With 2020 on the horizon, this is the time of year when many companies open their “enrollment period” for their employees to change their benefit elections. Many of my clients are in this period right now, so lately I have been having a lot of these discussions.
Of course, each employer varies on what types of benefits they provide, but most often the choices include life and disability insurance, medical, and dental. It’s important to review your options and not just be a SALY (Same As Last Year).
Here are 4 Things to Pay Attention To that could impact your health…and your wealth:
1. Life Insurance
Most employers offer life insurance of at least your annual salary at no cost. Unfortunately, people need more than that – typically much more. I always use the rule of thumb to have 10x your annual salary, potentially more depending on your family situation. You may even have an option to provide coverage on your spouse as well – so be on the lookout for that too.
If your employer allows you to buy additional life insurance, it’s definitely worth considering. But I usually tell people that if they are healthy and want a policy that will stay with them after leaving that employer, they should shop around outside of their employer to potentially get better rates. Usually, some type of combination (employer insurance and outside insurance) makes the most sense.
2. Disability Coverage
This type of insurance provides income replacement in the event you become disabled and are unable to work. A solid benefits package will offer both short term (up to 90 days) and long term disability (beyond 90 days). Typically, however, the amount of income being replaced is a fraction of what you actually make. Will 60% of your income be enough to pay the bills? If not, you might need to increase your base coverage, or shop around to get a supplemental policy.
I find that disability coverage is often overlooked, or at least misunderstood. Many people feel that disability is a result of an injury. The truth is that the most common types of “disabilities” are things like cancer, heart conditions, and mental disorders. Did you know that one-quarter of Americans currently are diagnosed with a mental disorder? I am sure you know people with all these things, and at a variety of ages.
Bottom line, check your coverages. And make sure you have both short and long term coverage in some way/shape/form.
One of the primary benefits of working for a large employer is the fact they offer medical and dental coverage. It’s no secret that our current healthcare costs are extremely high, so be grateful if you are being offered subsidized coverage. Employers often end up paying more than half of the cost of medical insurance. Customizing which plan works best for you is really based on your family situation.
My biggest tip here is to look beyond the premium amounts because the cheapest plans could end up costing you more if you need to use it. Review the copays, deductibles, and coinsurance to estimate the all-in cost you think you’ll be paying. If you are expecting a baby, or have a kid that is off to college, perhaps it’s time to change your coverages. And consider a high-deductible plan if you are healthy and want to utilize the benefits of an HSA plan.
4. Retirement Savings
While annual enrollment is generally focused on health plans and insurance, now would be a good time to review your retirement savings plan as well. Some questions to ponder are: do you have new investment options to choose from? Is your allocation still appropriate, or at least need a rebalancing? Are your beneficiaries up-to-date?
Perhaps most important is your contribution level. A no-brainer is to make sure you are contributing enough to get the company match. And if you aren’t “maxing out”, consider increasing your contributions through year-end to catch up. Another tip would be to allocate your annual raise towards more contributions. In other words, if you get a 2% raise this year, at least increase your contributions by 1% as this will help build up your retirement nest egg faster.
In addition to the “main areas” above, do not overlook any other options such as vision, legal protection, babysitting (aka nanny care), commuter benefits, and flexible spending accounts. There could be some nice perks that you can and should be taking advantage of.
In conclusion, be sure to take the time to review your annual benefit options. You’ve got a small window, and it’s potentially your only window to change until next year. Use it wisely and enhance your quality of life!