tips.

If you can memorize lots of cocktail recipes, if you have an outgoing personality and a steady hand, and if you’re willing to cut people off if needed, this could be a fit for you. Your best bet might be starting out tending bar for people you know and then building a network of referrals.

Plan on some up-front costs, such as a portable bar (if the host doesn’t have one) and basic bar tools. The host is expected to supply the alcohol and mixers. And to protect against possible liability you might want to consider an annual liability policy.

16. Shopping Specialist

Is it the shopping or the buying that you enjoy? If it’s the shopping, then you might consider becoming someone’s personal shopper.

The job title describes the job. You are given a shopping list and the means to make the purchase, and you chase after the items.

Certainly, many people already have personal shoppers and don’t know it. When they contact a grocery store and provide an itemized list of goods they want, someone does the “shopping,” and the items are then delivered.

But true personal shoppers are more likely to purchase clothing and accessories than groceries. A personal shopper often finds items and then sends photos and descriptions to the person who hired them to get approval.

Some high-end clothing stores offer personal shopper services as well. These positions might be a little less “personal,” as they might be a one-day relationship. But the concept is the same.

Personal shoppers who go after groceries or staples are likely to make typical hourly pay of $14 to $20. Those who work for a service are likely on a wage or salary determined by the service rather than by the client.

There’s also money to be made as a mystery shopper. Mystery shoppers are sometimes called evaluators or secret shoppers and often work on their own time. Their job is to document their shopping experiences and report back to the owners to help them improve customer service.

Got what it takes to be a mystery shopper? We’ve rounded up five companies that are hiring retail sleuths. 

17. Security Guard

A security guard who does not carry a weapon serves as a presence to discourage inappropriate behavior. While many large businesses like Target or Wal-Mart hire security personnel from a service, small employers such as charitable or service organizations are likely to hire someone who is reliable and gives the appearance of authority.

The responsibilities of a security guard depend on the needs of the company being guarded. There may be requirements that go beyond just being a presence, but the differences depend on the needs of the company.

Hourly pay for security guards without weapons training is likely to be between $10 and $17. Night-time security guards are likely to make more than daytime ones.

This is a good job for retirees who do not mind a bit of boredom.

Security guards who do carry weapons require special training and weapons licensing, and is an entirely different job pursuit, perhaps not as well-suited to a retirement job.

18. Seasonal Job Employee

Remember when you had a summer job as a teenager or a part-time job during your winter break from college? The same logic can work when you’re thinking about some extra retirement income.

Many seasonal jobs are defined by the weather, which is defined by the time of year and the climate where you live. Seasonal jobs are popular, never go out of style (except when the season changes), and can actually be a fun job to look forward to.

Ski resorts in the winter and water parks in the summer are two great examples of places that require seasonal employees. It is not necessary to be a ski instructor or a lifeguard, either. These places require assistance in areas outside of their main purpose: security, transportation, customer service. Even the National Park Service hires seasonal temps.

Also included in seasonal work are holiday positions during the months of October-December. On-site customer service, truck unloading, shelving of new goods, and custodial services are among the positions for which big box stores are likely to need employees. For example in 2021, we tallied more than 1 million seasonal jobs at national retailers and delivery services.

Some stores hold hiring events in October to fill these positions, but they often continue searching for employees throughout the final three months of the year.

A man takes out a croissant out of a display case for a customer who is purchasing it.
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19. Baker/Butcher

Perhaps you grew up baking your own bread, and your cupcakes were legendary at your kid’s school events.

Perhaps you know your way around a rump roast, or can identify all the various cuts of meat they offer at your local butcher.

You could turn your lifelong interest in food preparation into a part-time job, and you are likely to be welcomed because you don’t need as much training as a newbie. Your local grocery store would be a good place to start, letting the hiring manager know that you have some background as a butcher or baker.

These are speciality skills, and as such get paid better than some other positions. According to the U.S. Bureau of Labor Statistics, a butcher’s hourly wage is approximately $17.15 an hour. lists the average hourly wage for a baker at just under $13 per hour.

20. Specialty Store Employee

You know which hardware store to go to to get advice from someone who has fixed a toilet in their life. You know which fabric store to go to where the employees know the difference between chiffon and silk.

You could be one of those employees.

During your life, you have become knowledgeable about some aspect of household or everyday life. People with your knowledge are hired by companies to help people who do not yet have that experience. Stores that serve a specific type of customer would love to hire someone they don’t have to train extensively.

According to, the average hourly rate for a hardware store employee is just under $13. Indeed says a sales associate at a specialty store will make an average of just over $10 an hour, maybe more now that minimum wages are increasing across the country.

Pro Tip

The Penny Hoarder’s Work-From-Home Jobs Portal makes the remote-job hunt easy. Our journalists scour the web for the best gigs, vet the companies and aggregate the latest listings in one place.

Kent McDill is a veteran journalist who has specialized in personal finance topics since 2013. He is a contributor to The Penny Hoarder.


What Is a Health Reimbursement Arrangement (HRA) and How Is It Used?

