Open Enrollment Season Approaches
While benefits packages have expanded greatly since their inception, more choices can make your evaluation process more complex. The following questions may help you bring your company benefits into your financial big picture:
1. Is your 401(k) properly allocated? Your 401(k) may be your primary source of income in retirement. Unfortunately, employees who contribute to 401(k)s often put the account on auto-pilot. You may want to consider reviewing your 401(k) selections to ensure your goals, timeframe and risk tolerance match your asset allocation.
2. How much company stock do you own? While the Employee Retirement Income Security Act of 1974 (ERISA) restricts pension plans from investing more than 10 percent of assets in company stock, there is no similar restriction on 401(k) plans. It is important that you determine an appropriate amount for your portfolio and what to do if your current holdings exceed that amount.
3. Is there a better choice for your health plan? Health insurance can be one of the most complex and overwhelming benefit decisions. An evaluation of your own situation to determine the best choices for your family would be appropriate at this time.
4. Are you taking full advantage of Flexible Spending Accounts (FSAs)? No question, the use-it-or-lose-it rule is a hurdle to clear, but if you don’t take the time to calculate expenses that could qualify for a health FSA, you’re leaving money on the table. Your company may also offer a dependent care FSA.
5. Should you buy long-term care coverage and extra life insurance? A growing number of employers offer group long-term care and life insurance as a voluntary employee benefit. These policies may offer coverage that would have likely been more difficult or more expensive to obtain on the open market. While group policies may be less expensive, individual policies may better address portability and insurability issues.
6. What about the extras? Many companies offer attractive additional benefits from discounts on gym memberships and transportation costs to reimbursement for professional development, vision plans and matching funds for your charitable contributions.
You may wish to speak with a Certified Financial Planner about some of the above questions, or you may wish to schedule a review of your benefits so that they can assist you in making an informed decision during open enrollment season!
Procrastinators – The final date to file your 2011 Form 1040 tax return for those individuals who requested an extension is today, Oct. 15, 2012. The highest marginal tax bracket in 2012 is 35 percent. The highest marginal tax bracket 50 years earlier (1962) was 91 percent (source: Tax Foundation, BTN Research).
Out Of Work – The national unemployment rate in the U.S. was 7.8 percent at the end of September 2012, the lowest unemployment rate reported by the government since January 2009. The 12.1 million out-of-work Americans is also the lowest reported since January 2009 and is down 1 million since the beginning of the calendar year (source: Department of Labor, BTN Research).
Saving More – The national personal savings rate was 3.7 percent as of Aug. 31, 2012. Five years ago (Aug. 31, 2007), the national personal savings rate was 1.7 percent (source: Commerce Department, BTN Research).