Fall is “Open Enrollment Period” for many companies and an excellent time to revisit your employee benefits. Are you getting the most out of the options your employer is offering to you? Here are my top 5 tips on what to consider.
- Healthcare Tip: the H S A (Health Savings Account)
If your employer offers an H S A Plan, it could be worth looking into. First off, contributions are generally tax-deductible (up to the annual maximum limit), potentially reducing your taxable income. Next, H S A funds can be used for a wide variety of qualified medical expenses including deductibles, co-insurance, and prescriptions, as well as vision and dental care. After you turn age 65, funds from an H S A can be used for any reason – not just medical expenses – so it can also be thought of as an additional retirement savings resource. The downside is that it must be paired with a High Deductible Health Plan (for 2019, the deductible must be at least $1350 for an individual or $2700 for a family). You also may not be covered by any other type of health plan. More info can be found here.
- Retirement Tip: Employer Matching Contributions
Who doesn’t want “free money”? Yet many employees overlook the fact that this is what their employer is offering when there is an employer match in their retirement plan. If you are unsure about what your company offers, ask your Human Resources Department. Once you find out what the employer match is (for example, 100% up to 3% of your salary), make it a priority to contribute at least that amount annually. More is better, of course, but meeting the full employer match is a great way to start.
- Retirement Tip: Roth options
Many companies now also offer a Roth option to their 401k or 403b plan. This is another benefit that’s worth looking into. With a Roth option, you don’t get the up-front tax deduction today. So if you’re in a high tax bracket, it may not be as attractive for you. But the funds in a Roth wrapper grow tax-free – a potentially powerful feature – so it’s worth crunching the numbers. You may consider splitting your contributions between the traditional and Roth options, in order to take advantage of both. Your company website may have tools to help you; if not, Dinkytown has loads of calculators you can use for free.
- Life Insurance Tip: Inexpensive coverage
Many companies offer life insurance along with the health insurance package. This could be worth looking into if you need an inexpensive, convenient option, or if you have medical conditions that may limit your coverage options outside of a group plan. Why would you want life insurance in the first place? I wrote an article about that last year.
As a reminder, one of the most common reasons to consider life insurance is to align it with your outstanding mortgage. This strategy helps to prevent your heirs from inheriting a big debt along with a family home. To do this, you’d look at the amount outstanding on your mortgage and seek approximately that amount of life insurance coverage.
Additional thoughts on the advantages and disadvantages of group life insurance can be found in this article.
- Other Insurance Tip: Do I need this other stuff?
What about Disability, AD&D (Accidental Death & Dismemberment), AFLAC, and other insurance offerings? If these options are offered at no cost to you, then it makes sense to take advantage of them. However, if even a small cost is involved, you may want to stop and think for a moment before signing up.
I advise clients to look closely at what the triggers are for these supplemental policies. In other words, what has to happen in order for you to get money out of these policies? An AD&D policy, for example, is limited to accidents and often carries further restrictions and exclusions. Although these policies are generally inexpensive, it’s worth asking if it’s likely that you will ever use the coverage. You may be able to put your dollars to better work elsewhere (like your retirement plan).
I hope these tips help you to get the most out of your workplace benefits. After all, your employer set these up to help you – why not use them?
Please feel free to contact me with any questions about your workplace benefits and financial health. I’m here to help!
Shadowridge Asset Management, LLC does not offer tax planning or legal services, but may provide references to accounting, tax services or legal providers. They may also work with your attorney or independent tax or legal advisor.