Maximizing Your Employee Benefits During Open Enrollment 2025

Maximizing Your Employee Benefits During Open Enrollment

In this episode of The Retire Early Retire Now podcast, host Hunter Kelly, a certified financial planner, breaks down essential strategies for making the most of your employee benefits during open enrollment. He covers crucial topics such as choosing the right health insurance plan, utilizing Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) effectively, optimizing retirement contributions, and ensuring adequate disability and life insurance coverage. Hunter also provides a practical year-end checklist to help listeners streamline their benefit decisions, emphasizing the financial impact of making informed choices. From tax-saving opportunities to tips on coordinating benefits with a spouse, this episode is a comprehensive guide to maximizing your workplace benefits.

00:00 Welcome to The Retire Early Retire Now Podcast
00:07 Understanding Open Enrollment
01:53 Health Insurance Plan Decisions
04:55 Maximizing Your HSA Benefits
09:20 Retirement Contributions: Don't Miss Out
13:22 Protecting Your Income with Insurance
17:44 Exploring Additional Benefits
20:04 Year-End Checklist for Financial Health
23:24 Conclusion and Final Thoughts

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Transcript

0:00

And welcome back to The Retire Early Retire Now podcast. I'm your host, hunter Kelly, certified financial planner and owner of Palm Valley Wealth Management. And today we're talking all things open and enrollment. Every fall your company sends you a stack of benefit options, health insurance, disability, life insurance, maybe options for your health savings account. HSA. Or a flexible spending account, whatever health insurance, options that you may have, and they expect you to make decisions that could affect your paycheck and taxes through the entire year. Most people just click the same boxes as they did last year. They don't give a thought about changes for the next year, and they move on. But these decisions can actually be worth thousands and thousands of dollars. When you choose them strategically. So in this episode, we're going to break down smart moves that you can make during open enrollment from picking the right health plan to using your benefits to grow your wealth. And so if you're liking this podcast, go ahead and leave a five star review on your favorite podcasting app and share this with a friend that you know who is going through open enrollment right now. And for the every weekers, sorry, I missed the episode last week. The Kelly family had the flu. so we were down for the count and there was, you trust me, you didn't want to hear me talking, into a microphone. that would, that would've been rough. I appreciate you guys being patient. we'll continue on this week and through the, the rest of the year. like I, like every week I try to get a podcast out, but I am a one man show for this podcast, sometimes that just doesn't work out, but I appreciate. everything that you guys do as far as listening and sharing and leaving those reviews. And so let's jump into today's episode. So number one, health insurance plan decisions. So what should we think about? we wanna make sure that we make the right decision. sometimes that is sticking with, the same plan that we had last year, but sometimes there are changes in your health, changes in your family, like having kids or changes in their health. And so it does not always make sense to continue. Clicking that same box that you did last year. so we don't want to just compare, or just go through the motions on these things. We want to take a look. And sometimes those plans may change, from year to year based off of what your employer, may do because they're gonna go through a process where they're gonna do their due diligence. And so sometimes they may bring on a new carrier, they may bring on new plans. Whatever that may be. And so you wanna take some time to look through this because again, this could be a decision that affects thousands of dollars of your own money. And so with this, benefit being added, maybe your employer's putting or covering a lot of the cost, this is your compensation. So you wanna make sure that you are, doing the due diligence to make sure that you're maximizing this for you and your family. Right? And so health insurance is obviously the big one in open enrollment, so we'll spend some time. Talking about that right now. And so generally you have a high deductible health plan and a high premium health plan, and With these, you don't wanna just look at the monthly premiums and just go, ah, the high deductible is the way to go. It's the lower monthly premium because there are deductibles that you want to think about. There are, copays and then ultimately what is gonna be your out-of-pocket max or your total costs. If for whatever reason we need to use, disinsurance to the max, right? And so in my out of pocket 10,000 in my out of pocket, 15,000 in my out of pocket, 25,000. so if you have a family, what is the family deductible versus, the individual deductible? And then same thing for the out-of-pocket max. What are, what is the all in cost? Worst comes the worst, all right? Now you may be a fairly healthy family or a fairly healthy individual, you may be willing to take on that cost for the high deductibles, or you may have some health complications or you see the doctor more for whatever number of reasons. maybe you see specialists or. Have medications that cost quite a bit, whatever that may be. and the higher premium may make more sense because the higher premium's good for evening, evening out, that spending throughout the year. Yes, the premium's gonna be higher on a paycheck basis or a monthly basis. but your out-of-pocket max and your copays, your deductible generally are much, much less than the high deductible, hence the term high deductible plan. Now let's stick on the high