It’s hard to believe we’re less than 3 months away from the 2019 New Year. Before you start thinking about your holiday shopping & Winter escapes, there is something else you should immediately put on your “to-do” list: Benefits Assessments.
Traditionally, your Benefits Enrollment window will open between mid-October & early November. While the desire to quickly log into your Benefits website & confirm the exact selections we made the previous year may be strong, you’d potentially be doing yourself a disservice. In the same way that one size does not fit all for investments, the benefits that are most appropriate for you will also change over time based on your current circumstances.
Here is some advice on how to best tailor your benefits to you:
1. Insurance. Before you try to figure out what plan suits you & your family, take a minute to reflect on the last year. Did you reach your deductible? How much did you pay out of pocket? More importantly, was this an abnormal year or typical of what you would expect? For example, if you welcomed a new baby this year, you probably reached your deductible fairly quickly! That won’t happen every year.Once you have an idea of what you spent vs. what you expect to spend, you’ll be able to better narrow your choices to determine what makes sense for you: A HDHP (High Deductible Health Plan), HMO (Health Maintenance Organization) and/or PPO (Preferred Provider Organization).In the simplest overview, there tends to be a direct relationship between out of pocket expenses & flexibility of the plan. The higher your out of pocket expenses, generally speaking, the greater the flexibility of choice you have. When you have lower out of pocket expenses, it’s more likely that you’ll be restricted to specific physicians within your network – and they may require referrals.
2. HSA (Health Savings Accounts). If your employer offers a HDHP, there’s a chance you also have an HSA available to you. These plans are not use it, or lose it – instead, they allow you to put extra money aside and invest towards future health care needs. For 2018, contributions into a HSA are capped at $3450 per individual or $6850 for those with family coverage. If you’re 55 or older, you are eligible for an additional 1k “catch-up” contribution. * A perk to getting older! The best part: HSAs are triple tax free meaning you can put the money in pre-tax, it grows tax free & if used for eligible medical expenses, can be withdrawn tax free. Any funds you withdraw for non-qualified medical expenses will be taxed at your income tax rate, plus 10% tax penalty.
3. Life Insurance. Not to be confused with the standard Health Insurance package above, this is insurance purchased in the event of your death. For most individuals, your need will never be greater than when you have young children. Couples in their late 20’s or early 30’s typically have an outstanding mortgage, student loans, dreams of sending their children to college – not to mention the desire to keep a roof over their family’s head. Spend time determining what a realistic Life Insurance Need is. Your employer likely offers a guarantee of 1 or 2x salary, but if you are the sole breadwinner, you may need to consider purchasing additional insurance.Also keep in mind that while group coverage is very reasonable from a cost perspective and even more convenient (no medical exams required!), these benefits are not portable. Should you lose your job, you don’t get to take this with you permanently. A supplemental term policy for you or your spouse may be worth considering.In the reverse scenario – where your kids are college bound & the mortgage is paid down, perhaps you’ve over estimated your need! Reducing the amount of insurance you’ve selected in years’ past may be appropriate and could save you money.
4. Supplemental Disability. Similar to the Life Insurance need discussed above, almost every client we’ve met underestimates the value of their group disability benefit. Did you know most employers will cap disability benefits at 60% of BASE (salary)?* If a large portion of your annual income is paid in the form of commission or bonus, this could translate to a shockingly small monthly benefit. To make matters worse, up to 85% of disability income can be treated as taxable making your take-home benefit even smaller**. Look at your monthly expenses to determine what you need as a bare minimum. Consider supplementing this if you’d have funding shortfalls.
5. 401k. I cannot emphasize this enough: If your employer offers a 401k match, be sure to contribute enough to at least capture the full match. If you do not contribute, you lose out on the match: no do-over’s or look-backs!Finally, if you don’t intend to follow your investments closely, consider turning on the auto-rebalance. Enrollment windows are a great opportunity to confirm you’re still well diversified and on target to achieve your long-term goals.
If you’re not the greatest saver, consider allowing your employer to step up your contributions each year. For example, you can elect to start contributing 4% per pay period and annually increase your contributions by 1% each year. Out of sight, out of mind!
One last bit of advice: Don’t be afraid to ask for help! Not only do most employers have excellent Human Resources & Benefits staff who can address your questions, but our team is always here to help as well. Please give us a call if you have any questions about your personal benefits situation.
Registered associates of Bluestone Wealth Partners are registered representatives of Lincoln Financial Advisors Corp. Securities and investment advisory services offered through Lincoln Financial Advisors Corp., a broker/dealer (member SIPC) and registered investment advisor. Insurance offered through Lincoln affiliates and other fine companies. Bluestone Wealth Partners is not an affiliate of Lincoln Financial Advisors Corp. CRN-2272503-100918