*Special Episode* Maximize Your Company Benefits

Listen to this episode before you push the "easy button" for your 2023 company benefits. Many employers offer great benefits packages, but it's up to you to take advantage of all of the offerings. We delve into health care coverage, life and disability insurance, executive liability and retirement accounts on this quick episode. Listen on your way to work, before you make those final selections for 2023!

Transcript:

hello and welcome back to the Six Figure Investor Podcast. This is a special episode. Zach's not here, but it is open enrollment season for corporate benefits. And so I wanted to do just a quick episode to give you some thoughts around what to do when you're enrolling.

In benefits. A lot of companies have deadlines for that before Thanksgiving next week. And so in this episode, we're just gonna talk about a few things that you should absolutely think about. Um, And, and I think a few areas where people often miss the mark or um, just don't even consider what the, the benefits of their benefits might be as you go through open enrollment.

So if you wanna maximize the benefits from your employer, then this is the episode for you. And we'll dive in right after.

all right. As I mentioned, it's the time of year when company deadlines are approaching for open enrollment in benefit programs like health insurance, retirement plans et cetera.

And it's, it's really easy just to push the, keep my benefits to the same button. But it's really important to take a look at the offerings each year. The plans might change, your situation changes certainly as your life evolves and making the right benefit choices can be worth thousands of dollars.

Every year and much more than that compounded over the long term of your career. So spend a few minutes to get it right. So here's a few key things to think about. We're gonna talk about healthcare healthcare plans and tax savings. We'll talk about disability insurance, life insurance, executive liability, and then finish out with some thoughts around retirement account contributions as we go into the end of 2022 and into 2023.

So when we think about healthcare insurance it's really important to consider whether a high deductible plan could be the right fit for you especially if your healthcare expenses are typically low. And keep in mind that deductibles only need to exceed $1,400 for individuals or $2,800 for a family to be considered in a, in a high deductible plan.

So in our experience, a lot of corporate plans qualify for sort of high deductible tax treat. Even if it's just your standard corporate health insurance plan and that opens the door to health savings accounts. And health savings accounts are really important because they're what we call triple tax advantage, which is the holy grail of tax advantage long term investing.

Your contributions are tax deductible. The assets and health savings accounts grow tax free over time. And then withdrawals for healthcare expenses are also tax free. So HSAs or health savings accounts can be really valuable for professionals with lower healthcare expenses, particularly if you're earlier in your career, you don't have a family yet.

You don't have children that you're taking to the doctor like we do every single week and running up the bill. If your healthcare expenses right now are. Um, Then those higher deductible plans may be a great way for you to build healthcare savings for the long term. And then over time, later in life, as you have a family, or when your own healthcare expenses rise in retirement, you'll have a tax-free asset that you can use to meet some of those things.

So, so really think about the deductibles on your health insurance plan and and whether or not a high deductible plan coupled with a health savings account might be an opportunity for, for. Disability insurance. This one is really, really important. Everybody, or not everyone, but most people carry life insurance.

They understand the risk there but fewer people carry disability insurance. And the problem with that is that according to the Social Security Administration and lots of other folks that have done research on this, you're much more likely to become disabled. Before retirement, then you are to pass away early.

You're more likely to need to use disability insurance than you are life insurance, yet you have life insurance and not disability insurance. So if you don't have disability insurance, this is the time to make sure that that you have that. And depending on your field, that disability may mean a significant income loss over the rest of your career.

Many companies offer the opportunity to buy additional disability insurance. A lot of times they may offer you 50 or 60% of your base pay just as a standard benefit, and that's great. That's better than nothing. But a lot of times you can gross that up or you can buy more, maybe up to 75 or 80% of your, of your base pay.

And we recommend caring as much of that disability coverage as possible. Given that the probability that you might need it in the future is a lot higher, especially when it, it's compared to life insurance. So really think about disability. 25% of of people in the last Social Security administration study ended up needing disability insurance.

So it's really important to have it and for you to think about it as you go through benefits enrollment. Life insurance company benefits are often the lowest cost life insurance around. I'll say that again. The company benefits that are offered to you is often the lowest cost. Life insurance around companies can pull the risk of their entire workforce together.

That's a really attractive proposition in the, in insurance world. And so a lot of times the standard life insurance benefit that is offered is maybe one or two times your salary, and you'll get that maybe for free. But if you make say, $200,000 a. Your life insurance benefit is either $200,000, or if it's two times your salary, it's $400,000.

And for professionals with families to support future educational expenses, retirement often you need substantially more life insurance than just one or two times your current income. And so instead of going to a separate insurance company, a lot of times during open enrollment you can. Spend a little bit of money inside your corporate benefits plan and acquire additional life insurance.

And a lot of times you can get up to a few million dollars through your employer for a few dollars. Really a month, maybe 20, 30 bucks a month. Really worthwhile opportunity if that's available to you. So look for life insurance and most importantly, don't just sort of check the box on, Oh yeah, I have some life insurance.

Make sure that the life insurance that you're being offered is enough, and if it's not enough consider grossing that up when you're going through and making your benefit selections. You won't miss the few extra lattes a month. I, I promise. Executive liability. So if you're an executive at your firm which means you're at the sort of top levels of management or if you sit on the board of directors for your company or for other companies directors and officers, liability coverage is really, really important.

Those plans protect you in the event that someone sues the company for mismanagement or for finance. Actions that you took in your role. And remember, they don't have to be right. They just have to decide to sue you. And the lawsuit itself can be tremendously expensive, right? So even if you're saying, Well, I would never do anything wrong that doesn't mean that someone won't try to sue you.

So typically companies provide those plans for executives and board members. So be sure to check that out if you're an executive role. If you're not offer. Plan through your company than it is something you can get outside of there. Also keep in mind that the liability extends to both public and private companies.

So coverage is important. A lot of times I think people think about this as something for public companies. It's important regardless of the size of your company, if you've got employees it's a big enough company or whether it's public or private. So size of company ownership doesn't matter if you're an executive or if you're on the board.

Make sure that you've got executive liability coverage. And then last but not least, in this quick special episode retirement account contribution. So make sure you're contributing enough to your retirement accounts that are offered to you by your employer. At a minimum, you need to be contributing enough to receive the maximum match every year.

Usually that's somewhere between four and 6%. But it could be more. So check your plan documents and make sure that you're maximizing your employer's contributions. Matching contributions are the closest thing to a free lunch In investing.

There is nothing better than putting $10 in something and having somebody else immediately give you another $10. So, Make sure to take advantage of those opportunities. Um, Additionally, you might be able to contribute to a Roth version of your company's 401k plan, sometimes called a Roth K inside your 401k plan inside your company retirement savings offering.

So I. While you pay taxes on those Roth contributions, now those earnings grow tax free and the withdrawals are tax free in retirement. And so Roth savings can be especially valuable for professionals that expect their income and therefore their tax bracket to rise over the course of their career. You can pay the taxes now when you're, when you're earning a little bit less and paying a little bit less of a marginal tax rate.

And then obviously have that money down the road when your assets and earnings every year are more. So. So think about your retirement account contributions, make sure you're contributing enough to get that match. And then also consider whether a Roth k is the right option for you and check to see if that's available.

Okay. So that's a few things. Um, Open enrollment as you are making your benefit selections headed into the Thanksgiving holiday period. So make sure to double check those before you just sort of push the, keep my benefits the same, make sure you're getting the maximum value you can out of your employment every year.

And we will talk to you next time on the Six Figure Investor podcast