Fall is typically the season when many have the opportunity to review their workplace benefits and make changes.
Here are four items to keep in mind as you review your benefit elections and options:
- Make sure you have taken major life changes into account. Have you recently married or had a child? You may need to increase your life insurance coverage. Also check that you are covered adequately for disability, especially if your family depends on your earnings. There are no magic rules of thumb to pick the needed amounts, so discuss your situation and needs with your financial advisor.
- Review your health plan choices. It can seem daunting to explore the choices in the marketplace, but it is well worth the time. If you and your family enjoy good health, you might benefit over your working life from true insurance in the form of a High-Deductible Health Plan (HDHP) combined with a Health Savings Account (HSA). HSAs are like IRA accounts for health benefits where contributions grow tax-free if used for healthcare costs and are tax-deferred if withdrawn for other purposes.
- Take advantage of the use-it-or-lose-it plans. Dependent care reimbursement accounts and Flexible Spending Accounts (FSAs) can provide a great tax benefit if you have eligible expenses, even though legislative changes will make them less attractive. Beginning January 1, 2011, purchases of over-the-counter medicines will require a doctor’s prescription to be eligible reimbursements from FSAs. Then in 2013 FSA plans will be capped at $2500 (and indexed for inflation starting in 2014).
- Check if you’re paying for insurance you don’t need. Accident insurance typically is not worth buying. Don’t confuse it as a replacement for life or disability standard life insurance. There is often no good reason from a financial or protection perspective to purchase these policies.
Although you are probably not restricted to the fall to make changes to your company’s retirement plan, it’s a good idea to do a full plan review as well.
Start out by making sure beneficiary designations are up to date. Ensure your investments are allocated appropriately and that company stock is not an overwhelming part of your total investment assets (try for no greater than 5-10%). Make sure to take full advantage of any matching plan your employer may offer. If it is an attractive plan or your best option for retirement savings, maximize your contributions beyond the match.
I also recommend making it a habit to increase your contributions by at least 1% annually, and at any point in the year you receive a pay raise. It may require some discipline to do, but the difference that 1% annually will bring over the years will make all of the difference financially when you come to need it.
The preceding blog was originally published by the Financial Planning Association®(FPA®). To view the original blog please visit the FPA Web site.