It’s that time of year again: open enrollment season, a time of year that people largely forget about. Maybe you just picked the first health plan you saw when you started a new job, without considering your individual health needs, or you set up the 401k contributions based only on your employer’s match program.
If you’ve never reviewed your plans or contributions since then, you’re probably leaving money on the table – money that could be getting you closer to your financial goals. Reevaluating your flexible spending, retirement, and health plans each year and making adjustments as your needs change will help you align your contributions with your long-term financial plans.
In today’s episode, I’m talking about why you need to take advantage of the end-of-year open enrollment season, by reviewing your health coverage, asking questions, using trial and error, and planning out your contributions.
I’ll also walk you through the different types of programs that might be available to you and how they can work together so you can make sure that your money and your benefits are in alignment with your financial goals.
In this episode, you’ll learn…
- [01:22] Why you need to reevaluate your plans and contributions during open enrollment season and ways to ensure that the coverage you have aligns with your health needs
- [08:21] How paying attention to your bills and asking questions about your coverage can help you save money
- [14:07] The importance of finding out if your FSA money rolls over to the next year and monitoring how much you spend so you know how much to contribute
- [17:12] What’s different about an HSA and how to determine which plan makes the most sense for you
- [20:46] Why asking more questions before getting a procedure can benefit your health and your finances
- [21:29] How planning regular increases in your 401k contributions will benefit your long-term financial health
Tune in to this episode of Money Files for tips on how to approach open enrollment season and making the most of your benefit plans and financial contributions.
Are you ready to get help with your finances? Apply to work with me, and let’s start working towards your financial goals.
If you loved this conversation on reviewing your benefits during open enrollment, check out my episode on shifting your thoughts around saving!
Transcript for “Why Reviewing Your Finances During Open Enrollment Season Will Set You Up for Financial Success Next Year:”
[00:00:02] Keina Newell Hi and welcome to Money Files. I’m Keenanina Newell from Wealth Over Now. I work every day with professional women and solopreneurs to help them get out of financial overwhelm and shame so they can experience more flexibility and ease with their finances. Are you ready to gain confidence and learn to manage your finances intentionally? Tune in and grab financial tips that will help you master the way you think about and manage your finances.
[00:00:32] Hello and welcome back to another episode of Money Files. So we are nearing the end of the year and as someone who has worked in regular 9 to 5 and also working with clients who work 9 to 5, I love to put things in place for myself and for my clients when I’m working with them and my 1 to 1 partnership to think about their finances, like being able to check in on things. There’s not always going to be a time when you are feeling guilty or you’re feeling overwhelmed about your money and you still are going to want to manage your finances in a way that feels very clear and feels in control for you. And so part of that is putting things into place that you do annually or quarterly because they just become financial habits that you have.
[00:01:22] And so the financial habit that I really want to talk to or talk through today is like really taking advantage of like your employer sponsored benefits, specifically when it relates to open enrollment season and looking at your 401K contributions. So at the end of the year, generally speaking, open enrollment season can start for people anywhere from like October and it usually ends like mid December. So open enrollment is the time during the year in which you can enroll in your health and you can enroll in your dental and vision plans. So this is something that I would say, like sometimes we just don’t pay attention to because it’s just on autopilot, right? Like your H.R. department may or may not come and talk to you. They may have a really good email system at work. They may not. But I think it’s a really great time of the year when open enrollment system comes up to reflect on your personal health, reflect on what happened this year in regards to maybe what you needed to pay for in coverage. How much did you pay for things out of pocket like contacts, glasses? Did you have to pay, you know, what were your co-pays? Did you have any surgeries?
[00:02:37] And also start to look ahead to think about what’s happening for me next year? Have we started talking about having a baby? Have we started talking about maybe I’m having some elective surgery and I know that it’s going to cost more, but I’m going to delay the surgery because I know next year I want to be able to cover that with my health insurance more than it would be covered right now. And so right now, at this point in the year is when you should start to have those conversations with yourself where you’re actually looking at what happened this year in regards to your health and what you foresee happening next year in regards to your health. Because what’s true about open enrollment season is that without some type of life change, like marriage or having a baby, something that’s significant, you can’t opt in and opt out of different health care programs or health insurance, dental care vision, if you did not do it during this time. So this is something that you want to pay attention to so that you can leverage that for yourself.
