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. Your employer provided benefits are an important aspect of your finances so it’s a good idea to study your options carefully. It’s also important to realize that many benefits only allow you to make changes during this window of time unless there is a significant life event, so your decision will likely be with you for another year.
First of all, 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’s a good time to look at your retirement savings plan through your employer. If you aren’t enrolled, you probably should be. If you are enrolled, make sure you are contributing enough and getting match money if available.
Health, Dental, and Vision Insurance
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 or changing coverage options. Make sure you understand what type of coverage you need and how the plans differ. 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 lower coverage. But don’t just spring for an option based on price alone. Take a look at your medical needs. 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. So, start with what you know about your medical needs and use that as a basis for determining how much coverage you should opt for.
This option usually does not get enough attention, but it is a very important benefit if your employer offers it. 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.
Keep in mind that even though these employer group life insurance plans may be cheap, they are only good while you’re working for them. So, you could go from being well covered to having no coverage at all if you lose your job or quit. So, begin thinking beyond your employer’s plan. It’s great to have while you’re still working, but you have to think about your insurance needs beyond that as well.
Finally, consider the health savings account option if it is offered. The HSA can provide an easy way to put some money away for regular medical expenses while saving money on taxes at the same time.
A lot of people don’t even recall 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. Have a 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.
Learn more about how to change your W-4 tax exemptions.
More than likely your employer offers some sort of retirement savings plan. It could be a 401(k), 403(b), 457, or similar profit sharing plan. 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 so it’s hard to say exactly what you should be doing with your plan, but take the time to read up on yours. They may have changed fund offerings or even a matching or vesting schedule that could significantly impact your financial plan. The bottom line is there are many benefits to contributing to these plans and with uncertainty of Social Security and pensions you should seriously consider signing up if you don’t currently have any automatic retirement savings plan. If you are already enrolled, congratulations, but you aren’t off the hook just yet.
While most retirement plans don’t follow the same open enrollment schedule as other benefits it’s still a good reminder to check on your account. Look at the performance and your investment 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 may end up only being $10-20 extra, but while a small amount, will still increase your savings even faster.
Check On Your Benefits
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.