Every year around this time, whether in November or December, a confusing yet super important event occurs. This event is called open enrollment and is the time each year that you get to select your insurance benefits. Typically you’re stuck with your choices for a whole year, unless you quit and change jobs. During this time you’ll end up choosing health benefits like: health, dental, and vision insurance, life insurance benefits like life, accidental death and dismemberment (AD&D), and disability insurance. You’ll also choose your financial benefits like 401(k), Flexible or Health Savings (FSA and HSA) accounts and if your employer is a public company, an Employee Stock Purchase Program. 

Open enrollment is a lot to think through and make decisions about. Typically employers will offer webinars, lots of reading materials and 1:1 sessions to help decide. In this post I’ll do my best to outline them as well but please take open enrollment seriously! 

BENEFIT TYPE: HEALTH INSURANCE

What it is: Sooner or later in one way or another you’re going to get sick or hurt and need some medical attention, or even just for annual check-ups. Unless you’re able and don’t mind paying cash (out of pocket) for all these services, you’ll likely benefit from having health insurance. Health insurance provides a great safety net for both standard care and ‘just in case’ emergency type scenarios. For a full synopsis, check out my article on how health insurance works. Most of the time you’ll get to pick between 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).

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 to save for healthcare costs, as healthcare ain’t cheap and having citizens being able to pay instead of going broke, in debt or bankrupt is ideal. 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! 

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. 

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, the free coverage provided is likely enough. If you’re married without kids, consider upping coverage to $100-$250K. If you’ve got kids, consider upping to $500K+. 

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! 

What’s changing for me in 2022

I’m thankful to work at a company that offers great benefits and I have several options to choose from. Here are some of the changes or notable decisions in making to set myself up for success in 2022: 

Health insurance: A big event in 2021 was the arrival of SegundoMoneyFinance and so during last open enrollment we had that to plan for. We went with a high deductible health plan which the higher deductible was offset by a contribution to my Health Savings Account (HSA) by my employer. I liked the HDHP option and think we’ll stick with it again this year. Last year I loaded up on my HSA contribution (you can also put money aside tax free for health expenses) as we were expecting a big expense )having a baby). This year I think I’ll scale that back some. There’s an argument to be made for putting more in your HSA as if used correctly it can be triple tax favored (reduce taxable income now, spend it tax fee and invest leftover and let it grow tax free) but I feel we have other financial priorities this coming year and other places to save. 

In 2021 Mrs Money and I got term life insurance policies outside of our employers. Historically our employers had offered great term life rates and we just had that but people smarter than me told me it was wise to get a separate policy that wasn’t tied to my employer and more long-term. So we did that but will continue getting insurance through my work. 

Financially I’m going to keep contributing the max 15% to my Employee Stock Purchase program. 2021 was the first year I did the max (previous years I did 10%) and I just think it’s a great opportunity. My company stock has been rising and so I get a rising stock at a 15% discount essentially giving me a minimum 15% return which is pretty solid. Yes it’s wise not to put all your eggs in one basket (ie your company stock) but I don’t feel I’ve reached a point that I’d need to diversify and I believe in the growth potential of the company I’m at. 

Finally, I’m definitely continuing to max out my FSA dependent care account at $5,000. Daycare is not cheap and costs more than $5,000/year but getting $5,000 set aside pre-tax goes a long way helping out! 

Summary

Open enrollment is such an important time of year for your health and wellness. Please take the time to understand what’s offered to you, try to think through what next year holds in store for you or your family, and definitely take advantage of any and all tax favorable accounts! 

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.