Your employee benefits are a significant part of your total compensation. Far too many people don't maximize them. When was the last time you brushed up on your healthcare options? Or adjusted your 401(k) contributions? If you can’t remember, it’s been too long!
Open enrollment is the perfect time to take another look at your benefits. Below are common offerings to consider along with our thoughts. We are available to answer questions about healthcare plans, insurance options, or equity compensation.
If you don't have an employee benefits package feel free to forward this email to a friend or family member who might find it useful.
Your healthcare plan should be a top priority when evaluating your benefits package. Enrolling in the right plan can not only protect your health but also your wallet. Consider the following:
- Explore all your options. PPOs are usually more flexible. HMOs have lower premiums and added benefits for staying in-network. Pick a plan that best fits your preferred doctors, specialists, and health needs.
- Consider enrolling in an HDHP. High deductible health plans carry lower premiums and higher deductibles. With an HDHP, you are eligible for a Health Savings Account (HSA). You can create the HSA through your company or a third-party like Fidelity. HSA limits are $3,550 for single coverage and $7,100 for family coverage in 2020.
At Paradigm, we believe an HSA is the best gift Uncle Sam gives us. HSAs offer pre-tax contributions, tax-free growth, and tax-free distributions (at a later date) for qualified medical expenses. You can pay for medical expenses out of pocket and allow funds to grow indefinitely— it’s a win, win.
- Contribute to a Flexible Spending Account (FSA). If you aren’t enrolled in an HDHP, an FSA is another tax-advantaged account to consider. FSA funds have the same tax benefits of an HSA but funds do not carryover year to year. It’s a ‘use it or lose it’ type deal, so upgrade your glasses frames or schedule that specialist appointment. Contribution limits are also a bit lower, at $2,750 for 2020.
Life and Disability Insurance
Many employee benefit plans include group life insurance and disability packages. It’s important to know the difference between the two and decide if you need extra coverage.
- Group life insurance can be an inexpensive way to get coverage. Voluntary benefits can also let you add to your plan for cheap if you need it. You can likely find a more comprehensive policy outside your benefits plan, so we recommend looking at all of your term insurance options.
- A common offering is short and/or long-term disability insurance. These policies will cover up to 60% of your salary if you are unable to work due to disability. Most policies through work are affordable and offer a range of coverage options.
Make regular contributions to your 401(k) and other retirement accounts to maximize savings. The current yearly limit is $19,500, with a $6,500 catch-up contribution if you’re over 50.
- Confirm whether your company provides a match. Be sure you contribute at least enough to qualify for the match. It’s free money that helps your investments compound.
- Increase contributions when you can. If you recently received a bonus or raise, increase your contributions.
- Consider a Roth 401(k). This account benefits younger employees and those close to retirement. You’ll pay tax on the money you contribute to a Roth 401(k), but qualified withdrawals are tax-free.
Some employers may offer stock options as another ‘added money’ benefit. Look out for:
- Incentive stock options (ISO) and non-qualified stock options (NSO).
- Both have different tax outcomes so study your options.
- Employee Stock Purchase Plans (ESPP).
- An ESPP allows you to set money aside from your paychecks to buy company stock at a discount at the end of a period. This can be a great investment option due to its low risk and high return.
These are the perks that too often go unused. Our top advice is to:
- Use your vacation days. We know that they may carry over (some don’t), but you likely won’t use the extra next year, either. Take time away from the office and your inbox.
- Take advantage of flexible hours. If your company provides work-life balance opportunities, don’t let them go to waste. Focus on your mental health and wellbeing.
- Look into continuing education options. Whether it’s going to a conference, taking an online course, or student loan help, take advantage of it.
What you see isn't always what you get.
Not all employee benefit packages are equal. It’s important to read the fine print to understand the costs and benefits. To ensure you don’t spend too much, always calculate the annual cost of any benefits you are considering.
To living your ideal life,
Michelle & The Paradigm Team
Paradigm Advisors is a fee-only financial planning firm based in Dallas, Texas and Fayetteville, Arkansas. Paradigm Advisors provides comprehensive financial planning and investment management services to help clients organize, grow and protect their wealth throughout life’s journey. Paradigm specializes in advising young professionals and entrepreneurs in the early stages of life and well-established career executives through financial planning and investment management. As a fee-only fiduciary and independent financial advisor, Paradigm never receives commission of any kind. Paradigm is legally bound by certification to provide unbiased and trustworthy financial advice.