For many of us, benefits are the afterthought of our employment compensation. We get our paycheck, and our eyes go immediately to the dollar amount, and maybe to the PTO cache, but then we’re pretty much done. Whatever insurance/health plan/retirement plan we might have brushes past our radar once every few months or less.
Have you ever thought of your employee benefits as part of your financial plan? How do these programs and seemingly far away accounts actually work into your comprehensive financial health?
Your health plan, insurance coverage and especially your retirement savings vehicles are integral to your financial picture. Let’s look at how that works today, and how you can get the most out of what your employer is already giving you.
Keep Your HSA Healthy
Your Health Savings Account (HSA) is a cornerstone of your benefits planning. The money is triple tax-advantaged – contributions, growth and withdrawals for qualified expenses are not taxed. This account is like nothing else, and you need to take full advantage of it.
There’s no limit to how much you can have in an HSA, but there are limits for contributions. In 2019:
- Single person: $3,500 a year
- Family plan: $7,000 a year
- $1,000 yearly catch-up option for those who are 55 or older
Your employer can also contribute, as a benefit to employees, but their contributions count toward your annual contribution limit.
Keep in mind as well, that this money goes in and stays there. There is no “use it or lose it” policy, which is a main difference with the Flexible Spending Account (FSA), which has been around longer. Your HSA money is yours to keep, even if you change jobs or retire.
The HRA Spin-off
The Health Reimbursement Arrangement (HRA) is another benefit closely related to the HSA. HRAs are funded by an employer and used to reimburse qualified healthcare expenses incurred by an employee. So an employee could pay for a prescription and then request reimbursement from the HRA.
There’s a big change to these accounts starting January 2020. Employers can now use an HRA to reimburse employees for purchasing their own comprehensive coverage, whether on the healthcare marketplace or elsewhere. This could mean savings for everyone, as employers won’t be beholden to just one plan and employees can shop around for what works best for their family.
Other Health Considerations
As you can see, an HSA and HRA can profoundly affect your overall financial picture. Saving money on healthcare saves money everywhere – considering the national average right now for family health insurance premiums is over $20,000 per year! Strategizing with these expenses can help you immensely. There are also other considerations.
Look into what you’re offered as an employee for gym memberships or weight loss programs or other preventative healthcare. This is a preemptive move on the part of your employer – regular exercise cuts back on your weight, cardiac issues, even psychological stresses that result in expensive counseling appointments. They are investing in their future by investing in yours.
Your deductible can be part of your strategy. Can you schedule a surgery or other major expense for the end of the year when your deductible is already met? Medical professionals sometimes call it the “run of December,” when folks are trying to get that last procedure in to get the most of their health insurance plan. It makes sense.
This is another preventative piece. Does your employer offer you a flu shot? Do you have an on-site gym you can use? The management platform company Asana has on-site nap rooms and offers naps as an employee benefit. These small gratis items in your employment life can add up to larger benefits over the years – every little bit counts.
Maximize Your 401(K)
If you’ve never been to see a financial advisor before, you may be surprised where the discussion starts. They’re not going to take you immediately to the stock exchange floor or toss you copies of the The Wall Street Journal, they’re going to ask you about your 401(K).
Your 401(k) is where wealth-building really begins for a lot of people (especially when you take it to the next level). This nearly universal, easily accessible financial vehicle gives you a stable place to grow your money and prepare for the future. At the very least, make sure you’re paying in enough for your employer match.
The average employer match nationally is 4.7%, and that’s not money you want to leave on the table. Percentages can seem a bit abstract, so it can be helpful to put that in dollars and cents.
Take a salary of $100,000 a year. Take out 4.7% of that and you’ve got $4,700. As a percentage, it may seem small, but if you can get yourself to picture a stack of 235 twenty-dollar-bills or a few month’s worth of mortgage payment, maybe that will have more punch. That’s what you’re being offered by an employer, and it will collect interest as well.
Healthy, Wealthy and Wise
Your employee benefits are your in-road into wealth building, they are the back staircase that too many people overlook. Make sure you’re getting all you can from them, not only at the moment but over the decades of your career.
If you need help figuring through some of these small practical steps that add up, a sit-down with a financial advisor is the best place to start. How can we help? Let’s talk!