Autumn can be a busy time. Kids are back in school and the holidays are looming. Making employee benefits decisions may be just one more thing piling up on your to-do list. So you might be tempted to take a shortcut by renewing your current benefits without reviewing your options.
That could be a mistake. Open enrollment gives you an opportunity to reexamine your benefit choices and learn about any coverage changes or premium increases for 2018. It also gives you a chance to compare benefits, such as health care, dental, and vision coverage, with those offered by a spouse’s employer and choose the most appropriate and cost-efficient options for your family.
The pretax advantage
Your portion of the cost of some benefits your employer may offer is deducted from your pay before taxes are taken out (pretax). Since a smaller portion of your pay is subject to current taxes, pretax benefits may cost less than you expect.
Health insurance premiums are an example of an expense that you typically pay for with pretax dollars. Your employer may also offer a pretax flexible spending account (FSA) to pay out-of-pocket health care expenses, including doctor visit copays, prescription drugs, and other costs that your insurance doesn’t cover. And you may be able to contribute pretax money to a dependent care FSA to pay for child care for a child younger than 13 while you and your spouse work.
Help with retirement investing
The ability to set aside money for retirement in an employer’s tax-qualified plan is potentially a valuable benefit. Consider revisiting your contribution amount while you’re reviewing your other employee benefits. If you’re not contributing enough to take full advantage of any employer matching funds, think about increasing your deferral amount. As with health and other benefits, plan contributions are deducted from your pay pretax.*
Your employer may provide group disability income insurance as one of your benefits. However, if your group policy replaces only a portion of your income, you may need a supplemental policy to be adequately covered. Talk to your financial professional.
*Some retirement plans offer a Roth 401(k) option, which allows participants to make aftertax contributions and, if all requirements are met, take distributions free of federal income taxes.