[00:03:40] And I’ll give you an example. When I was still working in my 9 to 5, I remember one year I wanted to get Lasik surgery. And so one of the things that I did because I knew I wanted to get Lasik was that was the year that I made sure that I maxed out the amount of money that I was putting in my FSA. And so an FSA is a flexible spending plan. And I put I think at the time the max was like $2500. So the reason I use my FSA was because I get to use that money tax free and reduced my overall gross and reducing the gross amount. Remember, the gross amount is the amount that is before taxes. It’s bigger. I always remember that because gross has four letters, so it it reduced my gross amount, which then reduced the amount of money that would be taxed. So that’s one way that I would think about my flexible spending plan.
[00:04:33] Another thing that I would always think about, because my teeth love, love, love to cost me money. So I would think about other things that were happening. Like I know another year I needed a root canal and so I was on. I can’t remember exactly where I think I knew I needed it. So I got it at the beginning of the year, but I made sure that like the dental coverage that I had was going to cover a majority of what I was going to have to pay out of pocket. And then I also made sure that my FSA, how much money I put aside for FSA, that I was putting that money aside in my FSA account so I wouldn’t have to. I mean, it’s still my money, but I would have that money set aside so I could take it out pretax and use pretax dollars.
[00:05:20] So when I’m talking about looking at your expenses and what’s coming up for you in terms of your health benefits, like those are two examples that I have for my own personal life that you can use for yourself because those things are really important. And if you are like, you know, I don’t know how much I would need to pay out of pocket or I don’t know what that would look like. Here’s what I would also ask, and I think that we don’t do this enough is for you to advocate for yourself. Oftentimes when we go to the doctor, we just accept whatever the balance is due and they tell us we don’t ask questions beforehand. We just go forward with whatever the doctor has prescribed for us, whether it’s, you know, you need to get an x ray, maybe you need to get a filling, but you don’t ask questions. You can ask questions before you actually go into the doctor. There’s a billing department at your doctor’s office, at your dental office, at your vision or your optometrist. And so. It’s like I always ask, like, can I talk to the billing department? I know I need an x ray. Can you tell me how much is covered with my current insurance? I’ve also called up my doctor’s office before I enrolled into new health insurance or new dental insurance or new vision insurance. And I’ve called to ask like, Hey, if I go with Aetna, do you accept Aetna? Do you accept Blue Cross Blue Shield? Can you tell me? Like if I had the procedure that I had this year, how much would be covered? So you can ask those types of questions. If someone says they don’t know, keep digging, keep asking, because that’s part of advocating for yourself. Part of being able to prioritize your financial health. Because this is your money and you want to spend your money in a way that feels intentional, you feel in control, and you want to make sure that you know the numbers. And so part of knowing the numbers is not only knowing your own numbers, but also being willing to ask for the information that you need to make sure that you make the best decisions. And understanding. I mean, health insurance, I feel like they need to do a class on health insurance and all the different things. I will not tell you that I am a health insurance expert. I am just sharing my own personal story and the things that I’ve done to make sure that I have the information I need. If there’s a certain doctor that I like, there’s a certain procedure that I know that I want to get done. I make sure that I ask the questions even as a solopreneur like now I have insurance through like a health care exchange. And I really had to make sure I had open enrollment season just like you do. And I have to make sure that I ask the right questions. And so being willing to make those phone calls beforehand, before I enroll in something I know this year, which I’ve learned that I need to ask new questions I have. I switched dental providers and I in the last year since going full time into business for myself, I actually enrolled in one or had one dental program that was like from my employer. And so now that I employ myself, I enrolled in another dental program and I called to make sure that they were that I was covered under the dental program. I even called the dental health dental health insurance. Well, I’m tripping up over my words right now, but I called them to make sure, like my cleanings were covered, all of these things. So I thought I covered my bases. I went and got my teeth cleaned and I got a bill. I was so confused. Like, Why are you sending me a bill? Because I know that in my years of getting my teeth clean that you should get two cleanings and there’s, like annual x rays. Like, that’s preventative care. It’s generally covered. Well, what I didn’t understand was that whatever dental insurance that I have, the dentist that I go to. Yes. Is covered under the plan, but they only pay like let’s say they pay 80% versus 100% of the coverage. So that’s something that I learned. But when I got that bill, I was willing to call and ask more questions. And part of managing your finances is also being willing to experience trial and error. Right? Like once I learned something, then I put that into my my tool kit and I now know that I need to ask like, what’s the coverage amount for this dental provider, right? Like which plan does is this in or out of network for you and what does that actually look like? So that’s just when you are looking at selecting your health insurance, your vision and your dental. Think about those things like are you due for new contacts? Are you do for are you due for new glasses? Are you due for dental work? Are there some elective procedures that you want to get done like not to be your doctor here, but if I like generally, December has always been the time that I’ve had doctor’s appointments. And so if I knew like there was one year that I was potentially going to have a biopsy. And so I knew that I literally it was like December 24th and I could