Don’t Let Open Enrollment Go to Waste

It seems like when I start hearing people talk about pumpkin spice lattes, open enrollment season is right around the corner.  And in the last several weeks, I’ve talked to a lot of people going through the process of selecting benefits. Here are some quick thoughts regarding open enrollment that you may want to consider as you select your benefits:

Contribution rate escalator: This is a great time to sign up for the rate escalator feature of your 401(k).  If you increase your contributions by 1% per year, you will be building ever increasing momentum toward a financially secure future.

Automatic re-balancing: While you’re in your 401(k) to enroll in the rate escalator, it makes sense to sign up for the re-balancing feature as well. There are lots of studies that indicate that re-balancing your portfolio can increase your rate of return anywhere from ¼% to 1% per year. I prefer it as a risk management tool, rather than a growth tool. By never allowing one asset class to run wild and dominate your portfolio, you stand a lower risk of getting devastated if the markets in that asset class collapse.

Life insurance: Most companies allow an increase of 1x salary without evidence of insurability. I’ve talked to a number of people who have developed some health issues that make purchasing life insurance either impossible or very cost prohibitive. It may take a number of years, but if you have any issues with securing life insurance, use every annual open enrollment to increase your company-sponsored insurance benefit by 1x salary.

Disability insurance: Disability insurance is, in my opinion, the single most important insurance coverage anyone can have. At each open enrollment, make sure that you have the absolute maximum disability insurance coverage allowed.

Pre-paid legal benefits. I’ve seen articles saying that between 50% and 75% of adults don’t have a will and advance healthcare directives in place. Pre-paid legal plans are becoming more common in benefits packages and for usually under $20/month, you can get coverage that would allow you to draft these important documents.  If you sign up for one year and get your documents drafted, you will experience a tremendous return on the money spent for that benefit.

Your benefits are a key part of your total compensation. Open enrollment season is a great opportunity to make sure you’re taking advantage of them and getting your financial ducks in a row. Don’t waste it.

 

 

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