Fall is The State Fair of Texas, College Football, Oversized High School Mums and Halloween. It is also the time of year where most companies begin to offer open enrollment for your benefits.
Benefits are complex and the pressure to make the right decision for you and possibly your family increases each day you wait. It is important that you learn how to make your best money moves during your open enrollment.
Your Five Best Money Moves for Open Enrollment
First Money Move – Pick the Right Insurance Plan–
Picking the right insurance plan today might require a minor in engineering. As companies have increased choices and plans have increased their complexity, it is important you thoroughly review your options.
How much money you spent on health insurance this year.
Did you reach your deductible?
How much did you pay in out of pocket costs?
Was this an unusual health year, or can you expect the same in 2019?
What is the spousal surcharge when you compare plans?
Compare the cost of adding your children carefully on each plan to determine what is best for your family.
Your Insurance Plan Choices:
A high deductible health plan (HDHP) with an HSA.
This plan is also known as an HSA-eligible plan. It carries high out-of-pocket deductible costs to you, but the monthly premiums are typically lower. Many HDHPs are offered along with an individual HSA for health-related expenses. You can choose to set one up and fund it through your payroll on a pretax basis, and your employer may provide automatic seed money into the account as well.
A health maintenance organization (HMO) plan.
This type of health care plan may offer lower out-of-pocket costs, but it comes with some specific restrictions. Most HMOs generally require the use of network providers and typically require a primary care physician to coordinate your health care services, including providing referrals to see other doctors or specialists.
A preferred provider organization (PPO) plan.
In this plan, you’ll usually pay more than an HMO, but you can choose your own doctors and specialists. It is more cost effective to choose doctors in your network and you should expect to pay directly when you go out of network. Many employers also now offer PPOs with more restricted networks but lower out-of-pocket costs, so are sure to review the provider network carefully.
Second Money Move – Consider A Health Savings Account–
For 2019, a married couple under the age of 55 will be able to put away $7,000 pre-tax into an HSA account ($8,000 if they are 55 or older), and $3,500 for a single individual. The HSA is still really the only triple tax-free account that actually exists where you can put away money pre-tax, let it grow tax-deferred, and then take it out tax-free for approved medical expenses underneath the HSA rules. Remember, once you get to a cliff of about $2,000 in your HSA plan, the HSA bank will usually let you invest your health insurance money into a pool of diversified mutual funds as opposed to letting it sit in a savings account. Finally, HSA accounts are NOT used or lose and can be carried over from year to year.
Third Money Move – Your Life Insurance Need
Your company may allow purchasing additional term insurance for you, your spouse, and your children through work. This is a great time of year to determine whether your overall financial situation has changed and whether you need more or less life insurance rather than just signing up for the same amount you did the year before. Consider this purchase carefully, because term insurance through work is NOT always the cheapest form of insurance. Sometimes the cost of insurance can be more expensive and most of the group insurance policies are not portable, so choose wisely on the amount and type of insurance you want for your family.
Fourth Money Move – Consider Buying Supplemental Disability Insurance
Most regular group long-term disability plans cover 60% of your base salary only (not commissions, bonus, or stock options). Larger companies offer the ability to purchase supplemental long-term disability insurance through work. This can be an important part of your overall financial plan as your income is really what drives reaching your financial goals. If you don’t get adequate coverage through work, then you should consider looking at getting GAP disability insurance coverage from a third party.
Fifth Money Move 401(k) or Roth 401(k) (or both?)
To Roth or not to Roth, that is the question. Many employers have added the Roth 401(k) provision to their overall 401(k) plan. This is a great time to determine how much money to put away pre-tax and post-tax for your retirement, check your overall asset allocation and make sure to get the automatic rebalancing set on your 401(k).
Confused or have questions about your choices?
Go to Tannery & Company and set up an appointment to review your benefit choices
Michael Tannery CPA, CDFA® AIF®
Tannery & Company
Tax – Accounting – Wealth Management
Be A Financial Olympian™