It’s that time of year when HR sends a new benefits package from your employer (and if you’re lucky, or not, conducts an hour-long meeting on the changes). All joking aside, this an important time for you to reassess your family’s financial and health needs for the next year. Without careful consideration, you could end up losing money you could otherwise save.
Here are six areas that you should re-evaluate.
Don’t just choose the same plan as the one you selected a year before. Consider how your health needs have changed and adjust accordingly. For example, if a family member has been recently diagnosed with an ongoing medical condition, skip the high-deductible, high-maximum out-of-pocket plan that you used this year and go for the lower deductible, lower out-of-pocket max plan. But if your family spent little time in the doctor’s office this year, consider a high-deductible plan and pair it with a Health Savings Account (HSA). These are funded with pretax contributions, but any money used for qualified expenses is tax free. Unused funds roll over from one year to the next. HSAs also can be invested and have tax-deferred gains. Another plus: They can be a backup retirement account. “If you wind up with extra money in the account, at age 65 you can withdraw from it, as you would from a retirement account, and pay tax at that time,” says Bridget Grimes, president of WealthChoice in San Diego. No matter what plan you choose, make sure you have outside resources to pay your plan's deductible and coinsurance amounts up to the out-of-pocket maximums in case you experience an unexpected medical emergency or illness next year.
Flexible Savings Accounts
These accounts are funded with pretax dollars and can be used for two types of expenses: medical and care for a dependent. FSAs can cover annual, easy-to-plan-for health costs such as glasses, contacts and prescription drug co-pays. “That makes those expenses 25% cheaper to you and allows you to budget all year through payroll deduction for those unpleasant large out-of-pocket medical costs,” says Kristin Sullivan of Sullivan Financial Planning in Denver. Dependent-care FSAs can reimburse you for nannies, au pairs, daycares, after-school care and summer day camps. The funds can also be used for adult daycare for a qualifying dependent. You (and your spouse, if applicable) must be working, a full-time student, actively looking for work or incapable of self-care.
If your household depends on your income, make sure to sign up for your employer-sponsored, long-term disability insurance that will ensure you get a percentage of your income if you can’t work because of sickness or injury. To figure out how much you need, add up your monthly living costs and compare the total to what the coverage covers. If it’s not enough, consider buying supplemental insurance. “It’s also best if you pay for this coverage with after-tax dollars,” says David Haas with Cereus Financial Advisors in New Jersey. “Because then your benefit, if you become disabled, will be tax-free.”
Similarly, sign up for the free life insurance your employer offers, especially if your household depends on your paycheck. Plus, there’s no downside--it’s free. Coverage from employer-sponsored policies typically is not enough, covering at most only one to two times your salary. Find out if your employer offers the option to buy additional coverage. If so, compare that additional coverage and its price to what you can get on your own. Unless you’re particularly unhealthy, the employer’s optional insurance is often overpriced because every employee—despite age and health—is guaranteed to get the coverage. If you already have life insurance, make sure your policy’s beneficiary is up to date, especially after any recent life changes such as divorce and death. Retirement contributions: Revisit how much you’re putting away in your employer-sponsored retirement plan. Make sure you’re maximizing your contributions to get the full match, if your employer offers one. Then, increase your contribution—a good starting point is 1%—especially if you received a raise this year. For those with enough income after living expenses, boost your contribution so that you get the max allowed by law—that’s $18,500 for 2018.
Don’t overlook other, more minor benefits your employer may offer that could save you money next year. Dental insurance is a must, as is vision insurance if you have problems with your eyes. Plans that allow you to pay commuting expenses with pre-tax dollars can save you money on parking, transit passes or even bicycle expenses. Find out if you can lower your healthcare premiums or earn rewards by participating in a wellness program. Other benefits to look for: legal service plans, pet insurance, identity theft protection, student loan assistance, and discounted event tickets, among others.