It’s that time of the year when you get to snuggle up next to the fireplace, sip hot cocoa … and look at your employee benefits. Yes, it’s open enrollment time, and you may find yourself looking at a big ol’ packet of information, not really understanding what everything is, and electing the same stuff that you had last year. This may mean that you are missing out!
Since employee benefits can be a really easy way to cover your risks and save for the future, we’ve created a guide to evaluating your options. Ask yourself the following questions to figure out if you need to make any changes.
One of the first things to determine is whether your life has changed significantly since last year.
Have you added anybody to your insurance, or is there anybody that you need to add? Maybe you have a new bundle of joy. Maybe your spouse was employed this time last year but is now working part time and doesn’t get his or her own benefits.
Look over your options with a fresh pair of eyes.
For example, maybe you never registered or signed up for your company’s long-term disability plan because you didn’t really know what it was. Some companies fully pay for group long-term disability insurance and automatically enroll you, but others offer it as an option that you would have to elect. If it is not automatically offered, you may pay a monthly fee, but this is usually much reduced from what you would pay for an individual policy.
Do the same thing for the life insurance options. If you have a spouse and/or children who depend on your income, you most likely need life insurance. It’s not recommended that you have all of your life insurance coverage through work, but it is a good place to get started. A group policy through your job is also a great way to supplement your other life insurance policies.
See if the company has changed the list of insurance options. It’s possible that the health plan that you were on last year may no longer be available, in which case you’d have to choose a new alternative.
Open enrollment is a great time to bump up the amount you are socking away for retirement. In 2015, the IRS announced that people will be able to contribute up to $18,000 annually ($500 more than last year) to 401(k)s, 403(b)s, most 457s, or Thrift Savings Plans. Those who are over 50 can contribute an additional $6,000 as a catch-up contribution.
If you have the choice between making traditional pre-tax contributions or Roth contributions, you want to ensure that you’ve picked the option that makes the most sense for your situation. Pre-tax contributions give you a tax break now, but you will have to pay taxes on the money when you take it out in retirement. Roth contributions are after-tax, but if you satisfy the requirements, you can take the money out tax-free in retirement. It may make sense to split your contributions and put money into both types of accounts!
The health care flexible spending account (FSA) allows you to put away pre-tax money for health care costs that are not covered by your health insurance, such a copays, deductibles, and some medications.
FSA funds are traditionally “use it or lose it” by the end of the year, but a recent change by the IRS means that you may be able to roll some of this over to the next year. Be sure to ask your employer.
Before you contribute to an FSA, you want to make sure that you have a good idea of the health expenses that you’re going to encounter. Using the healthcare FSA is a great idea if you have something coming up, like laser eye surgery, you know the cost, and you want to be able to pay for it pre-tax. The FSA contribution limit for 2015 is $2,550.
You may also be able to put away pre-tax money into a flexible savings account for day care, which can save you money on taxes. The disadvantage? You may have to deal with more administrative hassle, because you have to get reimbursed from the day care FSA account.
If you decide not to participate in a day care FSA, you may be able to claim a credit on your taxes instead. The contribution limit for day care FSAs for 2015 is $5,000 if you are filing as single or as married filing jointly.
I hope you find this information helpful and be sure to check out the other articles on Your Richest Life.