Thread by @TKopelman

Your benefits make up 32% of your total comp

Yet the average person just clicks through their benefits to get them done

Don't be that person

Let me teach you what you need to know about your company benefits:

November is approaching us and you know that means… It’s employee benefit election time (for most people)

There are a lot of parts to your benefits so let's walk through each one individually

Employer-Provided Insurance Coverage

1. Health Insurance

One of the most crucial components of your benefits is health insurance; let's discuss the key parts you need to know

HMO vs PPO

Health maintenance organization, also referred to as HMO is where Doctors, hospitals, and other healthcare professionals have agreed to accept payment at a specific level for any services they perform

This allows the HMO to keep costs in check for its members

PPO stands for preferred provider organization

A PPO plan allows you access to a network of healthcare providers that you can use for your medical care, just as an HMO, or health maintenance organization

The plan members' care will be provided by these providers at the agreed-upon rate.

Most places offer both options

HMO’s tend to be more affordable but come with more restrictions and less coverage

PPO’s tend to have a higher price tag but come with more options

It all comes down to how much health coverage you use and what you want for you and your family.

When picking your health plan, do not just pick the lowest cost/highest deductible plan (it may or may not be best based on your situation)

If you are someone that uses a lot of healthcare, this will get pricey as as you have to spend all the way up to your deductible

However, if you do not spend much on healthcare, getting the lowest deductible/highest cost plan might also not make sense

You have to audit how much health care you use to understand what may be the best plan for you!

HSA vs FSA

Most people get these two confused, but they are quite different

FSA stands for flexible spending account

HSA stands for health savings accounts

Both FSA’s and HSA’s have great tax benefits

Both help you pay for health care in a way where you are using pre-tax dollars

However, with FSA’s they typically are use it or lose it meaning you have to use it on health care costs this year or it is gone (some plans allow you to rollover a small amount)

You have to be careful and make sure you don’t put too much money in it since that money can be lost

Now with HSA’s you can put money in on a pre-tax basis, let it get invested and grow tax deferred, then use it tax free on healthcare sometime in the future

So it is not a use it or lose it account like an FSA.

HSA’s are a great tool for people to build up money for the future

If you can afford health care costs out of pocket now, let this money grow for the future

I am a big fan of HSA’s, but you do not want to just pick the high deductible plan for an HSA if a low deductible plan would be the best option for you!

Dental and Vision

Dental plans come in a wide variety, so make sure that you take the time to understand how yours is set up as the specifics will probably influence how much you have to spend out-of-pocket

Preventive treatment, such as twice yearly cleanings and x-rays, are typically fully covered by insurance policies

Most the time with dental insurance, you pay pretty close to what the costs would be out of pocket as it is pretty easy to predict yearly costs

Dental is typically less advantageous than health insurance, but is something you still may want to get

With vision, if you wear glasses or have contacts, you will most likely want to elect into this as it will help cover routine exams, new glasses, etc

Short Term And Long Term Disability Insurance

Most people neglect disability insurance

They think a disability will never happen to them but that is not true

You statistically have over a 30% chance of having a long term disability during your working career

It's one of the biggest risks you face!

We want to insure against it and protect your income for the rest of your working career

Oftentimes, at work you will have the option to elect into short term and long term disability

Sometimes it is paid for by them (if so the benefit will be taxed if you were ever paid out) and other times by you

If you have the option, it oftentimes can make sense to choose to pay so the benefit would not be taxable

So many people get caught up on short term disability

Short term is more expensive but one of the goals of an emergency fund is to help protect against short term loss of income (could be short term disability)

But almost no one has enough cash to cover long term which is why we need to insure it

Think about someone who is 35 & making $150,000 a year. If they were disabled they would miss out on 30 years of income at least $150,000 a year

That is $4.5 million that would be lost

Protect against this and take what the employer has to offer (you may need more externally)

Life Insurance

Most employers give you 1-2x your salary of life insurance coverage for free

After that, you can pay to get more, the problem is when you leave your job it does not go with you

So you would need to get reapproved for coverage at whatever your health looks like in the future

Most times, it makes sense to get external life insurance to cover you and your family just in case, but take the free insurance you are given

It is nice to have

A good rule of thumb for how much insurance you need is 10x income if you have kids and both spouses work. Or 20x income if just one works

It sounds like a lot, I know, but term insurance is usually very cheap

Note: If you are in poor health, it may make sense to just buy more through work since it is a group plan

Dependent Care Options

Employees who care for small children or disabled persons may be eligible for dependent care benefits

You can save pre-tax money from your paycheck in a dependent-care flexible spending account and get reimbursed for qualified expenses related to the care of your kids

These accounts, like healthcare FSAs, function on the "use it or lose it" basis

Therefore it's critical to estimate the amount you will need and set that much aside

Dependent-care FSAs are different from healthcare FSAs in that you must pay for dependent expenses up front before requesting reimbursement from your FSA

Employer Sponsored Retirement Plans

Most of the time you can make changes to your retirement plan during the year, but this is a great time to review and ensure you are doing the right things

For most people, saving for retirement is a top priority, but it is not an easy one

In order to accumulate enough money to stop working, you are going to need to save a lot of money for a large number of years

One of the best methods to save for retirement is through the plan offered by your company

They frequently include a match depending on your company and you also have the option to contribute money on pre- or post-tax basis (Roth)

But know that regardless of which you choose, the employer match is pre-tax (for now)

Here are a few best practices:

- Contribute at least up to the match (don’t leave free money on the table)

- Increase yearly as your income goes up

- Think hard about pre-tax vs post-tax

- Start early

- Make sure your investments are diversified and not really expensive

- Know how long you have to work somewhere for the match to vest

- Pick an investment allocation and stick to itGym memberships/discounts

Other perks to look in to:

- Free parking
- Legal assistance
- Tuition reimbursement/support
- Professional development programs
- Catered lunch

Make sure to take the necessary time during open enrollment and pick the best options for you

Remember: this can be close to 1/3 of your compensation, utilize it!