Are You Making The Most of Your Benefits Package? 4 Clear Ways To Tell

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When exploring a new job opportunity, your mind may instantly evaluate your salary and future earning potential. But, your total compensation goes far beyond your salary.

In today’s market, companies are taking extra measures to attract and retain top talent. In many cases, they use benefits packages to compete against other employers. The question is, are you making the most of this opportunity?

Let’s explore four strategies that will help you make the most of your employee benefits package.

STRATEGY ONE: NEGOTIATE A BENEFITS PACKAGE THAT WORKS FOR YOU

Just like you can negotiate your salary, you can negotiate employee benefits. 

It’s so easy for Gen X professionals to let their benefits fall to the wayside or not include them as a serious consideration when making career decisions. Benefits like insurance, equity compensation, and PTO aren’t as easily quantifiable as a salary and bonus structure.

So what benefits should you be looking for?

HIGHLY VALUABLE BENEFITS:

  • Retirement Plans (i.e., 401ks, 403bs, and Pensions)
  • Equity Compensation (i.e., RSUs, NQDC Plans, and Stock Options)
  • Paid Time Off
  • Fitness and Health Stipends/Discounts
  • Commuting/Parking
  • Child Care
  • Work From Home/Flexible Schedule
  • Medical, Dental, and Vision Insurance
  • Disability and Life Insurance
  • Professional development/education stipends 

All of the above can have a massive impact on your take-home pay and lifestyle. With that said, we will focus on the three benefits that tend to be the most complex and come with various options and decisions.

  1. Medical Insurance
  2. Equity Compensation
  3. Retirement Benefits

STRATEGY TWO: CHOOSE AN OPTIMAL HEALTH PLAN

Whether you’re switching jobs and electing a new health plan or evaluating your options during open enrollment, it’s essential to have the most optimal insurance for you and your family.

TOP CONSIDERATIONS FOR MEDICAL PLANS

Start by asking yourself, what’s most important to you when it comes to medical benefits? The answer to this question can help guide your decision.

Do you value flexibility in your health care provider options? A PPO plan may be right for you (as compared to an HMO plan). PPO plans often have a more comprehensive network of providers and are more flexible with out-of-network coverage. Be careful, some plans have “local only” options which will reduce your coverage range and could be a major factor when traveling. 

Do you have a lot of prescriptions and want to minimize costs? You may want to choose a plan with lower copays or premiums. When evaluating costs, be sure to examine the total price of the plan, including premiums, copays/coinsurance, deductibles, and out-of-pocket maximums. Understanding how each of these costs affect you can give you a better idea of which plan will be the most cost-effective for you. 

Are you young and healthy with few medical concerns? A High Deductible Health Plan with an HSA could help you lower premiums while paying for medical expenses with pre-tax money.

If you are married and your spouse is employed, you will certainly want to evaluate your options across both employers. Many professionals do not realize that you can mix and match across two employers with some of their benefits.

HEALTH SAVINGS ACCOUNTS

For many Gen X professionals, HSA’s can be a savvy investment opportunity. These accounts are associated with High Deductible Health Plans. Since these funds are never taxed the amount you can contribute is limited as is your access. You can only contribute to an HSA if your medical plan has a deductible between a government-specified threshold range. For 2021, that threshold is $1,400 for an individual and $2,800 for families. Additionally, out-of-pocket maximums must be below $7,000 for individuals and $14,000 for families. Here’s how it works.

  1. You contribute funds from your paycheck pre-tax to the HSA (similar to a 401k). Doing so will lower your taxable income for the year.
  2. Should you have any out-of-pocket medical expenses, you can use the HSA to pay for them tax-free.
  3. If you don’t need the funds, you can continue to accumulate a balance from year to year (unlike an FSA).
  4. You also have the option to invest your money in the market via the funds within the HSA. Investing will allow you to grow your money for the long term and use it for medical costs in retirement (i.e., Long Term Care expenses). This is one of the most underutilized strategies and could come with incredible long-term benefits. 

STRATEGY THREE: MAXIMIZE EQUITY COMPENSATION

As discussed in our most recent blog posts on equity compensation, there can be several decisions to make when it comes to employee stock options.

COMMON EQUITY COMPENSATION TYPES:

  • Restricted Stock Units (RSUs)
  • Non-Qualified Stock Options (NSOs)
  • Incentive Stock Options (ISOs)
  • Employee Stock Purchase Plans (ESPPs)
  • Non-Qualified Deferred Compensation Plans (NQDC Plans)

Each of these forms of equity compensation is far too complex to explore in detail here (check out our equity compensation blog series to learn more). 

When evaluating an offer from a potential employer, you’ll want to take the time to educate yourself on your options. In some cases, equity compensation can outpace your typical salary in a given year! 

You may also have the option to choose which types of compensation you want. Be sure to ask any potential employer about the intricacies of their equity compensation package.

STRATEGY FOUR: TAKE ADVANTAGE OF YOUR RETIREMENT BENEFITS

For Gen X, saving for retirement is something you know like the back of your hand. But is your strategy on autopilot? What more can you do to maximize your peak earning (and saving) years? 

  1. Maxing 401k Contributions: In 2021, the maximum annual contribution to a 401k is $19,500. For those over 50, you can contribute an additional $6,500.
  2. Traditional vs. Roth Investments: Many employers will allow you to choose between Traditional (pre-tax) and Roth (post-tax) contributions to your retirement account. This decision is highly dependent on your individual circumstances and tax situation.
  3. After-tax Contributions: You may also have the ability to contribute on an after-tax basis. Doing so is different from a Roth contribution. These contributions allow you to contribute over and above the $19,500. For 2021, total annual contributions by employees and employers can not exceed $58,000 ($64,500 including catch-up).
  4. Employer Matching: Employer matching contributions vary from employer to employer. It is commonplace to get a matching contribution based on your personal contribution. This is free money—be sure to take it! Utilizing your match is a great way to have your future tax bill covered by your employer.
  5. Consolidation: When changing jobs, it’s important to consolidate your accounts. Consolidating will streamline your asset allocation and simplify your financial circumstances. Should you roll your old 401k into your new 401k? Should you open an IRA? Have you considered Roth conversions during a year with lower income?

ARE YOU MAXIMIZING YOUR BENEFITS? LET’S MAKE THE ANSWER YES

As you can begin to tell, the employee benefits landscape is constantly evolving, and there is no shortage of decisions to make. From medical plans to stock compensation and retirement plans, how do you plan on sifting through the noise?

At Bienvenue Wealth, we strategize with Gen X professionals to help them integrate their employee benefit elections into their comprehensive financial plans. We believe it is our job to consider everything about your financial situation (not just investment accounts). If it impacts you financially, we want to help. 

Related: How to Completely Master Your Equity Compensation: A Guide to Stock Options