deductible plan. if you do have the high deductible plan available to you, likely. You are, given a choice to contribute to an HSA, so a he health saving plan or a health saving account. if not, you can still do this on your own, but it is always a good decision to. Combine both the health or the high deductible health plan with an HSA. This can be a great tool for planning for those medical expenses because if you have a$10,000, uh, deductible or out-of-pocket max for that matter, then you're gonna want to plan for this. and do this in a tax efficient way, especially if you're a high income earner. So an HSA can be a great way to start planning for those, those costs, right? And maybe you're healthy and you're like, I'm never gonna use, or never gonna go to the doctor, assuming I don't have any emergencies. and so the HSA can be a really good, Tax advantage account for you. So taking, taking money out of your paycheck on a pre-tax basis, you can actually invest that money. fidelity is one of the, the more popular, custodians that where you can have an HSA, you can invest that money, you can grow tax free. And if you're using that for medical expenses, it'll be a tax free withdrawal. Right? And so this is a great way to start building wealth. Okay. And planning for, medical expenses down the road. So think of your HSA, like a stealth retirement account. You can invest it, you can pay current medical costs from your current cash flow, and let them let this account compound long term. And so what I mean by this, one of the strategies that you can utilize is if you have. enough cash on hand to cover. Let's say your out-of-pocket max. and you're still gonna contribute to your HSA, you can pay that money out of your normal cash flow. You can save that reimbursement for a rainy day. Keep that money invested and then you can reimburse yourself five years down the road, 10 years down the road, 20 years down the road, whatever that may be, and allow that money to stay. I stay invested. So you, you can earn the interest on that money and take that, that reimbursement later on down the road. So now if I let that money grow, maybe I start it with$10,000. It's been 10 years. I actually have$25,000 in there, and I have$10,000 worth of reimbursements, so I can reimburse myself that$10,000, but I still have$15,000 in that HSA account, right? the HSA, we've talked about it a lot on this podcast. It's a pretty, Talked about account because of the advantages. so you can find a lot of information on YouTube and podcasts and things of that nature about it. But, it's a. the thing that I want you to get, the point I want to get across here is that you should always pair, or almost always pair a high deductible health savings plan with an HSA, because the co the premium on those high deductible plans are gonna be lower. and so that should allow you to be able to save, into these HSAs. The other side, let's say you are, Needing to choose the higher premium. for whatever reason, you'll have the opportunity to contribute to an FSA. So a flexible spending account. the good thing about this is you can still get some of that, tax deductible contribution to this account, but it is a use, use it or lose it. Account now, you can carry over maybe$500 a year into it. but the likelihood of you being able to carry over the full amount, it's just not an option. this is good for, prescriptions, orthodontics, any other procedures, any, basically anything that you would pay out of your, Health savings account you can pay out of your FSA. but there's a little bit more urgency to get that money out because you cannot roll that, that balance over every year like you would be able to with the HSA. So you gotta be careful, when using FSAs, but if you know you're going to hit maybe your out-of-pocket max or what have you, it's a good way to get some tax deduction, for those expenses that you're going to pay for anyways. So once So once you've got your health plan squared away, the next place people often overlook thousands of dollars a year is in their retirement contributions. So one thing we want to take into account when we're. Looking at an open enrollment is not just the health benefits, but also your 401k or your 4 0 1 your retirement plans, right? So the other place we wanna look is your retirement plan. So that could be a 401k, could be a 4 0 3 B depending on where you work. And so you, a couple things you just wanna check for. You wanna confirm that you're receiving the full match if you're not already, receiving that or contributing to that, maybe you're early on in your career. And you start it with a lower contribution, just make sure that you're getting that full match. It's free money, right? so if you get a raise or a bonus this year, double check that your contribution percentage is correct. So especially bonuses are a large portion of your compensation. So one of the things that I see people do is max out too early. And so with a lot of employer plans, you have to contribute throughout the year to receive that match. So it's on a, on a pay basis. So if you max that 401k out, let's say in March, because you're, that's just how large your compensation is. You may not receive that full match because you're missing those pay periods throughout the year. so if you spread that contribution across all your paychecks, you would receive, your, your full match, right? So you just wanna make sure that. you're receiving that full match for your 401k, and then making sure that any bonuses and things of that nature are being contributed or being calculated into your percentage for savings and things of that nature as well. the other thing is, do you need to adjust Roth versus pretax? Right? Obviously Roth, you pay those taxes now, it'll grow tax free and be tax free later. Pre-tax, you're gonna reduce your recurrent income, but will be taxable later. And so for many higher earners, it's smart to do a mix of both, especially as you