Open enrollments will begin for many companies in the coming weeks. In an effort to be prepared before your window opens, consider reviewing the following outline. This may allow you to organize your “insurance” choices in advance before your employer’s enrollment period opens. This approach supports better decision-making by providing structure to your review process.
- Medical Insurance
How have you utilized your benefits this past year? Are your preferred doctors or specialists covered in your current plan? How much out-of-pocket expense have you incurred? Have you considered switching to your spouse’s plan once rates and coverage is available?
- Health Savings Accounts (HSA)
This requires you to participate in a high deductible medical insurance program. You may save pretax monies to cover medical costs or allow your contributions to compound for long term medical/health care needs in the future.
- Life insurance
These elections are a no-brainer as monthly costs are low. Careful to elect regular coverage and avoid accidental dismemberment coverage as it’s common that additional requirements are necessary for proceeds to be paid to your beneficiaries. Do you have enough to pay off debts, create additional liquidity, and provide income replacement to a spouse? If not, a supplemental policy that is portable may be valuable to you and your family.
- Disability insurance
This is absolutely essential yet often overlooked. Elect as much coverage as possible to protect your best asset; your ability to earn income. Your employer plan may or may not cover additional compensation such as bonuses in the form of stock or cash. It’s best to participate in both short-term and long-term disability insurance programs. Does your income replacement ratio provide enough monthly benefit after factoring in federal and state income taxes? Supplemental policies are available when your income supports it.
- Vision & Dental
These options are relatively low-cost but provide big benefits for your smile, vision, and overall health.
- Stock purchase & Deferred Compensation
Often changes to these types of plans may only be made once per year, during open enrollment. How much of your compensation is directed to these investments? What’s the tax impact to your financial plan and timeline to first use?
Other planning items:
- Do you need to update your beneficiary information? Pro tip: scan a copy of your beneficiary elections on your employer life insurance policies to your personal records.
- Now is a great time to log in and check your 401k elections and the income percentage you are deferring. If you are earning $150k a year and saving 10% of your income, that equals $15,000 to your 401k. Saving an extra $3k a year may only “cost” you $125 per pay period when 24 pay periods exist. Pro tip: consider splitting your investment between ROTH 401k and pretax 401k if your employer makes a ROTH 401k available. A date and duration specific financial plan will help you determine how much should be allocated to each tax environment for your future retirement income needs.
- Consider reviewing your W4 for better income tax withholding for 2021. Pro tip: Avoid owing more taxes or receiving a larger refund by updating this document before next tax year or when you and your spouse change jobs.
Advisory services through Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and Flowerstone Financial are not affiliated.
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