The benefits package your employer offers is a valuable part of your total compensation. Making the right choices is critical, and it’s worth spending the time to get it right. Use the “Open enrollment” season as an opportunity to review plan options, ask important questions and make informed benefits choices you’ll feel good about all year.
It isn’t uncommon for many of us to simply check the boxes to continue our current benefits. Maintaining the status quo takes less time and is a subtle way to validate the choices we’ve made in the past. Those who have gone through a major life event, such as a marriage, divorce, the birth of a child or a child leaving the nest, are more likely to make changes. Yet these benefits should not be taken lightly. Here are some key areas you should consider during your open enrollment period:
Insurance coverage is a top priority for most of us. Think about your own health and what your anticipated medical needs are in the coming year and pick an appropriate plan. You might want to choose a plan with lower deductibles if you expect to address specific medical issues. A high deductible option may be best if you don’t anticipate any major medical issues (although we never know when such issues will occur). If you go the high deductible route, look into a Health Savings Account (HSA). It allows you to set money aside on a pre-tax basis that can be used to meet current eligible out-of-pocket medical expenses, but can also be invested to grow and help pay future medical costs.
Flexible spending accounts (FSAs)
Your employer may offer you the ability to use pre-tax dollars to fund spending accounts to help pay for medical and child care expenses. In effect, this reduces your out-of-pocket expenses in each area. In 2015, individuals could put $2,550 toward a health care FSA and $5,000 toward paying dependent care expenses for children under age 13.
Retirement savings plan
This is a prime time to boost your retirement plan contributions and assess your investment choices. Individuals under 50 years old could contribute $18,000 to their 401(k) or 403(b) plan in 2015, while those ages 50 and older could contribute $24,000. Also consider a Roth 401(k) or 403(b) if it is offered as a way to build up retirement savings that may qualify to be withdrawn on a tax-free basis when you retire. It’s important to note that the 2016 limits for both FSAs and retirement savings plans are indexed to inflation and have not been set yet (as of Oct. 2, 2015).
Other types of insurance
Many employers offer disability income coverage. This is a valuable benefit to provide an income stream to you if an accident, injury or illness prevents you from working for an extended period. Any option to purchase additional coverage is worth considering to have more complete protection. Some employers also offer the opportunity to purchase long-term care coverage with a group discount. Compare the costs with coverage you can purchase on your own to determine where you will get the best value.
Open enrollment season is a good time to talk to your employer’s benefits administrator if you have questions about your options. It also makes sense to consult with your financial advisor for perspective on how your benefits fit with your overall financial plan.
William “Drew” Watson CFP® is a Financial Advisor and Private Wealth Advisor with Ameriprise Financial Services, Inc. in Owensboro, KY. He specializes in fee-based financial planning and asset management strategies and has been in practice for 20 years. To contact us by phone, please call 270-684-8424, or by mail at 111 West 3rd St., Owensboro, KY 42303. You may also visit our website at www.williamawatson.com.