have the biopsy on my January 2nd if that would have been like one, scheduling would have worked. But then too, I also thought about like the insurance side of that, like in terms of looking at my annual deductible, what like had I met my deductible or not met my deductible? So those are just questions that you want to consider because at the end of the day, it comes back to your budget and it comes back to your budget because when I’m talking to clients that I’m helping them think about their finances. I ask them things like, okay, tell me like do wear glasses, tell me about I don’t need to know your whole medical history, but like do you spend a lot out of pocket when it comes to prescriptions or co-pays, any of those things? Because those are the little things that catch us off guard, right? And so it’s things that you need. Like, I want you to have your glasses, I want you to have therapy, I want you to have the root canal. But it’s also the things that when I look asking and talking to clients that they’re like, Oh, well, this just came up and I don’t I don’t have money set aside for it. And so we’re able to build a strategy where if we need to have money set aside in your spending plan, we can do that. Or like how do we leverage using your flexible spending plan at work and how do we leverage some people also maybe using an HSA, which is a little bit different than an FSA. So just being able to have this overall financial picture for how you’re leveraging, like I said, your employer sponsor benefits, but then also managing your personal budget so you have money for things that you actually need. I would say you need a root canal. That is not an option. We want to keep your teeth. That is going to be cheaper in the long run, you know. So this is just a great time of year to, like I said, reflect on what’s coming up for you in terms of medical expenses. Maybe the year before last, you didn’t have a lot of medical expenses, but this year maybe you have some new prescriptions or you’ve started therapy. And so if you started therapy, you know, seeing if maybe there is another health insurance at your job that your job offers, where if you actually talk to your therapist and you are talking to them about, you know, is there do you accept any of these programs, then maybe you’re not paying as much out of pocket or maybe the therapist doesn’t accept any insurance and they’re just out-of-network in general. Do they accept FSA or do they accept it? HSA Can you use your how can you leverage? Your FSA or your HSA at work and increasing your contributions to your HSA or your FSA. So then that way you have that money already set aside. You also, I mean, with any of these things, if your insurance is increasing or your FSA is in the amount you’re contributing to your FSA or your HSA is increasing, then you also know that you need to go back to your budget and adjust your net pay that’s coming home, and then you’re also going to adjust your budget overall in the new year. But these are just things that we do as adults. And even if you don’t switch your health insurance, it’s important to know the premiums that you’re paying because those generally change from one year to the next, which can impact how much money you’re bringing home. So, yes, even if it’s $5, we want to consider it because that’s $10 a month. That’s $120 a year. It’s just it’s being able to see these things for what they are and being able to know your numbers in that way. Oh, so the other thing that I want to talk about, too, in terms of like your FSA, I think that’s really important to think about if you use an FSA is that when you get to the end of the year and I’ve learned that it changes depending on your employer, but you can ask your employer if there’s an amount that you’re able to roll over from one year to the next. I know one employer that I had allowed me to allow all employees to roll over $500 per year. So if you had put $1,000 in it and you only used 700 out or excuse $700, then you could roll over the 300. You didn’t need to go buy some extraneous things to spend your FSA money. Then I had another employer that didn’t allow you to roll over anything. So if you put $1,000 in and you spent. $200 and you had $800 left, then you weren’t able to roll over any of that $800 for the next year. And I learned that that’s just the employer can set that program up and how that looks for their employees. So if you are someone, you know, just knowing your own habits, thinking about for FSA, are you using the money every single year? If you’re not using the money, then maybe you don’t want to put in as much or you want to put in less. Also considering like are you using that dependent if you have kids, are you using the FSA dependent care? So just really engaging your H.R. department in some of the benefits you have access to. Once again, like Vader’s, some of the experts, I mean, if they don’t sound like experts, keep calling it. Do you get the experts? Sometimes you want to actually call your health care provider, so you might have to call the Blue Cross or the Aetna, but it’s all in service of your overall financial health and gaining awareness. If you are enrolled in an FSA. I also would encourage you to have a set time throughout the year, throughout the month that you put into your schedule. I love helping my clients on their money dates get reimbursements, right? So like if, you know, you went to the doctor and you didn’t have your FSA card or your HSA card. Just put that as a like a checklist of something that you do. So you submit that reimbursement and get your money back. It helps so you don’t wait to the end of the year to be paid back for those things. And then if you get to the end of the year and you have money left over, go on the FSA website and actually look at what you’re eligible for to buy. Like, I know a lot of things changed during COVID that you could actually pay for with your FSA. So one example which will apply for some of my listeners and not others, is that tampons were covered under FSA where like three years ago they weren’t covered, but under some provision that happened during COVID. They are now covered. You could look and see if contact solution is covered. So just thinking about little things that you probably don’t even realize could be covered with your FSA. Look at those things if you have some money that you need to spend from your FSA account. But don’t just hoard things like think about what you actually need to be able to use that money.
