With the arrival of spring, many workers receive open enrollment notices for employee group benefits. This is a great time to review the benefits offered to you and take advantage of them.
When working with clients, I often start with assessing their insurance needs. Health insurance is vitally important (and now mandated, due to the Affordable Care Act). Disability and life insurance are also important, especially if you have dependents and are a substantial breadwinner.
Disability insurance is important since you are insuring an income replacement in the event you can’t work for long periods of time. A good starting point is 50 percent to 60 percent of your income.
Life insurance can be relatively inexpensive and can help provide income replacement when you die or meet a specific goal (pay off mortgage, pay for children’s college, etc.). The younger and healthier you are, the less expensive these policies are. A good starting point is 7 to 10 times your annual expenses for life insurance. Group benefits are usually offered with few underwriting restrictions. If you do not have these group benefits, get an individual policy (you will have the advantage of portability).
If you’re already enrolled in your company’s group benefits, take time to review them to make sure all information is up to date. Be sure your listed beneficiaries reflect any recent family changes (e.g. marriage, divorce, new child). Also pay close attention to the significant benefits of pre-tax spending by utilizing Flexible Spending Accounts (FSAs) for medical or children’s dependent care, or Medical Savings Accounts (MSAs) for out-of-pocket deductibles and medical co-pays.
Finally, set up your savings for auto-pilot. One of the easiest ways is to participate in a company-sponsored retirement plan like a 401(k). Start with at least 5 percent of your salary, or enough to receive any company matching contributions.