It’s annual enrollment season -- the time of year when we are allowed to select the workplace benefits that can impact the care we receive as well as reduce stress and help to cover out-of-pocket costs.
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It’s worth the time to review your options. Don’t simply default to the benefits you’ve had year-over-year. Life changes – whether you’re planning to get married, have a baby, or finally plan to deal with that lingering medical issue.
Along with that, medical costs continue to increase, and those costs continue to shift to employees, especially as more employers move to high-deductible health care plans (HDHPs). Your employer put a lot of thought into benefits that can help you cover some of these costs.
So, just as we were told to do our homework back in high school, find time to study your benefits and select the ones that work together best to provide the protection, savings and investments you need now and to help keep you on track for financial wellness in retirement.
It’s easy to understand why so many Americans may want to simply stick with the benefits they had the year before. On average, employers offer 15 benefits each year and that can be overwhelming.
And while you don’t need to sign up for every benefit, there are likely one or two that could help mitigate the stress of unexpected out-of-pocket medical and other expenses and potentially better position you for retirement.
Here are a few tips to help you review and choose your benefits.
Take the time to look back.
Add up your out-of-pocket medical expenses from the past year. If you had to use money from your long-term savings or investments – like your 401(k) – or you had to borrow money from a friend or relative to cover those expenses, add that up too.
An average family incurs more than $4,500 annually in out-of-pocket medical costs. Yet, a recent Federal Reserve report indicated that four in 10 adults would not be able to cover a $400 unexpected expense. This is where supplemental benefits – like accident or critical illness insurance, or a health savings account (HSA) – might help cover qualified events or expenses (more on that below).
Take the time to look ahead.
If you’re expecting any big expenses in the coming year, estimate those costs. A supplemental benefit could cover a chunk of your out-of-pocket expenses.
For example, if you are expecting a new child and will need childcare, consider enrolling in a dependent care FSA. If you have a college loan to repay, your employer might offer a student loan repayment benefit.
Consider a health savings account (HSA).
If you’re enrolled in a high deductible health plan (HDHP) that is eligible for an HSA, your employer likely provides an online calculator that can help determine how much to contribute up to the IRS max per year ($3,550 for individuals and $7,100 for families in 2020). Your employer also might offer incentives that boost your HSA balance, such as an initial contribution or a reward for a health-related activity.
And, remember, you own your HSA, so it stays with you through a job change and the balance rolls over year-to-year. You can use it to cover qualified medical expenses today or save it for the future, even into retirement.
In fact, an HSA complements your retirement savings by helping you cover qualified medical expenses tax-free so you don’t have to dip into retirement savings for those expenses. Finally, your HSA might even include an option to invest all or part of your balance.
Take a look beyond medical.
Medical, dental and vision insurances are important, but don’t skip over supplemental insurance products – like accident, critical illness/specified disease or hospital confinement indemnity insurance. These can pay benefits for covered events and help protect your savings, and group rates through employers mean your monthly premiums could be less than your monthly lunch budget.
For some of these insurances, you can even use your benefit payment any way you choose, such as for daily living expenses, like your mortgage or food delivery if a broken leg is keeping you down. If your family is growing, you might also think about adding to your group life and disability coverage.
When offered through your employer, they can be an easy and budget-friendly way to help protect yourself and those who rely on your income.
Read and ask questions.
Be sure to review the materials your employer provides for details about what each product covers. Many benefit enrollment portals include calculators to help you understand which health insurance will be best for you based on your past year’s costs and what you expect to spend in the new year.
If you still have questions after that, ask your employer’s benefits team. In addition to helping you feel more informed and confident about your choices, your questions will help your employer – and benefits providers – improve the benefits information provided throughout the year and during enrollment.
The good news is that there’s likely the right mix of benefits to help you and your family with some of your expected and unexpected financial challenges to and through retirement. Gift yourself some peace of mind.
The time you invest in reviewing and selecting the right benefits for you and your family today can strengthen the foundation for your financial wellness now and in the future.
Robert (Rob) L. Grubka is president of Employee Benefits for Voya Financial, Inc., which helps Americans plan, invest and protect their savings — to get ready to retire better.