Open Season: The Importance of Reviewing Your Company Benefits
The leaves are just about done falling and the holidays are upon us. While many of us spend the next few weeks rushing around trying to fit in as many fun activities as possible, the end of the year can also be an opportunity to relax and reflect upon the choices that we've made over the course of the year. What went well? What do we want to do better next year? In regards to financial planning, one set of choices we are asked to review at the end of each year are our company benefit elections.
While it may be tempting to keep your benefits exactly the same year after year, this strategy may not be the best for your current needs. Here are some common misconceptions and overlooked benefits to consider when making your elections this year.
The most expensive option doesn't automatically mean the “best” for you. Sometimes choosing a high deductible plan coupled with a health savings account can be better for your finances in the long run. Personality can also come into play when making a selection. Are you OK with the potential for large medical expenses in order to have smaller monthly deductions or do you prefer to have higher monthly deductions but more predictable expenses?
Life insurance is often acquired through employers because it is convenient. However, it is important to understand the tradeoffs associated with this decision. An individual policy might be less expensive depending on your health. Also, the coverage through work is tied to your job. While you may be able to take that policy with you if you change jobs, the costs of doing so might be prohibitive.
Deferred compensation plans are often complex and frequently misunderstood and underutilized by employees. They can be a powerful tool for tax and retirement savings with proper planning.
Benefits such as commuter checks, pet insurance, and legal plans are often overlooked. For example, if you are planning on updating your wills next year, then electing for the legal plan might be the incentive you need to follow through and make it happen.
While you are making your benefit elections, the end of the year is also a great time to review some of your other company benefits to make sure everything is on track. Are you contributing the maximum to your 401k? If you are over 50, are you making catch up contributions? Is your asset allocation consistent with your target? Are there any new investment options available?
f nothing in your life has changed, then your existing benefits will likely be fine. However, even subtle changes in your life might necessitate changes in your elections. If you need any assistance with sorting through your options to ensure your choices are the best fit for your financial situation, please feel free to reach out to us