As annual enrollment approaches, it’s essential to make informed decisions about your company’s benefits. For many employees, this period can feel overwhelming, with numerous options and limited time to evaluate what’s best for your unique situation. From healthcare plans to retirement contributions, each choice can have a long-lasting financial impact. We often see people miss opportunities to maximize the value of their benefits. Here are five key tips to help you get the most out of your annual benefits enrollment:

1. Review Your Healthcare Plan Options Carefully

Healthcare is often one of the most significant components of your benefits package. Many companies offer multiple options, such as Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs), and High-Deductible Health Plans (HDHPs). To choose the right plan, consider your past year’s medical expenses and your expected needs for the upcoming year.

• For families with regular healthcare visits: A PPO or traditional plan might offer lower out-of-pocket expenses.
• For younger or healthier individuals: A HDHP paired with a Health Savings Account (HSA) can be an excellent option due to its lower premiums and tax advantages.

Take the time to understand each plan’s premiums, deductibles, and out-of-pocket maximums. Don’t just default to last year’s choice—reevaluate based on any changes in your personal health or family needs.

2. Maximize Your Health Savings Account (HSA)

If you’re opting for a high-deductible health plan, the HSA can be a powerful tool for managing healthcare expenses and building long-term wealth. Contributions are pre-tax, grow tax-free, and withdrawals for qualified medical expenses are also tax-free. This triple tax advantage makes the HSA an excellent way to save for both current and future healthcare costs.

If you have the financial flexibility, try to max out your HSA contribution limits each year ($4,150 for individuals and $8,300 for families in 2024). These funds can roll over year to year, allowing you to build a tax-efficient healthcare nest egg.

3. Evaluate Your Life and Disability Insurance Coverage

Life and disability insurance are often part of your company’s benefits package, but many employees overlook them. We recommend considering whether your current coverage adequately protects your loved ones and your income.

• For life insurance: Ensure the death benefit provides enough to cover your family’s financial needs, such as mortgage payments, education costs, and income replacement.
• For disability insurance: This is often the most overlooked benefit. Your ability to earn an income is your most valuable asset, so be sure to evaluate whether short- and long-term disability coverage is sufficient. If your employer offers additional coverage or buy-up options, it may be worth the extra cost.

4. Maximize Retirement Plan Contributions

Annual enrollment is the perfect time to review your contributions to retirement accounts such as a 401(k) or 403(b). Many companies offer an employer match, which is essentially free money that can accelerate your retirement savings. At the very least, aim to contribute enough to take full advantage of any match.

If possible, increase your contributions each year. Even a 1% increase can have a substantial impact over time due to compounding growth. Additionally, if your plan offers a Roth 401(k) option, consider whether paying taxes now (for tax-free growth and withdrawals later) aligns with your broader financial plan.

5. Leverage Additional Benefits Like FSAs, ESPPs, and Wellness Programs

Beyond the basics, many companies offer additional benefits that can provide significant value if used wisely.

• Flexible Spending Accounts (FSAs): If you’re not eligible for an HSA, consider utilizing an FSA for healthcare or dependent care expenses. While FSAs are “use it or lose it,” they still offer tax savings for eligible expenses.
• Employee Stock Purchase Plans (ESPPs): If your company offers an ESPP, you can purchase company stock at a discount, which can be a lucrative long-term investment. Just be mindful not to over-concentrate your portfolio in company stock.
• Wellness Programs: Many companies offer wellness initiatives that provide financial incentives for completing health-related tasks like biometric screenings or participating in fitness challenges. These programs can reduce your out-of-pocket healthcare costs or even provide cash rewards.

 

Be Proactive, Not Reactive

Annual enrollment is a critical time to ensure you’re taking full advantage of your benefits package. Don’t wait until the last minute or assume that the same selections as last year will still be the best choices. Take the time to review your options, make adjustments based on changes in your personal or financial situation, and ensure you’re optimizing your healthcare, retirement, and insurance benefits.

Your company’s benefits are a key component of your overall financial well-being, and thoughtful planning can help you maximize the value of these offerings year after year.

 

 

Advisory services offered through Commonwealth Financial Network®, a Registered Investment Advisor.