Make the Most of Your Annual Enrollment

It is that time of the year. Annual enrollment is currently underway for most people.

This can often be a time-consuming hard process to go through, but it is often easier than most think.

There is a simple three step process I follow with my clients to help them find the best insurance coverage for the next year.

Ryan’s 3 Step Approach

The 3-step approach is very simple.

It starts by taking a look at your current account. And location any shortfalls from your previous year plan.

Looking at things like your deductible and coverage terms and how they may have cost you more money is important. This will lead you into the next step.

What has changed in your life? Have you had another child? Have you retired? Or maybe your health has significantly changed.

Whatever changes have happened they need to be considered when selecting your next plan.

Finally, once you find your shortfalls and account for changes you select a new plan.

Pretty simple, isn’t it? That three-step approach will lead you to success.

But we need to consider the different aspects of your benefits enrollment. There are the items you have to choose each and every year.

This post will now explain a lot of the different aspects of an annual enrollment. Health Insurance, HSAs, life insurance, the list goes on and on.

I will go through each of the major areas to help guide you into making your choices.

Benefits Options – 9 Common Enrollment Items

This list is not exhaustive of all retirement plan options but it does consider many of most common ones.

Health Insurance

Buying health insurance through open enrollment is so much more than just picking the cheapest plan.

First thing to do is to check what plans your providers accept. This will narrow down what plan you should buy.

The next thing to take into consideration is the deductible. What options are available?

Should you go with the high deductible plan because you are young and healthy?

Or should you pay a bit more each paycheck for a lower deductible because you may pay less out of pocket if a health event does arise?

Also, if you are in a two-income household and your spouse’s employer offers coverage you need to come up with a plan for your family.

You typically cannot put a spouse on your plan if they already have work coverage. If you can, you may have to pay extra for this privilege making it cost prohibitive.

Also, if you have dependents whose coverage will they be under. Consider more than monthly cost when making this decision. Provider coverage and the deductible need to be factored in as well.

Dental & Vision Insurance

Many of the same approaches to picking health insurance apply to dental and vision.

Provider coverage and monthly cost come into play.

But what is most important is when emergencies do arise. Dental work can be expensive. So can eye surgeries. Really understanding the out-of-pocket max and what is covered versus what is nor is important.

When it comes to vision insurance you may have to choose between buying contacts or glasses every other year. Understanding what your plan covers here is important.

If you have children or want to improve your smile dental coverage may not cover orthodontics. If that applies to you try to find a policy that does or provides partial coverage, or you could spend a pretty penny.

Retirement Plan

Your retirement plan is an important part of your benefits package. While you do not normally have to wait until annual enrollment to change it, this is the time most people do review it.

Here you can change things like your annual contribution and your investment allocation.

You can also change your contribution type to before tax (traditional) or after tax (Roth).

Taking stock of your situation, you should look into whether you’re on track for retirement. If not, you likely need to contribute more or be more aggressive to make up for it.

Vacation Leave

Employers are increasingly offering the ability to buy more vacation.

This is a huge opportunity for employees. Most Americans only get 2-3 weeks of vacation a year. Which really is not that much when you think about it.

Having the ability to buy another week or two is huge. Vacation helps with mental health and work life balance. Buying a week or two can be a huge boon to productivity as well.

One caveat is that you buy it at your current wages. As you make more money it becomes more expensive to take. Buying an extra week of vacation will lower your paycheck.

Also, if you work on commissions or are in a sales-based role and extra week out of work can have an even more significant impact on your salary.

Weigh the pros and cons of an extra week off. Sometimes less pay is worth the rest and relaxation.

Life Insurance

I wrote this blog article on life insurance. It is a good starting point on the ins and outs of the topic.

You do often have the opportunity to buy insurance through your employer under a group policy.

The advantage to this is that it is normally much cheaper than buying a policy on your own. Because your risk is spread out among all the employees at your company.

The drawbacks are that there is typically an upper limit on how much you can buy. And, even more importantly, if you leave your employer this coverage stops.

This is why it is important to buy a policy outside of work to provide coverage in case you unexpectedly lose employment.

But this is a nice way to cheaply buy extra protection for your loved ones.

Health Care Expenses

You can typically contribute to accounts that you can use to pay for healthcare expenses tax free.

These accounts come in many different forms. Two of the most popular are Health Savings Accounts and Flex Savings Accounts.

Health Savings Accounts let you contribute up to $3650 for individual plans and $7300 for family plans.

This money is tax deferred meaning that you get to claim it as a deduction on your tax return.

If you use the funds to pay for a qualified healthcare expense, you do not have to pay taxes on it.

If you have money over at the end of the year you can also roll it over and use it in future years.

Even more importantly you can invest that money and let it grow. Doing this over the course of time you can grow the funds a significant amount and cover many healthcare expenses for you and your loved ones.

Also, at age 55 you can pull money out of the HSA for any reason not healthcare related but will have to pay taxes on it. If you do so before age 55 a penalty will apply.

Flex Spend Accounts are slightly different. The money still goes in tax deferred and can be used for healthcare expenses tax free.

The caveat here is that the money cannot be rolled over like in an HSA. If you do not use it for a healthcare expense within the year the money is returned to you and taxed as normal income.

It is still a nice way to save a bit on taxes for any health-related event.

Disability Insurance

Disability insurance provides you with coverage if you are suddenly unable to work.

Most employers pay for a portion of coverage for their employees. This coverage is often 50-60% of your current income.

You typically have the opportunity to buy more in case something was to happen. Through a group policy you may be able to buy another 10% or more if allowed.

I would recommend doing so as it protects you against a sudden loss of income.

Also, workplaces do sometimes treat maternity leave as disability. If you are planning to have a baby or know you will have one in the next year it makes sense to buy up your optional disability. This will allow you the opportunity to continue your income while bonding with your new child.

Child Care

Last but not least some workplaces offer child-care reimbursement. This can be a bit trickier to navigate. But it is something to consider.

If you pay for childcare employers may have a list of preapproved daycares and nannies, they work with. They may reimburse a portion of childcare making this more affordable to you.

Big Picture

Annual Enrollment is a very crucial time. Making the right choices can save and make you money in the long run.

Taking stock of the gaps you have had over the past year and accounting for change in your life will make it easier to pick your new plan.

Do not always go for the lowest cost but what makes the most sense. Benefits are never something to be cheap with.

What help do you need with your annual enrollment?