Making Your
Employer a Partner In Your Financial Planning
People who look to
their employers for nothing more than a weekly paycheck and basic health
care insurance are missing the boat.
It makes the most
sense to ask a future employer about benefits before you agree to come to
work. But even if you have been working for the same company for years, it’s
never too late to go to human resources to make sure you’re getting the
most mileage out of your current benefits and maybe pick up a new perk or
two. See if you have the following options available, and check with your
tax professional or a financial adviser before you make a selection:
Look at health
savings accounts: If your
employer has converted to a high-deductible healthcare plan, you may have
the option of starting a health savings account (HSA). These accounts help
workers to save and spend money tax-free for medical expenses not covered
by the plan or your deductible. Why are they a good idea? Because you can
sock away money tax-free that will cover the amount of the deductible (at
least $1,050 for individuals, $2,100 for families) if you need it, and it
will grow tax-free over time if you don’t.
See if a Roth 401(k)
works for you: In 2006,
the government gave employers clearance to offer Roth 401(k)s,
employer-sponsored retirement plans that allow workers to put all or part
of their 401(k)s into a Roth, which allow after-tax money to grow
tax-free. Roth 401(k)s allow higher contribution limits -- $15,500 in 2007
plus an additional $5,000 if you’re over 50 – compared to traditional
Roth IRAs that limit annual contributions to $4,000 with an extra $1,000
for those over 50.
Look for a finders’
fee: Companies rarely
like to give away money unless they know they’re saving some in the
process. Many companies are now offering finders’ fees to employees who
successfully bring new workers in the door. Why? Because it costs
considerable money and time to hire people, and employers are happy to see
their best employees bring friends and former co-workers in the door.
Also, some companies give away special bonuses for bringing in new
clients, so don’t miss a chance to earn them. However, keep in mind that
substantial bonuses may change your tax liability, so keep an eye on that
issue.
Check your target
bonus amounts: This is
usually not a problem for most people who receive annual bonuses, but it
makes sense to doublecheck the minimum bonus you should earn annually and
what it will take to exceed that limit.
Get flexible:
If your company has a flexible spending account for medical, commuting or
child-care costs, estimate carefully what you’ll need to spend and get
on board. While workers can get a chance to spend out their accounts into
the next tax year, it’s very important to project exact numbers so you
won’t lose funds at the end of the eligibility period.
Get smart:
More than three-fourths of U.S. companies offer education benefits, so if
you have the time and inclination, finish that degree or complete a
particular course of study to prepare you for your next job or for your
enjoyment. Most companies will ask you to stay a certain length of time
after receiving such benefits, which is only fair. But education is worth
far more than the dollar cost of tuition, so don’t pass it up.
Get fit:
Some companies negotiate membership discounts to gyms and other fitness
facilities, and that’s a worthwhile benefit. But these days, with
company health care premiums going through the roof, some employers are
actually paying employees to lose weight, quit smoking or take other steps
to improve their health and lower their boss’s costs.
Have some fun: Companies
get discounts to a variety of entertainments – the local amusement park,
sports events, theaters, restaurants, auto shows and other local events.
If they interest you – and particularly if they interest your kids –
you’d be foolish to pass up such discounts.
Be proactive:
If you hear friends or clients boasting about particular benefits or
incentives at their companies, quiz them to find out as much as you can
about how their companies afford those benefits. If the story checks out,
then go to your own company and ask them if they might consider it.
May 2007— This column is
produced by the Financial Planning Association, the membership
organization for the financial planning community, and is provided by
McGuire & Co., LLC, a local member of the FPA.
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