kind of move through your career. giving you that flexibility. And so we just like investments, we wanna diversify our tax buckets. the fancy term in our business is called asset location. So we want a good mix of pre-tax money, after tax dollars, like in our brokerage accounts, and then Roth money as well. And so we want to think about. are we having a good mix? what is our next few years gonna look like from an income standpoint? Do we need to go all pre-tax or should we go Roth? Whatever that may be. Right? So just giving that thought, right? the next consideration, is not as common, but people should consider this as after-tax contributions or potentially a mega backdoor Roth conversion, right? So some employers allow for after-tax contributions beyond the normal 23 5 for the, or 23,000 for the 2025, year. If you can, and it makes sense for you, it may make sense to go ahead and put in, an extra$23,000, as an after tax contribution, and then make sure that you can roll that over into Roth. This can be a huge wealth building tool. and so I wanna caveat that with this is a very complex, Tax strategy. So make sure that you're doing your research on how to do a mega backdoor Roth, call your provider, get the rules of the plan and all of that. this is just something I want you to think about it's worth asking HR if this is something that is common that employees do, they'll know a lot about it. Or calling your, your 401k provider, like Fidelity, Vanguard, whoever, getting those plan summary documents so that you can understand, one, can I do this? And then two, you have to start making the decision doesn't make sense for me to do this. So now that we've evaluated our retirement, benefits, let's talk about something that people really underestimate and that is protecting their income. So we just want to take a look at. Insurance. So employers often provide ancillary benefits and insurance is one of those big ancillary benefits, right? outside of health insurance, and that is disability insurance and life insurance. So disability insurance, most employers and cover somewhere around 60% of your salary. it could cap out, so it could end up being a little bit less than 60% of your salary. But that does not include your bonuses. So if your lifestyle depends on your full income, including bonuses, you wanna make sure that you're doing things outside of your place of employment. So maybe getting a private policy to cover any potential risk of a disability through disability insurance and a private policy, right? if you're living expenses, again. Are dependent on a hundred percent of your salary or 80% of your salary, you're gonna want to look into a private policy. and then if you are in a specific, if you are in a specific occupation like being a physician or a surgeon where you, or a dentist, will you rely on doing surgery or using your hands. just look at those definitions of those policies. Is it on occupation or is it any occupation? Right. And so that's a big difference. If it's on occupation, then you break your hand and you're a surgeon, then there may be a benefit there, for you where I can still go work and maybe teach or, not, maybe not do surgery, but still see patient patients in a certain certain degree. but I'll still get compensation because my main money maker was. Performing these surgeries, whereas any occupation is saying, Hey, I can't work at all. and so you wanna make sure that if you are in one of those niche professions, where you're using your hands, like a dentist or a surgeon, that you have the right definitions on them. And so this is your paycheck insurance, right? It's covering your ability to protect your income, and especially early on your income. Is your most important asset. it's not your house, it's not your car, it's not the life insurance you have, it's your ability to continue to work, and make income. So we want to savor that as much as possible. The next benefit or insurance benefit that you should take a look at is life insurance. And so, uh, the default. review your default coverage. It's often one or two times your salary. Likely you can buy up, which in a group setting, especially if you're young, can be much cheaper than, if you go into, if. Like a private policy plan, just an individual term plan. so if you're unhealthy and you know, you would get a bad rating on the private side, the group insurance may make sense to buy up. Now, I'll always be an advocate of having a private policy, especially if you're healthy, because it can be somewhat comparable. And you can, and it's horrible. it'll always stay with you as long as you're paying for it, right? Whereas these group plans, as long as you, or as soon as you leave, you're gonna lose, the coverage, right? So there's some good and there's some bad to'em. you just wanna be able to review them. if it's fairly cheap and cost effective, go ahead and buy up, right? or if you have a hard time getting insurance outside of work. then certainly you would want to, use that group insurance. other benefits that may be available to you, ac accidental death, critical illness, or long-term care, worth reviewing. But, oftentimes I've. Feel that some of these, aren't worth the money that you're paying for them. And if losing, so it's the rule of thumb for these, if losing your paycheck would derail your family's financial plan, make sure that you look into covering whatever risk that may be right for these insurance. So that's always a good rule of thumb, right? So obviously if you become disabled and you can't work and you rely on a hundred percent of your income. Well then disability insurance is gonna be, a key to, to one of your, is gonna be important to purchasing. so we've handled the big three. We've handled health, retirement, and insurance, but let's not forget about the smaller benefits that quietly make a big impact. And that is a couple of things that most people forget about, right? the big thing, especially