This week I talked with an employee who either forgot I was a CFP® professional or didn’t much care, but he told me he threw this year’s open enrollment notices in the trash because “they weren’t worth wasting time on” and “my employer’s website is more hassle than it’s worth” to make any changes. I guess I shouldn’t have been too surprised. He’s definitely not alone. A new LIMRA study showed that 53% of employees spend under an hour deciding on their benefits choices, and only 36% actually made any changes. When people do make changes, it is usually to their medical plan.
It’s not like the choice to pitch the papers is being made with much forethought. A recent Mass Mutual survey found that 34% of those surveyed knew little about their employee benefits such as health care, life insurance, 401(k) retirement plans, and other benefits. A recent VSP Vision Care survey shows an even scarier finding. Open enrollment is less popular than tax season and just ahead of cold and flu season in popularity. Only 10% of employees felt confident in their enrollment choices when they were done.
Before you rush through your benefit choices again or ignore them altogether, look at it like an opportunity to make a profit. After all, your old choices might be leaving money on the table. Here are some overlooked benefit changes you might want to consider:
Are You In The Right Health Plan? With health care costs continuing to rise more employers are going to high deductible health plans every year. Many employees resist the idea, reflexively believing that a HDHP must be a bad choice and a low deductible is always best. But if you and your family are generally healthy and take generic medications (if any), the HDHP can end up being a way to save on premiums and invest the difference.
If you aren’t spending the difference in premiums on medical expenses, take another look at your HDHP choices. Many of these plans offer wellness maintenance visits without co-pays and the opportunity to build a Health Savings Account for non-covered medical costs. HSAs have many beneficial features. Most allow you to invest excess balances over a modest threshold, and the additions and growth are completely tax-free if used for qualifying medical costs. It could end up your favorite “retirement savings” account of all, and many employers are offering cash to help fund it.
Why Bother With Life Insurance? It seems like I run into two kinds of situations with employee life insurance: the employee who buys more than they need to and the rest who don’t have nearly enough. Many employers offer employees life coverage of $50,000 or 1x salary as a standard perk and the ability to add coverage for them and their family by payroll deduction. But if that employee is younger and healthier than their co-workers as a group, life coverage could possibly be cheaper outside of work directly through an insurer.
It pays to first figure your insurance needs with a tool like non-profit LifeHappens.org’s insurance calculator, and then get a couple of quotes if you suspect you might be a healthy “preferred risk.” If you need coverage but suspect health or age will make your coverage tougher to get, jump on the opportunity to get it at work. It is likely to be the best deal or possibly the only coverage you can get.
Is Your Retirement Plan Starving? I wish I had a dollar for every employee I’ve worked with that didn’t know they weren’t getting their employer’s full matching contribution or felt they couldn’t afford to get it. But actually, I wish they would get the dollars even more because retirement savings is too important to ignore or put off even one more year! Of the workers who are behind in saving for retirement, our latest research shows 76% have never run a retirement estimate to know what they need so I guess it makes sense. How can you be motivated to save the right amount when you don’t know what that is? That’s why it’s so important to check your progress at your 401(k) website or this calculator.
If you’re not able to get your employer’s full match right now, use the rate escalator option in your company plan or increase your contribution by 1% a year to get you there over time. The earlier this happens, the sooner you retire. It’s really that simple.
Is Your 2016 Retirement Plan in a 1990’s Investment Mix? Most employees admit they’re not investment experts, but that doesn’t stop them from trying. Even when they do, an AARP survey reported 62% of workers didn’t know what their plan and fund fees were and the actively managed funds offered in their plans trailed their benchmarks 76% of the time in 2014. Instead of ignoring this reality, many plans now offer target date options that combine the low cost of indexed investing with consistent rebalancing. If you’re not going to watch your 401(k) funds with the same interest you watch your TV, let a target date option handle it for you or at least rebalance your account to its intended allocation quarterly.
And if your retirement plan now offers a Roth 401(k) option, don’t just shrug it off. It might be the better option for you. If you think your tax bracket is pretty likely to be higher in the future, you can lock out those taxes if you use the Roth for at least part of your retirement saving. This calculator can help you figure out if a change will do you good.
Don’t Disable Your Income. Most employees think a disability can never happen to them…until it does. Social Security Administration figures say 25% of workers now in their 20’s will have some sort of disability by retirement, yet only 33% of workers have long term (over 6 months) disability coverage.
Take another look at your disability insurance benefits. Is your employer providing some standard disability coverage, and will that be enough to let your family survive? Has your job or age grown to a point where a disability is more likely? Check the rates at work. This coverage is generally one of the least expensive insurance benefits offered.
These are just a few of the reasons you might want to pull those open enrollment papers back out of the wastebasket. Make sure you’re taking full advantage of any benefits being offered to you. Then smile as you figure out the money you might save by freshening up your choices.
