It's everyone’s favorite time of year – open enrollment season. As we approach the end of the year, many employees must make important decisions about their benefits package. Open enrollment can be a critical period for ensuring you have the right coverage to protect your financial well-being and health. Below is a list of considerations as you go through your employee benefits options.
Rising Healthcare Costs Demand Attention
Healthcare costs continue to climb, making it a critical consideration during open enrollment. According to a recent survey from health foundation KFF, the average cost of a health insurance plan offered through an employer is set to rise 7% this year.1 This increase is the highest since 2011 and is driven in part by higher inflation and higher healthcare wages. Here's what you should look out for:
- Evaluate Your Health Plan: Understand your current healthcare needs and how they align with your current plan. Consider how often you visit the doctor, whether you require prescription medications, and any anticipated medical procedures.
- Compare Plans: If your employer offers multiple health plans, compare them carefully. Look beyond the monthly premium and consider the deductible, co-pays, in-network vs. out-of-network providers, and maximum out-of-pocket expenses. Health plans can change significantly from year to year, and it is important to evaluate all options, particularly if both spouses are working.
- Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs): These accounts can help you save money on healthcare expenses by allowing pre-tax contributions. Consider contributing to an FSA or HSA to cover medical expenses and be sure to use any remaining FSA funds before they expire.
- Wellness Programs: Some employers offer wellness programs to promote a healthy lifestyle. Participating in these programs can lead to incentives, such as reduced premiums or contributions to an HSA.
Life Insurance Matters
Life insurance may not be top-of-mind when you think about open enrollment, but it's a critical component of financial planning. Here's what to consider:
- Assess Your Needs: Life insurance should be tailored to your unique situation. Consider your dependents, outstanding debts, and financial goals. Make sure your coverage adequately protects your loved ones in the event of your passing.
- Review Employer Offerings: Many employers offer life insurance as part of their benefits package. Take a close look at the options available and weigh the pros and cons of purchasing additional coverage through your workplace vs. seeking an individual policy from an insurance provider.
- Adjusting Coverage: Life events such as marriage, the birth of a child, or a significant change in income should prompt a review of your life insurance. Open enrollment is an ideal time to make necessary adjustments.
401(k) Plan Evaluation
Although you can make changes to your 401(k) plan throughout the year, this is also a great time to review your current investment options and allocations to ensure they fit with your long-term goals. In addition to reviewing your investment profile, allocation and fees, here are a few additional items to review:
- Employer Match: Ensure you're contributing enough to receive the full employer match, if available. This is essentially free money that can significantly boost your retirement savings.
- Roth 401(k) vs. Traditional 401(k): If your employer offers both Roth and Traditional 401(k) options, evaluate which one is more advantageous for your tax situation and retirement goals.
- Beneficiary Designations: Ensure that your designated beneficiaries are up-to-date. This ensures that your assets pass to the intended individuals or trust in case of your passing.
Open enrollment is a crucial period for assessing and adjusting your benefits to meet your unique needs. Take the time to carefully review your options, consult with a financial advisor if needed, and make informed decisions that will safeguard your financial future and well-being. Don't wait until the last minute; open enrollment is your opportunity to make the right choices for you and your loved ones.
Authored by Stephen Blahovec and Michael Rausch of North River Wealth Advisors. We are an independent, fee-only financial planning and investment management firm located in Pittsburgh, PA servicing clients locally and across the country. To learn more, contact us here.
This content is developed by North River Wealth Advisors from sources believed to be providing accurate information. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.