Dos and Don'ts

Emptier beaches and more waves mean that winter is coming.  And winter means holidays, food comas, and a nostalgic look back at the year mixed with excitement and planning for the year that comes.  Speaking of planning, this is also the time for employer benefit elections and open enrollment for healthcare exchanges! (And yes, that certainly does warrant the exclamation point of excitement.)   So let’s take a little stroll through some dos and don'ts to make sure your financial self gets the same kind of care and attention the rest of you is getting.

First: how’s that emergency fund?  As a rule, DO keep 3-6 months of expenses in a savings account that you DON’T touch.  Preferably at an online bank, since they’re paying 1.75% or so at the moment.  

Now, let’s look at some elective benefits:

• 401(k).  Does your employer offer a retirement savings plan with a contribution match?  DO make sure you’re contributing enough to take full advantage of any match.  DON’T leave free money on the table.  If there’s no retirement savings plan option or you’re self-employed, DO contribute to an IRA (either Traditional or Roth).  You can contribute up to $5,500 this year ($6,500 if you’re over 50).  As a general rule, save 10-15% of your income into a retirement plan. If your current contribution is below this, DO bump it up by 1-2%.  You won’t notice the difference in your day-to-day.
  

• Healthcare.  See if your employer offers a high-deductible plan with an HSA.  These tend to be cheaper for both you and the company, so many times your employer will contribute to your HSA (more free money!) as an incentive to use that plan.  No employer option? Open enrollment for the healthcare exchange runs from Nov 1 to Dec 15, so be sure to get on that.  If you make between $12,140 and $48,560 as an individual (between $16,460 and $65,840 as a couple), then you are eligible for subsidized rates.  DO keep in mind that the subsidy applies to all plans, but only the silver plans give you additional subsidies to deductibles and out-of-pocket expenses.  
  

• Medical expense accounts.  Does your employer offer an HSA (Health Savings Account) or FSA (Flex Spending Account) or both?  HSAs are better, because you can roll them over year to year. For those without employer plans, a deductible of $1,350 or higher qualifies as “high” and lets you open an HSA.  DO max out HSA contributions.  It is the single best way to save money tax-free.  Also, “medical expenses will decrease with age” said nobody ever.  DON’T let money sit in an FSA at the end of the year.  FSAs don’t roll over, so that money disappears if it’s not spent.  Search “FSA spending list” for some extra presents to yourself under the tree.
  

• Insurance.  Most companies include a token amount of life insurance and possibly disability insurance, with the option to buy more.  If you work for the city or state, there’s a decent chance their insurance terms will be more attractive than through an outside company.  DO use upcoming food coma time to review old policies and see if it’s time for a change.  If your kids are either grown and gone or nonexistent in the first place, chances are you need very little life insurance.
  

• Miscellany.  Your company may or may not offer a parking or transportation reimbursement.  DO take advantage of it.  If you’re self-employed, be sure you’re tracking expenses and DO take all available deductions come tax time.
  

Okay, stroll over.  Happy benefits election season!   

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