Fall signals the changing of the leaves, football Sundays, and Halloween. It is also the time of year where many of the companies begin to offer open enrollment for your benefits. With the increasing complication of benefits packages, it more important than ever that you learn how to make smart money decisions during your two weeks of open enrollment. Here are my five smart money moves to look at when your benefits season comes this fall. Don’t wait until the minute to check your options!!
1) Pick The Right Insurance Plan- Picking the right insurance plan today might require a minor in engineering. As companies have increased choices and plans have increased their complexity, it is important you thoroughly review your options. Consider closely how much money you actually spent on health insurance this year. Did you reach your deductible? How much did you pay in out of pocket costs? Was this an unusual health year, or can you expect the same in 2019? Here are the three types of plans companies will put in your open enrollment package.
You should also be careful about the potential spousal surcharge when you compare plans if your spouse or partner has a plan at work that they can qualify for in this calendar year. Companies are using this charge to encourage each spouse to stay on their own plan versus all combining on to one plan. Also, compare the cost of adding your children carefully on each plan to determine what is best for your family.
- A high deductible health plan (HDHP) with an HSA.This plan is also known as an HSA-eligible plan. It carries high out-of-pocket deductible costs to you, but the monthly premiums are typically lower. Many HDHPs are offered along with an individual HSA for health-related expenses. You can choose to set one up and fund it through your payroll on a pretax basis, and your employer may provide automatic seed money into the account as well.
- A health maintenance organization (HMO) plan.This type of health care plan may offer lower out-of-pocket costs, but it comes with some specific restrictions. Most HMOs generally require the use of network providers, and typically require a primary care physician to coordinate your health care services, including providing referrals to see other doctors or specialists.
- A preferred provider organization (PPO) plan.In this plan, you’ll usually pay more than an HMO, but you can choose your own doctors and specialists. It is more cost effective to choose doctors in your network and you should expect to pay directly when you go out of network. Many employers also now offer PPOs with more restricted networks but lower out-of-pocket costs, so be sure to review the provider network carefully.(source: fidelity)
2) Consider A Health Savings Account- For 2019, a married couple under the age of 55 will be able to put away $7,000 pre-tax into an HSA account ($8,000 if they are 55 or older), and $3,500 for a single individual. The HSA is still really the only triple tax-free account that actually exists where you can put away money pre-tax, let it grow tax-deferred, and then take it out tax free for approved medical expenses underneath the HSA rules. Remember, once you get to a cliff of about $2,000 in your HSA plan, the HSA bank will usually let you invest your health insurance money into a pool of diversified mutual funds as opposed to letting it sit in a savings account. Finally, HSA accounts are NOT use or lose and can be carried over from year to year.
3) Understand Your Life Insurance Need- Your company may allow to purchase additional term insurance for you, your spouse, and your children through work. This is a great time of year to determine whether your overall financial situation has changed, and whether you need more or less life insurance rather than just signing up for the same amount you did the year before. Consider this purchase carefully, because term insurance through work is NOT always the cheapest form of insurance. Sometimes the cost of insurance can be more expensive and most of the group insurance policies are not portable, so choose wisely on the amount and type of insurance you want for your family.
4) Consider Buying Supplemental Disability Insurance – Most regular group long term disability plans cover 60% of your base salary only (not commissions, bonus, or stock options). Larger companies offer the ability to purchase supplemental long term disability insurance through work. This can be an important part of your overall financial plan as your income is really what drives reaching your financial goals. If you don’t get adequate coverage through work, then you should consider looking at getting GAP disability insurance coverage from a third party.
5) 401(k) or Roth 401(k) (or both?)- To Roth or not to Roth, that is the question. Many employers have added the Roth 401(k) provision to their overall 401(k) plan. This is a great time to determine how much money to put away pre-tax and post-tax for your retirement, check your overall asset allocation, and make sure to get the automatic rebalancing set on your 401(k).
Ted Jenkin, CFP®, AAMS®, AWMA®, CRPC®, CMFC®, CRPS®
Co-CEO and Founder oXYGen Financial, Inc.
If you want to set up a time to review your open enrollment, please go to oXYGen Financial to set up an appointment.
Ted Jenkin is a frequent guest columnist for the Wall Street Journal and Headline News Weekend Express. He is the co-CEO of oXYGen Financial. You can follow him on LinkedIn @ www.linkedin.com/in/theceoadvisor or on Twitter @tedjenkin.
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. oXYGen Financial is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do not provide tax or legal advice.
The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.