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Whether you work for a large employer or a small business, health reimbursement arrangements (HRAs) provide a tax-free way to cover medical costs. 

An HRA essentially gives you a stipend to reimburse you for health care costs like insurance premiums, copays, prescriptions, and over-the-counter drugs, relieving some financial pressure, making them one of the most critical benefits employees seek.

This guide details everything you need to know about health reimbursement arrangements, including how HRA plans work, how they’re different from health savings accounts and flexible spending accounts, and what you can do with the funds. 

What Is a Health Reimbursement Arrangement (HRA)?

Health reimbursement arrangements, sometimes called health reimbursement accounts, are employer-funded accounts that help employees and their covered dependents pay for out-of-pocket health care expenses. HRAs work in tandem with your employer-sponsored health insurance plan to reimburse things like your copays, deductibles, or prescription medication.

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An HRA plan is a valuable tool to pay for medical costs not covered by your health plan. It reimburses you with tax-free money provided by the employer as an employee benefit.

How an HRA Works

Imagine you have a sick child who needs prescription medication. The copay for the brand-name drug (with no generic available) gives you sticker shock. Suddenly, high out-of-pocket bills overwhelm your monthly budget, forcing you to make some financial adjustments.

Fortunately, you submit a reimbursement request on your HRA and receive a check for the amount you spent at the pharmacy.

Employers set up HRA programs to provide extra funds for qualified medical costs you, your spouse, or your dependents incur. Employers are the sole source of HRA funds; employees cannot contribute to their HRA.

Every year, the participating employer determines how much they will contribute to your HRA. The IRS requires that every employee have access to the same amount of HRA funds. Fortunately, unused account balances roll over to the following year.

Types of HRAs

There are three types of health reimbursement arrangements. Which type you have access to depends on your employer’s circumstances. 

Qualified Small Employer HRA (QSEHRA)

Small businesses employing fewer than 50 full-time workers can set up a qualified small-employer health reimbursement arrangement, also known as a small-business HRA. 

These businesses are exempt from providing employer-sponsored health insurance. So employees must get their insurance through the national or a state marketplace if their employer doesn’t offer one.

Funds in your small-business HRA can subsidize health insurance premiums or refund medical expenses you pay out of pocket.

The IRS limits how much your employer can contribute to a small-business HRA. The amount changes with every tax year. For example, in 2022, the IRS capped employers’ contributions to $5,450 for self-only employees and $11,050 for employees with a family.

Individual Coverage HRA (ICHRA)

Some employers don’t offer employee health insurance but are willing to provide a stipend to cover the premiums. The individual coverage HRA helps employees pay for health insurance if their employer has no employee health care plan.

Since January 2020, individual coverage HRAs have created a new way for small employers to distribute tax-free money for health insurance. As a result, you can use your HRA funds to buy health insurance coverage through the or state marketplace or directly from a private insurer. Previously, rules prohibited employees from using HRA funds to pay for individual health insurance premiums. 

If you’re 65 or older, you can use the individual HRA balance to cover Medicare Part A, Part B, and Part C (Medicare Advantage) premiums. If you are still working and on Medicare, your employer may require Medicare coverage verification each time you request reimbursement from the individual coverage HRA.

Group Coverage HRA (GCHRA)

High-deductible health plans (HDHPs) offer more significant savings to employers since the premiums are typically lower than traditional group health insurance plans. However, employees must pay medical bills in full until they meet the deductible, which is several thousand dollars.

So some employers offer a group coverage HRA in conjunction with HDHPs. Since HDHPs can have higher out-of-pocket expenses, the group coverage HRA helps close the gap between the high deductible and the employee’s medical needs.

HRA vs. HSA vs. FSA

In addition to HRAs, there are two other programs that complement health insurance plans: health savings accounts (HSAs) and flexible spending accounts (FSAs). Typically, they all work on a reimbursement basis, but some employers offer debit cards for direct access to funds.

HSAs are unique because the account goes with you after leaving an employer but can only work with HDHPs. Although it requires cash contributions, you control the money and can invest the HSA balance in stocks, bonds, and mutual funds.

FSAs are similar to HRAs. However, they’re known for use-it-or-lose-it rules (they don’t roll over each year), and employees can contribute through salary reduction.

HRAs, HSAs, and FSAs have some important differences that could affect which one’s right for you. Those include:

  • Who funds it
  • How much money can be added annually (individuals; families)
  • Whether the employee pays taxes
  • What type of health plans it works with
  • Whether you can use it to pay health insurance premiums
  • Whether unused funds roll over each year
  • What happens to the funds when you leave the employer (portability)

Comparing the differences between HRAs, HSAs, and FSAs, you can see that there are pros and cons to each. So if you have access to more than one and can only fund one, consider the benefits and drawbacks carefully before deciding.

