Last week, I cracked a molar, the second time in two months, and my dentist just informed me that the only way to prevent more of this going forward is to get braces. My total costs for dental care not reimbursed by my insurance carrier this year exceeds $3,000, and the cost of braces could be up to $10,000 over the next few years. Needless to say, I was not expecting this at all. I’ve taken great care of my teeth my entire life. However, as an apparent consequence of having kids in my forties (which caused my teeth to move during pregnancy) three years of teenage braces have been undone, causing stress fractures in my teeth when I bite.
Perhaps I should have expected it though. Unexpected dental expenses happen. In fact, they are more common than not, so perhaps they should be considered “expected but unpredictable” — and expensive. On the average, per an American Dental Association (ADA) study, only 48% of dental expenses are financed by private insurance.
The typical dental insurance plan is capped at $1,500 in coverage per year. If you have an unexpected dental expense that you aren’t financially prepared for, how can you handle it? Here are some ideas:
Flexible spending account
An FSA is a tax-advantaged account at work to which you can contribute up to $2,600 in 2017 from your paycheck in order to pay certain medical and dental expenses. If you already contribute to an FSA, that’s the perfect source to pay for most dental treatments that haven’t been covered by insurance. If your dental treatment is not urgent or can be spread out over time, consider putting it off until the following year, so you can choose to fund an FSA during your benefits enrollment. FYI, if you already contribute to a health savings account, you’ll need to choose a “limited purpose” FSA (just for dental and vision expenses) in lieu of a regular FSA. For tips on using an FSA, see this blog post.
Dental problems don’t heal themselves. If you need treatment, but you don’t have resources available to pay in full right now, you may want to consider financing:
Credit card – The advantage of putting the charge on your credit card is that it’s easy and immediate. The disadvantages are significant though: high interest rates, lower credit score (from higher credit card utilization) and reduction in monthly cash flow from credit card payments.
Personal loan – For a borrower with a good credit score, a personal loan may be a good alternative. Rates are generally lower than credit cards. Because a personal loan is considered installment debt (like a car loan or a mortgage), it may actually help your credit score.
You’ll still see a reduction in your monthly cash flow from loan payments though. Make sure you choose a reputable lender with low fees. See this article for more tips on finding a personal loan.
Dental office payment plan – For treatment plans that stretch out over time, your dentist may offer you the option of a payment plan, typically financed by an outside company. However, a dental office payment plan can have a very high rate of interest, more than a credit card. Be cautious and make sure you read all the fine print before you sign.
401(k) loan – A small loan against your retirement plan balance can be processed fairly quickly, without a credit check or any reporting to the credit bureaus. You’ll be repaying yourself via after-tax payroll deductions at a low rate of interest. There are downsides, however, including when you leave your company for any reason, any unpaid loan balances typically become due in full or are considered an early retirement plan distribution – subject to income taxes and a 10 percent penalty for early withdrawals.
Consider a dental school clinic
Many top dental schools offer affordable care from dental students and residents. This can save you fifty percent or more on the cost of your treatment. Search “dental school clinic” online for clinics or search this list of accredited dental schools near you.
What I chose
Luckily, I was able to dip into our cash reserves to pay my dentist for this year’s treatment. That’s what emergency funds are for, after all. I can’t say I enjoyed having to spend the money though.
I also chose to defer the decision about braces until next year, so I have time to weigh the pros and cons. We have some new benefits at work and no longer have access to a limited purpose FSA, so that’s not an option for me. I have some regrets, though, for not funding a limited purpose FSA for 2016. It would have come in handy.