Open-Enrollment Is A Key Part Of Financial Planning: What You Should Know
If you’ve received an email from your employer about open enrollment, do not ignore it! Set aside time to make this a priority. Open enrollment only comes around once a year, so it’s not something you want to push off until later. For anyone who is unfamiliar with open enrollment, it’s an annual window where you can sign up for employee benefits, change them, or cancel them altogether. Some of the benefits you may get to opt in or out of include health insurance, life insurance, disability insurance, and legal services.
This period is important because these employee benefits have financial advantages that can aid you on your path to building wealth. That said, open enrollment is a good time to reevaluate existing benefits or access new benefits you didn’t previously have.
Types Of Benefits Offered By Employers
Employers offer a range of benefits but they vary between companies. Some employers will fully cover the cost of these benefits, some will share the cost with employees, and others may have employees cover them through their paycheck.
A few common benefits include:
Disability insurance: Ensures you still receive a percentage of your wages if you become disabled or are unable to work.
Health savings account (HSA): An account you can use to save money for healthcare costs. Sometimes employers will contribute to the account and you can contribute pre-tax dollars, too. Any money not used or earmarked on healthcare may be invested in the stock market.
Legal benefits: Provides access to legal aid at a discounted price. In some cases it may be fully covered by your employer.
Group life insurance: Provides money to loved ones or beneficiaries you list should you pass away while employed at your job.
Other common employee benefits include:
- General Healthcare benefits: medical, vision, and dental
- Flexible savings account
- Financial planning resources
- Professional development stipends
- Healthy lifestyle incentives (E.g. gym memberships)
- Mental health resources (E.g. access to therapist or counselor)
Reasons To Consider Updating Your Enrollment
When life changes such as marriage, expanding your family, being diagnosed with a health condition, or a death takes place, re-evaluating your benefit elections makes sense. While some of the mentioned are often categorized as qualifying events, meaning you can change your benefit election any time if they occur, it’s easy to forget to do so. Choosing the right benefits can help you save money or protect you and your family’s financial wellbeing.
Here are scenarios where you may want to update your benefit elections and the specific benefits to consider.
Getting Married
Getting married is a milestone event, and once you’re done celebrating, you should sit down and discuss your benefit options. Some specific benefits to look at after jumping the broom include:
Healthcare: Compare health benefits to see which of you has a plan with the lowest cost and wide coverage. You also want to think about who has the best in-network doctors for your specific needs. Also think about whose insurance best covers medications and health services for chronic health conditions.
Life Insurance + retirement plans: Now that you have a significant other, consider updating your beneficiaries on both of these benefit types. That includes your 401(k), employee stock account, or any other retirement savings plan your employer offers.
W-4 Forms: As a newly married person, your taxes may look different moving forward. Decide whether you’re going to file jointly or separately, and then update your tax withholdings on your W-4 if you need to.
Expanding Your family
Life Insurance: If you don’t already have life insurance through your employer and they offer it, consider opting in now that you have a child. While the goal is to live long, you want to ensure the little one has a financial safety net in case you pass away prematurely. You may also want to consider obtaining child life insurance.
Health Insurance: Expanding your family means you may need to add any new children to your health insurance plan so they get coverage too.
Legal benefits: Companies sometimes offer legal benefits like access to a lawyer. This can come in handy when you expand your family as you’ll need to create or expand your estate plan. You’ll likely pay a lot less than you would if you hired a lawyer on your own.
Disability insurance: When you have a household depending on you, it’s key to think about insuring your income. Consider opting into disability insurance so if you’re unable to work, you can still get paid a percentage of your wages.
W-4 Forms: If you have a new child, you may be eligible for various benefits and tax cuts. Update your W-4 to include your new beneficiary or new additions so you’re saving as much as possible on taxes.
Getting Divorced Or Losing A Loved One
Life Insurance + retirement plans: Losing a loved one through death or divorce is a reason to update the beneficiaries on life insurance and retirement plans. Think about the next best beneficiary to add so your assets go to the right person when you pass.
W-4: Remember to update your W-4 form for taxes withholdings to reflect your new tax status after your loved one dies or you get a divorce.
Next Steps
Now that you have an idea of the type of benefits your employer might offer and what instances you might need to change or opt into them, it’s time to think about next steps. Some may include marking the open enrollment deadline on your calendar and mapping out your needs and goals for the next year. If you have a spouse, discuss it with them so you can make these decisions together. Choosing the right employee benefits can help you build wealth quicker than doing it alone.
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About Rianka R. Dorsainvil
Rianka R. Dorsainvil, CFP®️ is the Co-Founder and Co-CEO of 2050 Wealth Partners a virtual, fee-only comprehensive financial planning firm dedicated to serving first-generation wealth-builders, entrepreneurs, and thriving professionals. Rianka also hosts 2050 TrailBlazers, a podcast aimed to address the lack of diversity in the financial planning profession by engaging industry experts and leaders in conversation.
As an award winning successful, millennial Certified Financial Planner professional, Rianka offers a unique perspective not only on the current state of the financial service industry, but on how to stay relevant in an ever-changing world.
Rianka serves as a member of CNBC’s Digital Financial Advisor Council and CFP Board’s Diversity Advisory Group, is a Forbes Personal Finance Contributor, and has been recognized for her accomplishments and leadership within the industry by leading publications and organizations such as Investment News’ inaugural 2017 Women to Watch Rising Star and Wealth Management’s Ten to Watch in 2018. She has been published in PBS NewsHour, Forbes, USA Today, Black Enterprise, CNBC, Women’s Health, and more.