Fall is in the air, and that means many employers begin their open enrollment period for benefits. Even if your employer doesn’t do open enrollment in the fall, keep reading. There is important information to consider for when your time comes. This is an important time of year for anyone who works and can only make benefits elections during this window for many reasons.
First, things change in your life. During the course of a year you may have experienced many issues that could have a substantial impact on how your benefits should be set up. Second, you want to make sure you are adequately covered while not over insured. Finally, it is a good time to look at your retirement savings plan through your employer. If you aren’t enrolled, you should be. If you are enrolled, make sure you are contributing enough and getting match money if available.
This is a major issue for many people because we all know health care costs are continuously increasing and health care providers through your employer may be increasing their prices and/or coverage options as well. Make sure you understand what type of coverage you need. Are you single or are you married? Have children? You will typically be presented with a few coverage options with different prices for each. Generally the cheaper the option, the higher the deductibles and possibly limited coverage. But don’t just spring for an option based on price. Take a look at your medical needs currently. Do you require regular prescriptions or doctor visits? Do you have contacts or glasses? Many of these questions will play a part in how much coverage is adequate without paying too much for it. There is always the possibility of a medical emergency as well, but unfortunately those are unpredictable.
This option usually does not get enough attention and people don’t like to think about life insurance, but it is a very important benefit. Most employer group term life policies by default provide you one times your annual pay at no cost to you. For some, that is all they offer. For others, they allow you to purchase additional insurance for an additional fee. Most even allow you to add this additional insurance without getting an exam or submit any health information. My recommendation is to take advantage of as much additional insurance as they offer where you do not have to submit to an exam. As an example, my employer offers an insurance benefit of one year’s salary with the option to have a benefit of 5 times my annual salary without an exam. The cost? Under $3.00 per pay period, or roughly $6.00 a month. That small amount of money that comes out of my paycheck provides a tremendous benefit to my spouse or beneficiary in the event I die.
A lot of people do not even remember doing this, but remember when you were hired how you had to fill out that tax form for exemptions? That determines how much money is withheld for taxes for each paycheck. Do you get a tax refund every year? You may be withholding too much. Tax bill each year? You probably aren’t withholding enough. Or maybe you bought a house recently, had a child, or some other significant tax event. These events entitle you to different tax deductions and credits where you could benefit by changing your exemption status with your employer. Maybe you can free up more money each paycheck to pay off some debt or put into your retirement fund, or possibly you can finally have a little more withheld so you don’t have to write a check to the IRS come April.
For more information the IRS offers a neat little withholding calculator.
More than likely your employer offers some sort of retirement savings plan. It could be a 401(k), 403(b), 457, or similar. Unfortunately, only about 70% of eligible employees contribute to these plans. Many employers even offer some sort of matching program, which is essentially free money available to you. Every plan is different and retirement savings is a whole different conversation for another day. The bottom line is, there are many benefits of contributing to these plans and with uncertainty of social security and pensions you should seriously consider signing up if you do not have any automatic retirement savings plan. If you are already enrolled, congratulations, but you aren’t off the hook just yet.
While typically you don’t need to make changes to these plans only during open enrollment periods, it is a good reminder to check on your account. Look at the performance and your portfolio allocation. Make sure it is still suitable for you and that you are taking advantage of as much match money as you can. You also want to look at how much of your salary you are deferring into the plan. If it is 5% currently, consider bumping it up 1% this year. Typically a 1% increase can end up only being $10-20 extra, but while a small amount, will increase your savings even faster.
Whether your employer has open enrollment periods this fall or not, or even if you are open to changes all year, now is a good time to review all your options and reflect on what changes have occurred in your life during the past year and make the changes necessary to maximize your benefits while ensuring you aren’t missing opportunities or wasting money.
Author: Jeremy Vohwinkle
My name is Jeremy Vohwinkle, and I’ve spent a number of years working in the finance industry providing financial advice to regular investors and those participating in employer-sponsored retirement plans.