Note – this post is a bit of a repeat from a post I did two years ago but with a few updates and perspective! Picking the right employer benefits is super important both to your health and financial well being! 

The November/December time frame brings a lot of things to do for young professionals; whether it’s the holidays, working extra at work to finish out Q4, or all the social activities that come around. One activity that is super important, but often gets pushed to the side is open enrollment, i.e. picking the employer benefit that’ll stick with you for all of next year. It’s a lot to read, consider and think through but also critical that you pick the right options. Choosing the wrong type of insurance could lead to a lot of extra costs being incurred and that something that none of us want. So, to avoid waiting until the very last day of open enrollment and choosing blindly or giving very little thought to it, I thought I’d pass along a little information. Granted, I’m not an insurance expert of financial advisor, so definitely consult those if you feel the need to. 

Benefit Type: Health Insurance

What it is: Health insurance is a super political issue [2020 update – still is] right now in the US, which is a little bit of a bummer, cause it’s meant to be a good thing – helping people out with healthcare costs. That’s neither here nor there, and for a full synopsis, check out my article on how health insurance works. Most of the time you’ll get one or two carriers (i.e. Aetna, Blue Cross, Cigna, UHC etc) and then within those get 3 options of coverage. Think of them as low, medium, high usage plans. Common names would be “HDHP” (high deductible health plan), “HMO” and “PPO”, in that order. If you’re a young invincible (yes that’s what they call young professionals who don’t go to the doctor very often), go with a “low usage plan”. If you have medical conditions or get sick a lot, consider a “medium” or “high” usage plan (HMO or PPO). The medium/high usage plans will have higher premiums (what you pay out of your paycheck) but will have more coverage in terms of a lower deductible or lower coinsurance. So, you’ll pay more each paycheck, but when you actually go to the doctor, it’ll cost you less than a HDHP. 

YMF Advice: First of all, figure out your health usage. If you go to the doctor once a year for a checkup and maybe one sick visit, you could probably go with a lower cost health plan. If however you go more often, or expect major care in the next year then a HMO/PPO would be better. Secondly, picking between insurance carriers (i.e. Aetna vs UHC in my case) should involve not only costs, but also ensuring your favorite doctors, or hospitals are close by. On the insurance website, there should be a link fairly visible letting you put in a doctor/hospital to figure out in they are ‘in-network’ (i.e. covered).

[2020 Update] – as our family grew with BabyMoneyFinance, Mrs. Money and I shifted strategies from that HDHP to a HMO or PPO option. We’ve been using more healthcare (having a baby, all the doctor visits for a newborn, now toddler) and therefore pay more in monthly premiums but going to the doctor (which we do more of now) is a lot cheaper! 

Benefit Type: HSA/FSA

What it is: The US government, as it often does, uses tax breaks to incentivize citizens to financially do things that they want. One such thing is save for healthcare costs, as healthcare ain’t cheap and having citizens being able to pay instead of going broke, in debt or bankrupt. Tax advantaged health accounts come in two flavors: HSAs or FSAs. You can read more in this article that I’ve written. Not all health plans qualify for a HSA but if they do, you can put away money (tax free) to use for most health expenses. A FSA is similar, except that you can’t roll the money over year to year. 

YMF Advice: If you have access to a HSA, I’d recommend putting some money in there. It won’t disappear if you don’t use it, and it can actually grow via interest or be invested in stocks/mutual funds, both tax free. If you only have access to a FSA, only put an amount that you know you’ll use. Better be safe instead of sorry! 

[2020 Update] – I’ve really come to value HSA and FSA accounts, especially as we’re now more frequent consumers in the healthcare market. For 2018 and 2019 I underestimated my much I would need and had to spend some money out of pocket. 2020 looks to be a similar situation – in which I’m going to spend more than I allocated. I still feel decent about that because the thought of losing FSA money (I don’t have access to a HSA right now) doesn’t sit right with me. I have learned that with my company’s plan that I can roll over $500 in unused FSA money so that’s a) good to know and b) will factor into my 2021 plans. It’s a bit of a balancing act for sure! 

