How to Make the Most of Benefits Enrollment
While benefits enrollment season may not top the likes of football tailgates and pumpkin spice lattes when it comes to associations with fall, it is nonetheless that time of year when young professionals across Minnesota will begin the process of signing up for their 2018 employer sponsored benefits.
What follows is a helpful guide outlining the most important employer sponsored benefits, how to make the most of enrollment season and important considerations for your situation as a young professional.
Pick the Best Health Insurance Plan
Picking the best health insurance as a young professional can be daunting given the variety of choices and the fact that what, on the surface, may appear cheapest is not always the case once you factor in co-pays, prescription costs and a potentially higher deductible.
Young professionals without kids, who don’t tend to frequent the doctor each year, should give serious consideration to using a high-deductible health plan (HDHP) as it will keep premiums low and also make you eligible to contribute to a health savings account (HSA)—a powerful savings vehicle with triple tax benefits!
On the flip side, for young professionals with kids or who might be expecting, it may make sense to use a higher premium policy that has a lower deductible to make costs more predictable throughout the year.
Tip: Pay attention to any new health insurance benefit options your employer is offering for the first time this year, as more and more employers are beginning to add high-deductible health plans, which open up HSAs for young professionals that enroll in them.
Time to Maximize My Retirement Savings
Most retirement plans allow you to join (once eligible) and make changes throughout the year, so retirement planning and enrollment season don’t match up perfectly. However, some employers will announce changes to their retirement plan during enrollment season as it makes for more streamlined communication. Pay close to attention to any new investment options that might now be available or changes to the employer match.
Even if there are no changes, enrollment season can serve as an opportune time to revisit your retirement savings to ensure that you’re contributing an adequate amount, you’re allocated properly and on track to meet your retirement goals.
Tip: Step 1 should always be to contribute enough to get your employer’s full match, after that things become largely driven by your personal situation, but a good place to start is usually to balance some combination of getting your retirement contributions up to 10-20% of your income and maxing out an HSA. Lastly, if your retirement plan offers a Target Date Fund, that is usually a great (and simple) starting point for how to set up your retirement plan allocation.
The Often-Overlooked Benefits: Life and Disability
Young professionals frequently overlook the life and disability insurance options made available through their employer. After all, we’re young and invincible, right?
The Social Security Administration estimates that one in four young professionals will be disabled for some period of time prior to retirement, which further illustrates the importance of taking advantage of employer sponsored disability insurance. Pay close attention to the terms of your disability insurance and keep in mind that employer sponsor disability insurance is a great starting point, but it usually lacks the comprehensiveness that high earning, young professionals should have.
Life insurance benefits are usually offered in a couple forms through an employer. The first is commonly referred to as “basic” which is frequently ranges from one to three times your annual income. Employers will often pay for basic life as a benefit to the employee, but keep in mind that one to four times your annual income is usually well short of adequate life insurance for a young couple, especially if you have kids.
“Voluntary” or “elective” is also commonly offered to employees as an option to purchase more life insurance through a payroll deduction. This additional coverage can help close the gap of what a young couple may need and is also oftentimes made available to spouses and children. Be cognizant of “AD&D” or Accidental Death and Dismemberment insurance, which is usually an add-on policy and only provides limited life insurance protection in the event of a death caused by accident. These policies aren’t good, nor bad, just limited so it’s important to recognize that AD&D coverage shouldn’t be a substitute for adequate life insurance.
Tip: If you’re just joining a company and enrolling for the first time be sure to consider life and disability benefits extra closely! In most situations if you enroll at the onset of joining a company or when they add life and disability insurance as a new benefit, you get to avoid going through underwriting! This can be a tremendous advantage if you have a health issue that prevents you from getting individual life or disability insurance on your own or at a reasonable rate.
Tip 2: One of the downsides to getting employer sponsored life and disability coverage is that it can’t always be taken with you when you change jobs. This can create tricky issues if you have adequate employer sponsor coverage and then find yourself changing jobs after acquiring a health issue that now prevents you from getting proper life and disability (assuming the new employer doesn’t offer these benefits). Be sure to ask your employer’s benefits department if these benefits are “portable” and can be rolled out into an individual policy.
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