By Bob Harris
Open enrollment season is upon us! If you’ve not yet waded through all your company benefits and made elections for you and your family, the deadline may be drawing near. With a little forethought (and maybe a little help), you can set yourself and family up for success in 2020 and beyond.
While you might compare enrolling in company benefits to the drudgery of preparing your taxes, it’s important to consider the big picture, and how each benefit election ties into your overall financial plan and financial well-being.
Obviously, some benefits have costs to employees. For example, some insurance plans have higher premiums than others. And some benefits require you to choose whether you want to participate (and pay for those services) or not. Every dollar you spend on a benefit is a dollar that’s not available to spend on another benefit. More broadly, every dollar spent on a benefit is one you can’t spend on something else, like a nice meal, a tank of gas or a family trip.
The key questions here?
- Will the dollar you invest in any benefit provide you with a greater benefit – now or in the future?
- Or, will that dollar prevent you from paying much more down the road if a certain circumstance or event, like a significant health issue, occurs?
Some decisions are completely subjective because ONLY YOU can determine the greatest value to you and your family. Other questions, like “How much should I invest in my 401(k) plan?”, “How much life insurance do I really need?”, and “Should I use an HRA, an FSA, or an HSA to pay for medical expenses?”, are the types of questions that often require a little more research, or guidance from a CERTIFIED FINANCIAL PLANNER™ (CFP®), someone who’s trained to help you answer these types of questions.
There are many benefits to working with a certified or experienced financial professional. Not only can they save you time and costly mistakes by answering questions involving immediate concerns, they can also use their training and experience to help you understand some of the more far-reaching and less direct consequences of your decisions. A professional can often see how each decision relates to other issues or concerns that you may have missed.
For example, if you are a great saver and maximize the tax-favored benefits of your 401(k) plan by fully funding your pre-tax savings account each year, you could be setting yourself up for unnecessary taxes later. That’s because the IRS will require you to pay these taxes on required minimum distributions from certain retirement accounts beginning when you turn age 70 ½. With a little foresight and planning, you can still leverage some of these tax-favored benefits – but minimize the future tax impact – by using alternative investment vehicles such as the Roth component of your 401(k) plan.
Of course, everyone’s situation is unique. Rules of thumb only work sometimes for some people. If your goal is to take full advantage of your benefits by knowing how each decision impacts your overall financial situation, you might enlist the services of a professional, someone who has experience applying holistic and comprehensive financial planning principles to your financial goals.
Open enrollment season is the perfect time of the year to consider how your benefits package relates to your overall financial well-being. The holidays can be stressful enough. By working with a financial services professional, one who understands your situation and can help you make the difficult decisions, you can reduce or remove some of that worry and stress.
With one less thing to worry about, you just might find yourself having more fun than usual at your company’s holiday party!
This commentary is provided for general information purposes only and should not be construed as investment, tax or legal advice. Past performance of any market results is no assurance of future performance. The information contained herein has been obtained from sources deemed reliable but is not guaranteed.