Funding Source Employer Employer or worker Employer or worker
Annual Cap (2022) Unlimited on most $3,650; $7,300 $2,850
Employee Taxes  No No  No
Plan Type Any  HDHP Any
Premium Coverage Yes No Not usually
Rollover Yes Yes Sometimes
Portable No Yes No

Advantages & Disadvantages of HRAs

An HRA is a powerful tool to manage health care costs. Essentially, HRAs are free money for employees with great flexibility in how you choose to spend it. Plus, employers also win because they can deduct 100% of requested reimbursements from their taxes. 

But there are advantages and disadvantages you should consider carefully.


HRAs have plenty of advantages for employers, such as their tax-deductible status. But HRAs have robust benefits for employees too.

  1. Contributions Are Not Taxable as Employee Income. Employees don’t pay income taxes on the amount their employer provides in an HRA, lowering their taxable income.
  2. Withdrawals Are Tax-Free. Employees pay no income taxes when making withdrawals for qualified medical expenses. 
  3. The Balance Rolls Over Annually. Your HRA balance doesn’t expire, allowing you to use the rest in later years. So if your health was good last year, but you experience a new illness this year, your HRA surplus helps pay for unexpected doctor’s appointments, treatments, or hospitalization. 
  4. You Can Use HRA Money for Many Things. HRAs have the most comprehensive list of qualified medical expenses. That includes (but isn’t limited to) medical bills and dental and vision expenses.


Although HRAs are a boon to employee health care protection, they have limitations too.

  1. You Must Have Health Insurance to Use the HRA. If you opt out of buying health insurance coverage, you’re not eligible to use an HRA.
  2. Your Plan Determines Qualified Medical Expenses. Your company’s HRA plan may cover things that other companies’ plans don’t. Check with your HRA administrator for a list.
  3. You Lose HRA Funds if You Leave the Employer. If you separate from the employer, you lose all funds in your HRA account. So if you’re planning a change, exhaust your HRA funds before departing.
  4. Your Employer Determines the Contribution Amount. Some employers opt for lower-cost group plans that force the employee to shoulder more financial responsibility. If the HRA contribution amount is low, the health care program may not offer the employee much protection.
  5. Employees Cannot Contribute to their HRA. Unfortunately, you cannot contribute part of your paycheck to your own HRA. Only HSAs and FSAs permit employee funding.

Health Reimbursement Arrangement FAQs

HRAs are great supplements to health insurance, but you probably have more questions. These answers will clear things up.

What Health Care Expenses Do HRAs Cover?

HRAs cover various costs not usually covered by health insurance, like:

  • Routine doctor’s visits and copays
  • Medical bills, including hospital stays
  • Deductibles and coinsurance amounts
  • Hospital copays and expenses
  • Prescription medication
  • Over-the-counter medicine
  • Vision care (exams, glasses, contacts, and corrective surgery)
  • Diabetic supplies (testing kits and blood glucose monitors)

These are just a few of the circumstances HRAs can cover. Some plans also include:

  • Monthly premium payments toward health, vision, and long-term care insurance
  • Acupuncture and chiropractic treatments
  • Dental treatments and orthodontics (not premiums)
  • Speech therapy
  • Mental health care, such as talk therapy and alcoholic and drug addiction treatment
  • Weight loss programs
  • Service animal acquisition, care, and training

Since covered items vary among companies, check with your employer for more details about qualified medical expenses.

What Health Care Expenses Do HRAs Not Cover?

Essentially, HRAs only cover expenses directly related to treating a medical condition. 

For example, HRAs will not reimburse you for gym memberships, child care, cosmetic procedures, marriage counseling, feminine hygiene products, and funeral expenses.

What Happens to Unused HRA Funds at the End of the Year?

Fortunately, HRAs roll over funds from one year to the next if you don’t use them. So healthy people can save HRA funds for a catastrophic health emergency.

However, if you change companies, your HRA balance returns to your employer.

Can I Get an HRA if I Don’t Have Health Insurance?

No, you must have health insurance to get an HRA. Either enroll in the employer’s group health insurance plan or a marketplace policy to be eligible for HRA benefits.

Can I Cash Out an HRA?

No, you must use all HRA funds for qualified medical expenses. You can only access the HRA funds by submitting a reimbursement request to your HRA plan. If you leave your employer, they retain your HRA balance.

What Happens to an HRA When I Leave a Job?

Because your employer paid for 100% of your HRA contributions, the money stays with them if you leave your job. Find a way to use up the HRA balance if you plan to change employers.

Final Word

A health reimbursement arrangement is basically free money your employer gives you to spend on medical fees. The HRA funds are tax-free for you and tax-deductible for them. 

HSAs are straightforward to use with your health insurance plan. For example, suppose you visit the doctor, then receive a $100 invoice two weeks later. You would pay the bill, submit your payment to your HRA program, and they would reimburse you for $100. 

Another critical point is that the detailed list of covered expenses depends on your employer. Still, HRAs have the most generous reimbursement list of the three types of health accounts. 

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Alyce Meserve writes about personal finance, retirement, insurance, travel, making money, credit cards, and more. When she’s not sharing personal finance strategies, you can find her on a cruise or writing about one, hanging out with her American Eskimo Dog, Casper, taking a road trip, and playing video games. Reach her on Instagram @alyce.meserve.