Five Questions to Help Make the Most of Your Employee Benefits

Open enrollment is an opportunity to put yourself and your financial health first. Here are five questions to help you make the most of your employee benefits. checking a list: review employee benefits
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Key Takeaways

  • Consider contributing enough to your employer’s 401(k) plan to receive all of the matching available 
  • Review your medical expenses from the previous year to assess your needs for the next year
  • Explore all available benefits to help maximize pre-tax contributions and potentially lower your tax bill

Employee benefits are more than just perks; they’re a key part of your financial well-being. Between health care, life insurance, retirement plans, and other benefits, it’s possible your employee benefits plan could be as much as 30% of your total compensation. They also provide the opportunity to build your savings for the future and to choose the protection you want in the most cost-efficient way. This savings could potentially be substantial depending on the choices you make.  

Here are five questions to help you optimize your employee benefits plan: 

Has Your Family Situation Changed?  

Life events can play an important role in deciding which employee benefits to choose and how much you pay. For example, the birth of a child might mean switching to family coverage for health insurance. Recently married? You and your spouse should do a side-by-side comparison of the benefits offered by your employers to see which ones best meet your needs. It’s possible you might decide to choose some benefits from each package because of the cost or coverage. Of course, both of you should consider contributing as much as possible to any workplace retirement plans. Have adult children under the age of 26? See if they can get medical coverage through their own employer. If so, you may not need to keep them on yours.

How Much Are You Contributing to Your Retirement Plan?

It's a good idea to review your 401(k) or 403(b) plan to see if your retirement savings is on track. For 2020, you can generally contribute up to $19,500 if you’re under age 50 or $26,000 if you’re over. If you’re not doing the maximum, consider contributing enough to receive any employer matching contributions. It’s almost like “free money” for your retirement.

Christine Russell, senior manager, retirement and annuities, TD Ameritrade also offered this suggestion. “Think back over the last year: did you really miss that money you contributed to the plan? Probably not. So consider increasing the percentage. After a month or so, you will adjust to that too.” A 1% increase could go a long way in helping to build your retirement savings. And your future self will appreciate it. 

Remember your contributions are usually pre-tax, which may help lower your current tax bill and there’s the potential for tax-deferred growth. Alternatively, many 401(k) plans today allow your contributions to be Roth deferrals. “Earnings on Roth contributions are tax-free in retirement. You get very few opportunities for tax-free income in retirement, so make sure you consider taking this one!” said Russell. “Many folks consider converting money to a Roth IRA, but if you can make Roth contributions to your 401(k) you save yourself a step,” Russell commented.

Note: Contribution limits vary by plan type. For example, if you have a SIMPLE IRA, you can contribute up to $13,500 for 2020 with a $3,000 catch-up for those age 50 and older. Be sure to confirm the limits for your workplace plan with your employer.

Plan for tomorrow by setting financial goals today.

How Much Do You Typically Spend on Medical Expenses?

When reviewing your medical benefit options, you’ll likely have your choice of multiple health care plans with varying premiums, deductibles, co-payments, and services. One way to help narrow down your choices is to estimate your expenses for the upcoming year based on your out-of-pocket costs for the past year. For example, if you went to the doctor once in 2019 and expect to go only once next year, a higher-deductible, lower-premium plan might be the way to go. The reverse may be true if you or a family member have a chronic condition.

Your employer might also offer a health savings account (HSA), which is way to save and pay for future health care costs. HSAs offer the potential for tax-deductible contributions, tax-deferred growth, and tax-free distributions for qualified medical expenses. Plus, you can generally take your account with you when you retire. For 2020, the contribution limit is $3,550 for individuals ($7,100 for families). If you’re age 55 or older, you can contribute an additional $1,000. Russell reminded us, "In order to fund a HSA, you must pick a high-deductible health plan from your employer. If you do have a high-deductible health plan offering, some employers will contribute to your HSA for you as part of their benefit offering, so be sure to ask about this."

Still not sure which medical plan to pick? See if there’s a comparison tool you can use to help evaluate your options.

Are You Protecting Your Future (And Your Family’s)?

Life is full of unexpected events, some of which could have a potentially negative impact on your financial well-being, such as disability, death, or the need for long-term care. Make sure you have sufficient protection.

  • Short- and long-term disability insurance. According to the Social Security Administration, more than one in four of today’s 20-year-olds can expect to be out of work for at least a year before age 65 because of a disabling condition. The basic coverage your employer provides may not be enough to meet your expenses. You may want to consider purchasing supplemental disability insurance if it’s available. 
  • Life insurance. Most companies also offer basic life insurance for employees. So the question is whether you should purchase supplemental coverage. If you’re the primary breadwinner for your family, it probably makes sense to get it. However, if you’re single, basic coverage may be enough.
  • Long-term care insurance. This type of insurance is relatively new and expensive, and only a small percentage of employers offer it. If yours is one of them and you’re between ages 50 and 65, it’s worth considering. The average annual cost for nursing home care is over $89,000 for a semi-private room, according to 

Keep in mind you’re not required to purchase any of this insurance through work. You could shop around and buy it on your own, although your employer’s policy is usually cheaper because they can negotiate rates.

Are You Leaving Any Benefits on the Table? 

Your employer has a vested interest in your physical, emotional, and financial health. Because of this, they may offer additional programs and services to help you pursue your goals and save money—and potentially lower your tax bill. Make sure you understand all that your company offers and when you have to sign up. For certain benefits, you may have to do it during open enrollment. For others, such as tuition reimbursement, you may be able to wait until the need arises.

Some of the more common benefits include:   

  • Pre-tax commuter benefits
  • Discounts for local businesses or events
  • Fitness center reimbursement
  • Adoption assistance
  • Employee assistance programs
  • Student loan assistance

“Open enrollment is the perfect time to put yourself first by making choices that support your goals for physical and financial health,” said Russell. Your employee benefits plan can help you build and protect your savings and move forward on your financial journey. During open enrollment season, be sure to attend any benefits fairs or webcasts your employer may offer to learn what’s new or changing for the upcoming year and to get your questions answered so you can tailor the offering to your unique situation. Remember, these benefits can be incredibly valuable, so don’t waste them.


Key Takeaways

  • Consider contributing enough to your employer’s 401(k) plan to receive all of the matching available 
  • Review your medical expenses from the previous year to assess your needs for the next year
  • Explore all available benefits to help maximize pre-tax contributions and potentially lower your tax bill
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