How Misunderstanding Your Benefits Coverage Can Cost You

According to a recent Aflac study, over 90% of employees kept the same benefits selections as the prior year, 80% spent less than an hour making that decision, and 3 of 4 don’t fully understand their options. This is a developing problem in our workforce, and we’re here to help you navigate through it.

Health Insurance

It is critical to evaluate all of your options. One of the most under-utilized tools in employee benefits today is the Health Savings Account. That is unfortunate because the triple tax benefits are unparalleled. Contributions to an HSA are tax deductible or pretax, then the interest accrued in the account accumulates tax-free, and last but not least withdrawals are tax free if they are made for qualified medical expenses. If the US government is willing to forego collecting taxes on an investment on that many levels, it would be wise to take advantage. Read carefully through your health offerings for this unique opportunity, or set up an HSA on your own to supplement your employer offerings.

Life Insurance

The first step when deciding on life insurance coverage, is determining how much coverage your family will need if a worst-case scenario were to happen. Many employer plans offer a very low amount of free coverage and it is a mistake to assume this would be enough to protect your family if you pass away. Decide on how much death benefit you would need to provide for your family for an acceptable amount of time should you pass away, then decide on the insurance options that fit your goal, not vice versa.

Retirement Strategies

You likely already know what retirement options are available to you at work. If your employer matchers a portion of your contributions, take full advantage of it before exploring other investment options. One growing segment of the employee retirement plan is the Roth 401k option. Nearly two-thirds of plans offer them now, and they could compliment your traditional account nicely. The Roth 401k (like a Roth IRA) contributes after-tax dollars to be withdrawn tax-free in retirement. Conversely the Traditional 401k contributes pre-tax dollars, before paying taxes on the withdrawals. As you can imagine utilizing both of these strategies is a way of balancing your retirement savings from a tax standpoint.

Tips

  • Take the time to fully understand your plan at open enrollment. It can be tedious but it will save you time, aggravation, and money in the long run.
  • Put your plan in cruise control. It is much easier to control your spending after your savings have already been made. Set your contributions and payments up before your other expenses and spending habits get involved.
  • Save the phone and email addresses of your go-to people into your contacts. This way no lost paperwork, or other interference can get between you and the information you are looking for.
  • Take notes at your open enrollment and plan education meetings. Often times the company offering your benefits can be a valuable financial resource in other areas as well.