Taking Advantage of Open Enrollment

And the life-changing impact taking your employee benefits can have on your life.

by Kaitlyn Ranze

Open enrollment is the time of year where your human resources department will dump pamphlets and info-graphs into your inbox and add reminders to your boss’s Google Calendar. For employees, it’s time to sign up for benefits at work. This makes it the perfect opportunity to evaluate your life, pull out the employee benefits handbook, and make some life-changing decisions. 

Open enrollment defined

Open enrollment is a limited period of time when you can select or change the benefit options you’ve chosen through your employer. 

Before rushing into anything, here are a few things to know about open enrollment so that you can make the best decision for yourself financially.

Health Insurance – It can save you (financially)

Health insurance provides financial protection in case you have a serious accident or illness, limiting high, unexpected costs. It lays the groundwork for most of your other money moves during open enrollment and depending on your monthly premium (the amount paid to the insurance company for coverage) can make up a pretty sizeable portion of your expenses. 

Why you should enroll in health insurance through your employer

In most states, employers are required to contribute or pay at least 50% of each employee’s healthcare. That means you’re actually getting health insurance coverage partially under your employer’s dime. We love a discount. 

Having health insurance will save you 

According to the U.S. Census Bureau data on the burden of medical debt, 19% percent of U.S. households could not afford to pay for medical care upfront. 

We know healthcare premiums are expensive. The thing is having health insurance decreases the likelihood of you having medical debt.

You’re less likely to go into debt if you have health insurance

16.2% of households with health insurance coverage for all members all year (fully insured) had medical debt compared to 30.8% of those that were not fully insured. Worse yet, the lower-income you are, the more likely you are to have medical debt

Do you still need health insurance if you’re healthy?

No one plans to get sick or hurt, but most people need medical care at some point. Health insurance covers these costs and offers many other important benefits. Without health insurance, you will be responsible for 100% of your medical bills and hospitals charge uninsured the highest prices

How can having health insurance change your life?

Going from uninsured to insured can dramatically reduce your financial stress. Take it from Sarah Morgan, who explains “At only 21, I realized that receiving insurance coverage would be a necessity for the rest of my life and would have to be at the forefront of my future decisions.

The cost for me to function is currently priced at $3,500 every eight weeks. That’s over $20,000 a year and more than half of my previous years’ salary. It’s crazy for me to think about.”

By being insured, Sarah saves $20,000 a year at 24-years-old.

Saving More During Open Enrollment

Open enrollment is the perfect opportunity to enroll in programs meant to help you save more. 

If you’re new to employee benefits like a 401(k), it may seem prudent to do what the guy right next to you is doing. But if you follow a co-worker’s recommendations, or use default options, you could miss out on important wealth-building opportunities.

Perks of taking advantage of a company retirement plan

Automation

Evidence from multiple studies suggests you will actually save more over the long term by automating it. Automation is autopilot for saving, reducing the risk posed by willpower fatigue or consciously having to THINK about putting money aside for retirement. 

You can play catch up.

There’s a good chance, you’re not saving enough. After all,  a report from the Economic Policy Institute found that only half of American families have any retirement savings at all, and the average savings for couples approaching retirement is just $17,000.

With a company 401(k), you can automate your savings and hopefully (and more than likely) make money off the investment of your savings.

“Free” money

Employer matching is one of the most common benefits offered to employees. With a matching contribution, employers will match a limited amount you contribute to your 401(k), usually stopping at a certain percentage.

For instance, if your employer offers a 5% match, it means they will contribute the same amount to your account that you do, up to 5% of your salary. While you may be able to contribute more, your employer will only match the first 5%. 

Not taking advantage of this is losing out on “free money”.

Tax breaks

Money pulled from your paycheck and put into a traditional 401(k) lowers your taxable income. This doesn’t mean you escape paying taxes altogether. This just means that when your income is lower (likely during retirement), you’ll pay taxes then versus now.

During open enrollment, you can also take advantage of other little-known accounts that will help you save more.

HSAs, HRAs and FSAs are accounts used to save on taxes and pay for qualified medical, prescription, dental, and vision expenses. Read more about them here, and make sure you’re taking advantage of them.

Protecting Your Legacy During Open Enrollment

Enrolling in life insurance through your employer

Real talk: can you afford to pay all of the household bills if income is lost permanently? Or can your partner?

A record number of grieving survivors resort to GoFundMe to cover funeral expenses, averaging $8,755. In fact, this was the most common type of fundraise on the website for 2013 and 2014. 

Having life insurance gives your family options by providing financial benefits to pay off debt, pay for housing, and ongoing living expenses in the event someone passes away. Open enrollment is the perfect time to ensure your family is protected. 

Digital Marketing Director Samantha Miller writes about being the recipient of her boyfriend’s life insurance policy in this post, “

[My boyfriend’s] job had the remarkable foresight to offer life insurance as a benefit to the employees…

His sister and I [received] his life insurance money. Money that probably set her up on her path to becoming a doctor. Money that allowed me to pay the fine for breaking our apartment lease, find a new place to live, obtain a car, take care of our cats, put some money in savings, pay off a significant amount of medical debt, and accumulate a retirement cushion.”

Life insurance provided by his employer changed the lives of his loved ones. But there are other life-changing benefits you should also consider enrolling.

Enrolling in disability insurance through your employer

Disability income insurance is the most overlooked area of personal finance. If you are sick/injured and unable to work, how will you pay your bills? Your medical insurance will pay for your medical care, but how will you buy groceries or pay the mortgage? Disability income insurance replaces your income in that event.

Enrolling in wellness programs during open enrollment

Many employers offer wellness programs such as gym membership discounts or free yoga classes at work, financial well-being programs, as well as dependent care assistance programs (DCAPs). Open enrollment is the perfect time to pull out your benefits package and make decisions that can improve your overall quality of life.

During open enrollment employees have the option to enroll in benefits for the first time, change their current plans or coverage amounts, or to drop coverage completely. These decisions have a significant financial impact so it’s important to weigh your options carefully. Preparation and education are the two key pillars to managing open enrollment stress this year. Be sure to have a clear understanding of your needs and take time to review your options.

Related Reads:

Understanding Health Insurance

Protecting Your Financial Legacy

From Finances to Feelings: Planning Your Estate

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