[00:17:12] So now I want to shift to HSAs and an HSA is a health spending plan. Once again, I am not the expert here. I’m just giving you my own personal knowledge. But an HSA usually is not. Usually it is attached to a high deductible insurance health insurance program. And so what that means is that if you ever look at your benefits and what’s allowed with your benefits, there’s when you look at the high deductible plan and you look at maybe a plan that offers an FSA, your overall deductible is like what you have to pay out of pocket before your benefits kick in, before they start to pay 80% or 100% of coverage, whatever that looks like. So in a high deductible plan, it’s high deductible, just like it says. And so you may have to pay upwards of $2,000 or even $6,000 before your coverage kicks in, like your full coverage kicks in. So I’ve always been told that in terms of like the high deductible, like I it’s always important to consider what you need personally. If you’re someone who’s probably in and out of the hospital all the time and your health is something that you actually invest a lot of money in. Maybe you don’t want to go with a high deductible plan because it would just cost you more out of pocket. But with the high deductible plan and access to the HSA, your HSA money is something that you can put money into your HSA, but it rolls over from one year to the next and it has tax advantages that you can use. It’s pretax dollars and you get to you could also use it when you’re 60 years old and you’re in retirement. So that money could live forever or as long as you live, and you could use that later on in life. So you may use your HSA as another investment vehicle or tool for you to have during retirement. Like I know a lot of the people that I connect with, not necessarily clients but other peers of mine, if they have an HSA, they’re using it as something that they want to use later on in life. They’re not actually using that to like get their Lasik surgery. And so that’s a financial strategy that they have put into place. But I just wanted to briefly name the difference in between the two. And I think if you do your own calculations and see like what makes sense, do I want to go with a high deductible plan and potentially use an HSA? Or do I want to go with my other plan and use my FSA in terms of my overall benefits? So I think it really depends on how much you’re spending out of pocket, being able to see how much is your monthly premium and just being able to say like what does it actually make financial sense for me to do that for myself?
[00:19:58] So that is in a nutshell how I want you to think about and leverage your health insurance, dental and vision, like leverage those employer sponsored benefits. And think about how does that fit into your overall budget, what impact, what things will shift in January, what things are going to come up next year that you want to actually proactively plan for? And in that part of your numbers, because there’s a lot of us out here wearing glasses and contacts and you’re going to therapy, you’re getting prescriptions. And so just think about how you want to leverage those benefits. So you are getting the most out of those those things that your employer provides for you. And being able to make sure that you have that that it’s not just something that you sign up for, but you don’t know anything about. But also remembering that you I think the other tip that I would tell you to take away, if you’re like, oh, yeah, I got, you know, don’t worry about my health insurance. I got that is also knowing that you can ask questions before you get a procedure done at your doctor’s office. I know I did a Facebook story. Gosh, I don’t know how long to go now, but like, you know, if I’m working with clients and I hear something about a health care bill, I’m like, Oh, no, no, no. We’re asking questions. We’re going back in and we’re asking this and this. And so it just teaches you how to advocate differently for yourself and be informed, because ultimately this is about you being informed and about you feeling really empowered about your finances. And that doesn’t just all live on a spreadsheet.
