As the year draws to an end, employers will begin rolling out new and revised employee benefit plans. Even if nothing changes, this is time for you as an employee to make important decisions to maximize what you get out of your employee benefits. You will need to pay careful attention and make strategic selections in terms of health insurance, tax withholdings, 401(k) contributions and life insurance policies. You should take the time to do your research, look at your financial situation and review your financial goals for 2020 and beyond.
If you are not paying attention and just continue with things as they are (or whatever default selections your employer’s plan provides), you could be missing out on important opportunities. There may be a lot money you can save if you make the right choice. You could save on taxes or reduce medical costs. You might be able to get more out of your retirement savings plan, as well.
Let’s take a look at a few steps you should be taking this time of year as you take a hard look at your employee benefit package.
First and foremost, you need to thoroughly review your healthcare insurance plan. Did your employer change healthcare providers or plans? If not, are there changes that have been made to your existing plan? Have your family’s medical needs changed (new child, new spouse, illnesses or medical conditions)? These are important questions to ask before you settle on your specific plan.
Look at your premiums, deductibles, copayments, prescription costs, HMO vs. PPO options, dental and vision options, and all other factors to select coverage that best suits your needs. Go through your plan line by line and make sure it’s the right fit.
If your benefits plan offers a flexible spending account (FSA) option, be sure and look into it if you have a lot of recurring medical expenses. This is a tax-deferred account that allows you to contribute a portion of each paycheck and then pull from as needed to cover your family’s medical bills. If you know you are going to spend a lot of healthcare expenses next year, an FSA can save you money and won’t leave you scrambling to pay medical bills throughout the year.
Just know that whatever money you put into your FSA must be spent before the year’s end. Some can carry over, but otherwise you will lose what you don’t use. If you already have an FSA this year, find a way to spend any excess you have in there before 2019 is over.
If you have a life insurance plan through work or another source, the end of the year is a great time to sit down and review it. Again, make sure there aren’t any significant changes. If so, look over each item carefully and adjust your options accordingly.
Of course, review your beneficiaries. Things change over time (marriage, divorce, children, etc.), so beneficiaries can also change. Make sure the names, disbursement amounts and contact information are correct and up-to-date with your life insurance plan, your will, your bank accounts, your retirement savings and other documentation that will affect any inheritances you leave behind if something bad should happen.
If you are part of your employer’s 401(k) plan, use this time to review your contributions. Maybe you got a raise this year or just a cost-of-living pay increase, so it might make sense to up your tax-deferred retirement savings contributions from paycheck to paycheck. Ideally, you should be increasing how much you contribute every year until the point where you are maxed out. Even then, you can look for other investment opportunities or alternative IRA plans to grow your wealth and save even more for an early retirement.
You can also take a close look at your 401(k) plan and decide if you want to change your investment allocations or not. Review how your funds have been performing and think about changing. Doing some good research and making adjustments can help you maximize the long-term earning potential of your IRA.
As you look ahead to retirement, you can also consider setting up and contributing to a health savings account (HSA) that will benefit you in the future as your medical expenses increase. It’s a great way to put away extra money (with significant tax savings) for future healthcare costs.
You will also want to review (and change, if necessary) your tax withholdings before the calendar rolls over to 2020. The fewer deductions you can afford to take, the better off you will be come tax season. If you are already withholding zero, consider withholding a little extra for Federal or state taxes. Think about what you got back in your tax returns this year. If you owed money, then it’s definitely worth withholding more if you can.
You should be reviewing every aspect of your employee benefit plan. Flex time, overtime pay, daycare and other fringe benefits could be opportunities to save more money or improve your current lifestyle. Or, you may be paying extra for something you don’t actually need. Review the details of every single benefit in your package and make the right decisions.
For help with all your financial planning needs, including a thorough review of your employee benefits package, tax strategies and retirement savings plans, count on the trusted financial advisors at Illumination Wealth. Contact us today for more information. Let us show you how we can help you get the most out of your employee benefits and save more for your future.