November 01, 2018
This is the time of year when employers let workers make changes to their benefit plans. I know many of you don’t bother to review, and just keep everything the same. That can be a costly mistake. Please use your current open-enrollment to give your workplace benefits a check-up:
• Are You Contributing at Least 10% to the Retirement Plan? If your contribution rate is lower, you need to change it right now. Saving 3% or 5% of your salary each year is not going to build the savings you need to retire comfortably?
• What are the Copays and Coinsurance Rates for Your Health Insurance? Many employers offer a few different health plan options. But the features of a given plan change from year to year. Make sure you know what’s in store for 2019. If anyone in your family has a chronic condition that requires medication, confirm what the copay (if any) will be next year. Insurers often move different drugs into more expensive “tiers” that require consumers to pay more.
• Check out the High Deductible Health Insurance Plan. If you are relatively young and in good health, and you have the savings to cover a high-deductible, this can be a smart option. Once you are enrolled in a HDHP you are eligible to contribute to your own personal Health Savings Account (HSA). An HSA is packed with tax breaks. Your contributions are tax deductible, the money grows tax-free and when you make a withdrawal to pay for a health care expense, there is no tax. Yep, triple tax free. That’s even better than a Roth IRA! And speaking of retirement, if you don’t need to use the money in your HSA, it just grows from year to year. That makes an HSA a powerful retirement savings account: money you put in today can grow for years, and then in retirement you can use it—tax free—to pay for your health care costs. If your employer kicks in a contribution to an HSA, that’s all the more reason to consider a high-deductible health plan.
• Life Insurance. If your employer offers you life insurance, I want you to check exactly what your beneficiaries will be entitled to. I bet it’s just one or two times your annual salary. That is so not enough. If anyone is dependent on your income, I want you to have much more. Don’t worry, it’s affordable, and as I explained last month it’s not hard to shop and buy the right amount of term life insurance.