The Little Italy of Open Enrollment

October 08, 2010

In my last blog, The Little Italy of Open Enrollment, I was a hungry man staring down a street filled with masses of people and almost visible aromas and tastes of authentic Italian food. I was in search of a simple answer yet was faced with too many choices to see things clearly. For the employee receiving thick info packets during open enrollment season, there is good news. You can absolutely find what you need without your head exploding because of too many choices.

The most important thing to remember is that the choices you are faced with are about BENEFITS. Now I’m not exactly Webster’s Dictionary, but I seem to think that the definition of benefits is something that is good for your overall well being. So, let’s start with the assumption that even if you don’t make “perfect” choices, you will still make “good” choices. As with all choices, the best place to start is with your long term goals.

Some things to consider:

Are there people (kids, spouse, etc.) who depend on your income? The voluntary life insurance benefit may be a place you want to consider selecting the maximum (or close to it) benefit.
One of the most important benefits available to many employees is long term disability insurance. In listening to stories from people across the country, I have lost count of the number of times I have heard that “long term disability was the best thing ever.” (Have these people never heard of chocolate?)
For health insurance, objectively look at your health history, claims history, and family history. A young healthy person with no kids can often select a high deductible and low premium insurance and use the savings to fuel a retirement plan. A person with 5 kids may need to have a more comprehensive plan that costs significantly more but has lower out of pocket expenses for each trip to the pediatrician. You probably have a sense of your current level of health and your family medical history. If you think about the choices available to you, there is probably a plan that is the best for you at this stage of life. And, when your stage of life changes, there will often be a better plan option for you.
You can borrow for lots of life’s events (home purchase, education, cars, etc.), but you can’t borrow for your retirement. You have to prepare. If there is a strategy here, it’s “save till it hurts!” Rather the pain be experienced now than post-retirement when there isn’t enough money to live the lifestyle you want to live.
As for the Roth vs. Pre-Tax question: Do you need tax relief now on a smaller amount of money or would you prefer it out in the future on a larger sum of money? Do you expect tax rates to go up or down in the future? Does your company’s contribution go into the Pre-Tax and could you diversify taxation in retirement by contributing to the Roth?
Which benefits may be portable and able to go with you when you retire?

The starting point and most important element of your benefits is you and your goals. What do you need from your benefits? In the event of a significant catastrophe, make sure that your loved ones are taken care of by the choices you make. In the event that you live to blow out the candles on your 100th birthday cake, I hope your benefits choices helped you get there.