Does your employer offer a benefits package? Benefit packages are one of the most effective tools for saving for retirement and unexpected financial emergencies. Unfortunately, many Americans don’t fully understand the extent of their benefits and how to use them. Therefore, to help you use your benefits package to its fullest potential, we explained a few of the most common components of an employer-sponsored benefits package below.
Retirement plans:
Employer-sponsored retirement plans do the hard work of retirement planning for you. Instead of taking out your retirement savings manually, these plans automatically withdraw funds from your paycheck and place them into a non-taxable retirement account. If you have an employer-sponsored retirement plan, all you need to worry about is crunching some numbers to determine whether or not the plan alone will be enough for you to retire at your desired retirement age.
Health insurance:
Health policies purchased by your employer cover the employee and their dependents, which saves you and your children from unexpected health care costs. To determine what is covered under your health plan, we suggest discussing this matter with your employer or an HR representative. Doing so will help determine how much you should hold in an emergency fund in case an unexpected health care cost arises that is not covered by your insurance.
Flexible spending accounts (FSA):
An FSA is an account that grows through payroll deductions throughout the year. The funds put into an FSA are non-taxable, and therefore, save you an amount equal to the amount of taxes you would have had to pay. FSA’s have a limit of $2,850 per employer. The funds in an FSA can be used to pay for necessary health costs. This includes medical bills, contact lenses, eyeglasses, feminine hygiene products, pregnancy products, dental care, and much more. At the end of the year or after your employer's grace period, you will lose any of the unspent money in your FSA.
We hope this helps you comprehend the extent of your employer-sponsored financial benefits. These benefits can save you thousands over the years, and most importantly, save you from financial hardship. If you need more help understanding your employee benefits package, contact us today. Our financial advisors can ensure you use each benefit to its maximum potential. Additionally, if you are an employer, educating your employees about their benefit package is crucial to increase work satisfaction. Thankfully, U-Vest® offers informational benefit package seminars to educate employees about their benefits. Contact us today to schedule an online or in-person session.
This article is meant to be general in nature and is not intended, and should not be construed as personal advice of any kind. Please consult your financial advisor prior to making financial decisions. Dustin Johnson, CFP®, ChFC® is a Financial Advisor with U-Vest Financial®, a separate entity from LPL Financial and can be reached at (727) 343-4200. Securities and advisory services offered through LPL Financial, a registered investment advisor, Member FINRA/ SIPC. (2/10/22)