As spring winds down and summer fast approaches, there have been a slew of business- and employee-centric awareness observances – from the U.S. Chamber’s Small Business Month and the SBA’s National Small Business Week, to Global Employee Health and Wellness Month – and your friends at O’Donnell, Ficenec, Wills & Ferdig thought it fitting to do our part. As vital partners with businesses, we can aid in “upping the utilization” of benefits provided by employers. In spreading awareness of the ways to maximize offerings you may know that you had, or may not be fully using to your advantage, you can reduce your expenses, grow your wealth, and reach your goals.
Do your due diligence
You cannot improve upon what you do not know. In turn, it is essential to understand the specific benefits that you are eligible for within your benefits package. With a foundational understanding of your unique starting point, you may uncover other options for the likes of insurance coverage, which may be more favorable to you and your situation. Making the most of benefits also means making the most of communications about these perks. After all, most employers partner with other organizations and professionals to accurately, frequently and fully communicate available offerings to their workforce. Do not ignore such communication. Take the time to take advantage of these learning opportunities, which could ultimately lead to money-savings and considerably greater retirement funds over the long haul.
Bear in mind that your organization’s HR department is there to answer any questions that you may have about these and related matters, or they can send it on through the chain to a resource that is best-equipped to accurately respond to your specific query. In this vein, plan early for open enrollment. There are opportunities during this vital period to make changes to coverages that are in your best interest and may save you considerable hassle in the long run.
Elevate your HSA performance
Benefits are largely categorized as:
Health/wellness
Financial/retirement
Time-off/leave
Work-life/fringe
On the health front, don’t let your HSA account sit on a shelf and gather dust. HSAs are largely eligible for policyholders of high-deductible health plans. A very broad range of health expenses may be paid for with funds from your HSA account. Furthermore, the HSA is funded by payroll deductions using pre-tax dollars. Depending on factors such as your age, you may be able to contribute a greater amount (for instance, as “catch-up contributions”) to your account. This is especially helpful with advancing years, as more comorbidities may be diagnosed within your family that require more costly care and treatment.
Strategies to enhance the health of your savings
Retirement plans such as 401 (k)s and IRAs are decidedly king in an environment whereby pensions are increasingly looked upon as artifacts of yesteryear. For those employees with access to 401 (k)s, these plans are critical vehicles to grow your savings. Notably:
Save more than the minimum or “default” rate. Often, employees are automatically enrolled in plans with a low savings rate of around 3%. While socking away 3% of your earnings is certainly better than 0%, to maintain your lifestyle and keep up with increasing costs of needs like out-of-pocket health care expenses, reach higher. And consider setting aside more funds with every raise. After all, you will likely have the capacity to do so without stressing your day-to-day needs/expenses as you advance in your career.
In an environment that has been described as a “war” for top talent, it is likely your employer offers perks like matching. This presents a great incentive for employees to set aside more of their earnings in the 401 (k). After all, employers who match contributions partially or fully do so – up to a specific maximum (or percentage of one’s salary). It pays to investigate that maximum, as this is essentially free monies being contributed into your retirement savings by respective employers.
Couple your savings strategy with a Roth 401 (k). This flavor of 401 (k) provides valuable flexibility and diversification to older workers as they near retirement, while providing a favorable savings vehicle for early careerists and moderate-income employees who anticipate advancing into higher tax brackets later in their careers. Notably, employees may sock away after-tax monies, and distributions are not taxed in retirement.
Map out your career. So, your benefits work best for you. By that, read up on when you are “wholly vested” (or can retain all of the 401 (k) matching contributions) within your organization. It can take years of working within the company to acquire the maximum benefit of these incentives and retirement savings perks. To ensure that you do not have to forfeit the thousands of dollars that may have been matched by the company, stick around. You do not want mere months to result in such a significant savings hit. Likewise, remain invested. “Cashing out” and withdrawing monies early is associated with stiff (read: costly) penalties. If you are must, consider withdrawing from other income sources or savings within your portfolio, which are not associated with such expensive fees. And, to avoid further penalties and taxes on your money when you do leave, roll over to your new workplace’s plan. Request for your monies to be transferred to your bank or financial institutions, as opposed to providing you directly with a check.
Of course, stay up-to-date on the max that you can contribute to your savings account from year to year. This varies by the type of plan, as well as considerations such as your age. For the latest information on contributions by plan type, visit the IRS’ online hub for all things retirement plans.
Make fringe benefits front and center
While they may not make the biggest splash in your nest egg, ancillary workplaces incentives should be used with enthusiasm! For instance, assistance with tuition or reimbursement on additional vocational training can lead to more lucrative positions down the line, as you acquire those coveted skills and certifications. Furthermore, when your company pays for everything from insomnia-fighting sleep apps to smoking cessation programs, you don’t have to! And, by getting ahead of problems, you avoid the exorbitant costs associated with illnesses and reactive treatment. Plus, you stay healthy and happy – a priceless benefit.
Even something as seemingly simple and minor, such as savings recouped from free or discounted lunches, can really add up and likely provide healthier and more nutritious options than your fast jaunt to the nearest fast-food franchise. These so-called “fringe” benefits may add to the richness of life, and not so much to the abundance of your savings. But, they are all the more important to your overall health and well-being. What good is financial health if you can’t enjoy the fruits of your efforts?
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