Soon, workers will enter one of the most stressful seasons of the year and it's not the period from Thanksgiving to New Year's Day.
Rather, it's open enrollment season when workers must decide whether to make changes to their health, retirement and other benefits. What better time than now to start thinking about what you might change, and what is fine as is. Here's what experts suggest.
"Open enrollment season is an excellent time to review all of your employee benefits, including retirement benefits," said Catherine Collinson, president of Transamerica Center for Retirement Studies. "Unlike other health and welfare benefits, employees who are already enrolled in a 401(k) or similar plan do not need to re-enroll in their retirement benefits each year."
Because of this, some employers don't include retirement benefits on the menu of available health and welfare benefit options during open enrollment season, Collinson said. Given that, you might have to take matters into your own hands when it comes to your employer-sponsored retirement plan during open enrollment season.
Increase your savings. "Even if your employer doesn't mention 401(k) benefits during open enrollment season, it is an excellent time to recalculate your estimated retirement savings needs and determine whether you are on track to achieve them," said Collinson. "If you are falling short, consider increasing your contributions to the plan or save more outside of work."
Others agree. "Open enrollment is a great time to increase retirement contributions," said Rob Austin, director of research at Alight Solutions. "About one out of every five workers who is saving to the defined-contribution plan is missing out on the full employer matching contributions."
Rebalance your 401(k) plan. When reviewing your retirement savings, Collinson recommends checking your investments to ensure they are well-balanced and aligned with your risk tolerance and years to retirement. "Seek help from your employer's retirement plan provider or a financial adviser, if needed," she said.
Austin shares this point of view. "Open enrollment season is a good time to rebalance your retirement portfolio," he said. "Experts recommend doing this at least annually, so why not add it to the list of things to do when looking at the other company-provided benefits?"
Consider a managed account. Austin also noted that more employers are offering managed accounts to
Health and welfare benefits
Review all your options. Karen Frost, senior vice president of health strategy and solutions at Alight Solutions, recommends taking time to re-evaluate your health benefits, too. "Don't just enroll in the same health plan as last year," she said. "Consider options that cost less each paycheck and contribute to a health savings account (HSA) to cover the deductible," she said.
Collinson offered similar advice. "Do your homework about health-care coverage options offered," she said. "Employers change their benefits offerings from time to time, so be sure to find out if they have changed. Learn about all of the available options to determine which is best for your situation."
Enrolling in an HDHP? If you elect to enroll in a high deductible health plan (HDHP) with a tax-advantaged HSA, consider contributing up to the maximum allowed to the account to pay for qualified medical expenses, Collinson said. "Any unused funds at the end of the year will accumulate in the account and can be used in the future," she noted.
Betsy Dill, the U.S. financial wellness leader at Mercer, also said employees who are saving for retirement, with access to a HDHP, should consider participating in their employer's HDHP, so that they can take advantage of the HSA offered with it. "Realize that the HSA can be treated as a long-term savings vehicle for future health expenditures, even though money can be withdrawn for current health costs, like deductibles and copays," she said
HSA contributions, Dill noted, are generally pre-tax savings. Investment earnings on those savings are not taxed and, once amounts are withdrawn, they are not taxed when used for health-care expenditures.
According to Healthcare.gov, an HDHP as has a higher deductible than a traditional insurance plan. The monthly premium is usually lower, but you pay more health-care costs yourself before the insurance company starts to pay its share (your deductible). An HDHP can be combined with an HSA, allowing you to pay for certain medical expenses with money free from federal taxes.
The IRS defines a high deductible health plan as any plan with a deductible of at least $1,300 for an individual or $2,600 for a family. An HDHPs total yearly out-of-pocket expenses (including deductibles, copayments, and coinsurance) can't be more than $6,550 for an individual or $13,100 for a family. (This limit doesn't apply to out-of-network services.) Any unused funds in the HSA accumulate for future use.
If you are enrolled in an HDHP, consider critical illness coverage, if offered by your employer, Frost recommended. "It can be a low-cost way to protect you from a high-cost health event," she said. Look at your dental and vision needs to determine whether contributing to a health flexible savings account (FSA) is a better choice than insurance.
Workplace and financial wellness program at work? Some employers are now offering workplace wellness and financial wellness programs, said Collinson. "These are programs are offered by employers to offer comprehensive services to employees to help support healthy behaviors and their overall financial well-being," she said.
Collinson said health-related services may include health education and coaching, weight management, medical screenings, on-site fitness, and more. And, financial-related services may include tools for goal setting, budgeting, managing debt, preparing for retirement, building emergency savings and more, she said.
"If these benefits are not mentioned during open enrollment season, check with your employer's HR department or intranet to find out if they are offered," Collinson said.
Dill also noted that many employers offer incentives around open enrollment for participation in health screenings, health risk assessments, and wellness activities - this can essentially put more money back into the employee's pocket, with the added benefit of helping the employee to better understand and manage health risks.
Frost also suggested taking advantage of incentives for well-being. "Some employers offer $300 or more for well-being activities that may lower health insurance premiums or may be used to cover other health-care expenses," she said.
Don't forget disability insurance. Short- and long-term disability insurance offers income protections if you are unable to work because of certain health conditions or disability, said Collinson. "This type of insurance will pay a portion of your income while you are not working, which can help mitigate the need to dip into savings - including retirement savings - or go into debt while you cannot work," she said.
Frost also recommends considering disability insurance. "If you're unable to work, long-term disability provides the financial safety net most people need."