Benefit Type: Dental/Vision insurance

What it is: You should go to the dentist probably twice a year, and if you have glasses/contacts, you’ll go to the eye doctor. Most employers either offer opt in/out for this type of coverage, so it’s much simpler than health insurance. It can be helpful to read up on the benefits offered, so if your dental coverage offers only 1 visit per year, you don’t end up going twice a year and having to pay out of pocket. For vision insurance, make sure you figure out if your eye doctor takes that insurance and also figure out how much they’ll pay for each year (i.e. contacts/glasses). 

YMF Advice: Get the dental coverage, your teeth will thank you, and typically it’s pretty cheap premiums. If you have glasses/contacts, get the vision insurance, if not, pass on it. 

[2020 Update] – Mrs. Money and I both have dental & vision insurance through our employers, although for 2021 we’ve decided to move Mrs. Money to my dental plan. The premiums (how much we have to pay monthly) are about the same but my plan has much better coverage compared to Mrs. Money’s. Also something I’ve learned this year – toddlers need to start seeing the dentist before they’re 2. I didn’t realize this and didn’t add BabyMoneyFinance to one of our dental plans and had to pay out of pocket for the first visit! 

Benefit Type: Life insurance

What it is: Life insurance will kick in and pay a large sum to your elected beneficiary(ies) in the event of your death. Employers will most likely offer term life insurance, which offer coverage as long as you pay the premiums each month. I personally find employer sponsored plans to be very affordable, and have gotten coverage through them. A lot of employers will offer, for free, basic coverage of like $50,000. If you want additional coverage, it costs a few dollars per $10Ks of additional coverage. Up to a certain amount (which will vary), you don’t have to get a doctors exam completed, which makes signing up that much easier. Once you elect your coverage amount, you put in your beneficiaries (i.e. who gets paid if you pass away). Life insurance is optional, and you very well might be ok without it. 

YMF Advice: For single young professionals, that’s likely enough. If you’re married without kids, consider upping coverage to $100-$250K. If you’ve got kids, consider upping to $500K+. 

[2020 Update] – I’ve been able to increase my life insurance coverage through work to a point where I still feel decently comfortable with our coverage amount. I’ve done a lot of thinking (having a kid will do that to you) on what it’d be like to raise a kid without my spouse (or vice-versa), but although I feel we’re a bit ‘under-insured’, I still don’t feel we’re that under-insured to the point where I’d invest in another policy, as they are a bit pricier than I was looking for. So, moving forward I’ll continue just having coverage through work for the time being. 

Benefit Type: 401(K) Retirement

What it is: None of us want to work forever, or will be able to do so. Federally sponsored retirement (i.e. Social Security) won’t be enough (if it’s still around when us young professionals make it to 65). So, we’ll need some money set aside that we can spend in our golden years. One realistic, easy way to do so is to put your money in a 401(K), through your employer. To do so allows you do get tax benefits (i.e. pay tax now and not later, or pay no tax now and pay it later). Thanks to the power of compound interest, doing a little consistently now is worth more than a lot later. A 401(K) is nice for three reasons – a) it’s easy to setup b) comes out of your paycheck and c) likely will come with a match, which is FREE MONEY that they give you. 

YMF Advice: As you’re able, contribute to your 401(K). Definitely contribute up to the match, so you’re getting all the free money you can. Saving something is better than nothing, and even saving 2% of your paycheck will add up. Start small, and increase it as you’re able. One smart way to increase your contributions is to increase it by 1% each time you get a raise. You won’t be used to that money yet and therefore won’t miss it! 

[2020 Update] – I learned that my employer’s 401(k) match is only up to a certain dollar amount, despite being 6% of my salary. I reached this limit in about September of this year and went ahead and increased my contribution amount by a few percentage points to make up for losing that match. Normally I just contribute 9% and with the 6% match am at 15% but this year I did 10% and then bumped it up (not to 15%…alas) to try to stay as close to 15% as a I could. 

Hopefully this guide helps a bit as you think through and select your benefits. Best of luck selecting them! One quick shameless plug – I have written a much more in-depth guide on Employer Benefits that I’ve got for sale via my store. It starts at $0.99 which will help keep the lights on for this site, but do have additional add-ons that include email and a virtual meeting support.