if you're a parent with the young children, and that is the dependent care, FSA. So you can put up to$5,000 into an account that is pre-taxed and it can go to daycare, preschool, summer camps, aftercare. as long as you're not staying over, the kid's not staying overnight, you can pretty much use this money. And so while it's not a ton. it's not really gonna move the needle from a tax standpoint. it could save you up to a thousand dollars, maybe$1,500, depending on where your taxes land, which could be another week of daycare, which is, or not a, hopefully another month of daycare. But it's crazy how much daycare costs. But, so it's called a Dependent Care. FSA, so if you're not contributing to that, you should certainly look into it. Because it can save you, hopefully in, into the thousands of dollars, in taxes, which would allow you to be able to have more money for that particular childcare. Other things that you can look into, legal plans. So if you're one of those, In the majority where you have not done any estate planning, because I meet a lot of people that have never done estate planning, especially if you have families, you need to be doing that. a lot of times they'll offer, attorney services and things of that nature where you can go do this for free. And so look into that as well. if you have student loan debt, there's, could be tuition reimbursement, commuter benefits, gym stipends. So these are all kind of different ancillary benefits that sometimes are offered. So you just wanted to check in to see if. What are some extra benefits that are being offered because it could add up to, again, potentially thousands of dollars. So even if you don't use them every year, it's worth scanning your benefit portal. employees or employers are always adding new perks, trying to. Attract talent or retain talent, right? what are they offering this year, that maybe I could use is the question that you should be asking. And so now that we've hit all the major categories, let's wrap up a quick. Year end checklist you can use this week. And so checklist, end of year action plan. That's what we're about here on this podcast. What are some action items that I can do to improve my financial life? And so checklist item number one, review your benefits side by side with your spouses or partners. So again, if you're both employed, you don't wanna double pay for coverage. So if it makes sense for. Both of you to jump on one plan or go to separate plans. You wanna make sure that, that you're utilizing that, especially from a health standpoint, and make sure there's no redundant, plans that you're paying for or double paying for any coverage. checklist. Item number two, run quick math on a high deductible plan versus a high premium plan, based off your last year's healthcare spending. does it make sense for us to stay on the high deductible plan or does it make. More sense for us to go to a higher premium plan based off the amount that we use, doctors or medications, things of that nature. Checklist item number three, confirm your 401k contribution percentage and making sure that you're receiving the full match checklist. Item number four, update your life insurance and disability coverage to reflect your income. And dependence. Also, make sure you check your beneficiaries as well while you're doing that. I was meeting with a client actually this morning, and we were looking at his TSP and there's a substantial amount of money in there, and there was no beneficiaries, so that would be a big pain in the neck for his wife. God forbid something happened to him. So we got that all changed up. And, she is now officially the beneficiary. make sure that you're double checking those beneficiaries. Item number five, double check your FSA balances and spend them before the year expires. if you have a couple grand in there, and you wanna go get your teeth whitened. Or, you have a procedure that you've been wanting to do, whatever that may be, see if it's covered and go spend that money because you're not gonna be able to use it afterwards or after the new year. checklist. Number six, or checklist item number six, skim your extra perks, legal, wellness, tuition, whatever that may be. see if there's some items that you would be able to use. Checklist. Item number seven, schedule a call either with your hr, person that you talk to or your financial planner to verify everything before your company's deadline, just to get a second pair of eyes on that. this is what I do for, quite a bit of my clients. They send me their open enrollment packets. They say, Hey, this is what I'm thinking about doing. We review it and then they submit everything. it's a good practice to do, just to have an extra set of eyes on your open enrollment packet. So this stuff isn't glamorous. It's not the most sexiest thing. It's not, Hey, I hit big on a stock and now I'm financially free, or I'm retiring, or whatever. but it's real money. It makes a difference. it can save you in a lot of instances, so optimizing your benefits is like funding a hit and raise every single year. So if you want a simple walkthrough, just go through the checklist that I went over, right? the seven steps to review your benefits. and that'll help you kinda work through, most of everything that, that's gonna be offered to you, through your employer. if you want more help about your financial situation or your open enrollment packet, I would love to have a conversation with you. You can go to my website, Palm Valley wm.com, schedule a call. And would love to talk to you. So I'm Hunter Kelly. Thanks for listening to The Retire Early Retire Now podcast. And remember, your benefits are part of your wealth plan and treat it like it. This podcast is for educational purposes only. It is not meant to be investment or financial planning and advice. It is do not make decisions solely based on this podcast alone. Please seek professional help when considering your own situation.