Review Your Benefits
- November 13, 2018
Your benefits can be considered as a nest egg. A “nest egg” is a substantial sum of money that has been saved or invested for a specific purpose. Usually, these funds are earmarked for longer-term objectives, the most common being retirement and buying a home. When is the last time you really looked at your benefits and retirement contributions?
With open enrollment typically taking place near the end of the year, it’s a good time to review your elections and see if there are opportunities for additional savings.
Start by requesting a benefits package from your HR department, and review your available options to find what makes sense for your individual needs.
Health Benefits
Take a closer look at your available health benefits and compare your options. The type of plan that is best for you will depend on your lifestyle. Here’s a few factors to consider when making your choice:
Cost vs. deductible
Your deductible is the amount you pay for covered health care services, before your insurance plan starts to pay. With a $2,000 deductible, for example, you pay the first $2,000 of covered services yourself.
After you pay your deductible, you usually pay only copayment or co-insurance for covered services. Your insurance company pays the rest.
Typically, the lower the deductible, the higher your monthly insurance cost will be. If you’re relatively young and don’t have any current health issues, you may be better off with a high-deductible plan. A high-deductible plan will translate to a lower monthly premium.
If you have frequent visits to the doctor’s office or multiple dependents, a low deductible plan (higher monthly premium) would likely make the most sense for you.
If your spouses’ company offers insurance, be sure to compare plans to see which offers you the most value for your needs.
FSA vs. HSA
FSAs and HSAs are health savings accounts included under select insurance plans. Typically, HSAs are only available through high-deductible plans.
These accounts you can contribute to on a pre-tax basis and they can be used for approved medical expenses such as copays, your deductible, prescriptions and select medical equipment.
The main difference between an FSA and HSA is what happens to the funds at the end of the year.
FSA funds typically do NOT rollover to the next year, unless the employer sets up a grace period or carryover limit. Therefore, it is important to ensure you use all of your funds before the end of the year.
HSA funds do NOT expire from year to year, and can be rolled over to act as another savings account.
Retirement Benefits
When planning for retirement, the earlier you start saving, the better. It’s never too late to get started—make a commitment to contribute as much as you comfortably can to your retirement savings account. Start today and keep these tips in mind when maximizing your returns. Ask yourself, are you taking advantage of your benefits?
Take advantage of any employer contributions
Many employers offer a contribution match up to a certain percentage (typically up to 5%) of your retirement account contributions. If your employer offers a match contribution, increase your 401(k) or 403(b) contribution to take advantage of your employer’s match. This is essentially free money.
For example, if you make $45,000/year and contribute 5% of this income to your retirement account $2,250, your employer will make an ADDITIONAL $2,250 contribution to your account for a total of $5,000! Check out next years limits.
Consider the type of 401(k) or 403(b) account that you are investing in
The main difference between a traditional and ROTH account is that under a traditional 401(k) or 403(b) your earnings are taxed.
A traditional account is taxed only when funds are taken out of the account after you retire. Under a ROTH account, funds are taxed at the time they are placed into your account, but then grow tax free and are not taxed when taken out at retirement.
Younger employees (or those who anticipate being taxed at a higher rate when they are older) are more likely to benefit from a ROTH account. While those individuals closer to retirement are probably best suited for a traditional 401(k) or 403(b).
Consider Your Asset Allocation
Your retirement account is made up of a portfolio of various bonds and stocks, which make up your asset allocation.
Younger investors who have more time for their money to mature and are able to tolerate more risk should have a higher percentage of stocks.
Older investors, closer to retirement, should have a portfolio with more bonds. There are many target date funds that will automatically adjust from year-to-year based on these risks.
Other Benefits
Are there additional benefits that you can take advantage of? Your employer may offer child care, tuition reimbursement, profit sharing or bonuses. They may also allow you to use time off for volunteering or give you additional time off for the birth of your child. Explore what your options are.
Talk to the Experts
When reviewing your benefits, it’s always a good idea to get input from the experts. Talk to your employer’s insurance and retirement advisors to discuss your individual situation so that you can find the option that works best for you.
GreenPath Financial Wellness is also available to provide free financial counseling as well as debt management services. Call GreenPath today at 800-550-1961.
