Open Enrollment Season: Making Smart Choices for Your Future

As the fall season arrives, many of us are presented with a crucial financial task: open enrollment. This is the one time of year you can review and select your workplace benefits, from health insurance to retirement plans. It's easy to rush through the process, but the choices you make can impact your finances, your health, and your long-term goals for the entire coming year.

Don’t let this opportunity slip away. Let’s break down the key areas to focus on during open enrollment to ensure your benefits truly serve your future.

Step 1: Review Your Health Insurance – Look Beyond the Premium

It's tempting to just pick the plan with the lowest monthly premium. However, a lower premium often comes with a higher deductible and out-of-pocket costs, and vice versa. The right plan for you depends on your anticipated healthcare needs for the coming year.

Assess Your Health

Look at your health from the past year. Do you have a chronic condition that requires regular doctor visits or prescriptions? Are you planning a surgery, or a family? If so, a plan with a higher premium and lower deductible might be a better value, as your insurance will start paying sooner. If you and your family are generally healthy and rarely see a doctor, a lower-premium, high-deductible plan could be a good fit.

Know the Plan Types

• HMO (Health Maintenance Organization): Typically has lower premiums but requires you to choose a primary care physician (PCP) within the network and get a referral to see a specialist.

• PPO (Preferred Provider Organization): Offers more flexibility with a larger network of providers, and you can see a specialist without a referral. This comes with higher premiums.

• High-Deductible Health Plan (HDHP): A plan with a lower premium but a high deductible. These plans are often paired with a Health Savings Account (HSA), which is a powerful savings and investment tool.

Check the Network

Even if you like a plan, check to see if your preferred doctors, specialists, and hospitals are in the plan’s network to avoid higher out-of-network costs.

Step 2: Make the Most of Your Retirement Plan

Open enrollment is the ideal time to adjust your retirement contributions. Even a small increase can make a big difference over time.

Don't Miss the Match

If your employer offers a 401(k) or 403(b) match, make sure you're contributing at least enough to get the full amount. This is essentially free money and is one of the most effective ways to boost your retirement savings.

Increase Your Contribution

If you're not yet maxing out your plan, consider increasing your contribution by even 1% or 2%. You'll likely barely notice the difference in your paycheck, but this change can have a substantial impact on your long-term compounding growth potential.

Consider a Roth Option

If your employer offers a Roth 401(k) or Roth 403(b) option, evaluate if it's right for you. While contributions are made with after-tax money, the distributions in retirement can be tax-free. For many young professionals who may be in a lower tax bracket now, this can be an appealing option.

Step 3: Understand and Utilize Your Flexible Spending and Health Savings Accounts

These pre-tax accounts can be a powerful way to manage healthcare costs and save for the future.

Health Savings Account (HSA)

If you choose an HDHP, you are likely eligible for an HSA. An HSA is a triple-tax-advantaged account: contributions are tax-deductible, the money grows tax-free, and withdrawals for qualified medical expenses are also tax-free. HSAs have no "use-it-or-lose-it" rule, and you can even invest the funds, making it a valuable long-term savings tool.

Flexible Spending Account (FSA)

Offered with traditional health plans, an FSA allows you to set aside pre-tax money for healthcare expenses. A key difference from an HSA is the "use-it-or-lose-it" rule (though many employers allow a small carryover). This is best for those who know they will have predictable medical or dental expenses in the coming year.

Step 4: Evaluate Other Benefits

Don't stop at health and retirement. Take time to review other benefits that can be valuable.

Life and Disability Insurance

Review the life and disability insurance offered by your employer. While these policies are often affordable, it's wise to assess if the coverage is sufficient for your needs or if you should consider additional coverage.

Supplemental Insurance

Look into other offerings like dental, vision, and critical illness insurance to see if they fit your family's needs.

Employee Stock Purchase Plan (ESPP)

If offered, an ESPP can be a way to acquire company stock at a discount, but it's important to understand the details and how it fits into your overall investment strategy.

Take Control of Your Financial Future

Open enrollment is more than just a task on your to-do list; it's an annual opportunity to make informed decisions that can positively influence your health and financial future. By taking a proactive approach, reviewing your needs, and understanding your options, you're not just choosing benefits—you're strategically building a foundation for a more confident life.