[00:21:29] And the other shift that I want to take and help you think about at the end of the year is your 401. K contributions. And the reason I am putting this in is an end of the year strategy is because I want you to be thinking about increasing your 41k allocations every year, if not twice a year, because so many of us are not actually maxing out our 41k. I did a podcast episode with a financial advisor and we talked more about this, especially some of the common myths when it comes to retirement or 401k contributions. And I think the number one thing that I see is that we’re not maxing out 401ks. And I was guilty of this in my twenties. I heard that you should do up until the match in your 401k. And so for so long I did a little bit above the match, but I didn’t realize that I was leaving like money on the table, if you will, in terms of the fact that there was an annual IRS limit, contribution limit that I could take advantage of. And so I found that out later on in my twenties and started doing it. But I think that a lot of people hear that like just match, which when you hear the just match advice, they’re really just telling you make sure you don’t leave the money on the table that your employer is giving you. So oftentimes employers might say, like, oh, I’m giving you a 5% match or 3% match or like a 2% employer contribution. So it’s important to know what your employer is doing or not doing what a new employer is doing or not doing. And then also knowing what is the annual contribution limit. So every year the IRS publishes what the limit is, and it’s important to have this on your radar to look that up for yourself. You know, what is the annual contribution limit? So this year, in 2022, the annual contribution limit is 20,500. But in 2023, the annual contribution is going to go up to 22,500. So why does that matter? Well, if you were maxing out this year and you’re like, Oh, yeah, I’m already maxed out, I’m doing the 20,500. Well, next year you would want to know, oh, the contribution is going up to 22,500. So do I want to increase the percent that I’m actually contributing into my 401k? And so how you would calculate what percentage you would need to put in of your overall gross income. Remember, gross is the bigger amount is that you would take the annual contribution maximum and you would divide that by your gross amount and then multiply it by 100. So if you made $100,000, you would take $22,500 and divide that by 100,000. And you would figure out, oh, I need to be putting in 22.5% of my salary to hit that max. So just knowing that those numbers can shift every year in not having your finances be on such a set and forget kind of pattern that you don’t actually go in and check on your numbers. Like some years, like in 2020 and 2021, the IRS annual contribution limit for the 401k was 19,500. So it stayed the same for two years. It was also less than it is this year. But being able to look at those things and consider How do I want to think about that in my overall financial plan? Like if I know I’m getting a raise at the beginning of the year, maybe I want to use that 2% increase to actually bump up my 401k contributions and having a strategy for that. I always like all of my clients, especially after we’ve gotten them out of the overwhelm. I always look at the 401k contributions with them and help them make a plan to be maxing out their 401k and I see this for all of the different groups of people that I’m working with. Like sometimes I’m working with women that are recently divorced and so maybe they’re rebuilding their 401k and we actually put a strategy in place or I have a client that just got their first six figure job. And so we’re thinking about, Okay, well, how do we build in your strategy to start maxing out your 401k or I may have a client that’s already contributing to their 401k, they’re like, Keina, I do this And this is something I do consistently. It’s something they’re very proud of. But then we just go in and check and make sure we’re like, What are you contributing? Could you be contributing more? Do you feel like or not? Do you feel like but are you on track to max out those contributions? And so we consider that as well as like where other pieces are of their financial journey, but then also for my solopreneur who can also contribute to their retirement, it’s helping them think about like after you start paying yourself consists. And your business is taking care of itself. Like how are you contributing to your overall financial health when it comes to retirement and making some of the money that you get month to month, that revenue, that it can also be going towards retirement. So we’re looking at that whole picture and we want to take care of that future self and not just be thinking about the day to day pieces of our finances.
[00:26:52] So 401k, looking at the annual contribution limits, looking at how much you’re contributing, I also want you to make sure that the money that you’ve contributed into your 401k is actually invested. So make sure that you check those things, like check your statements, log in to the system, make sure your the money that you’ve contributed isn’t all sitting there in cash. Generally speaking, there might be some sitting in cash because whoever is monitoring your account may want to keep some in cash so that they can invest when the market dips high, low, etc.. But if you see that you’ve invested $10,000 this year and all 10,000 is sitting in cash, you need to call your 401k provider and ask them to actually be invested and make sure that that’s something that you’ve elected for yourself.
[00:27:42] So that is all for today. I feel like that was a lot. But one thing, like I said, wanting you to be able to pay attention to end of the year things that you can be doing on an annual basis. So looking at, okay, let me look at my 401k and maybe you have some 401k that you haven’t consolidated from a job to one job to the next. So maybe you want to actually put that on your to do list. But checking into your 401k, looking at your your open enrollment season and making sure that your health care coverage is going to support you as you go into this next year. So that is the episode for today. And as always, if you are looking to dive deeper into your finances so you can start experiencing ease and peace of mind and be excited, like being able to have this confident conversation about open enrollment and. 401k contributions. I would invite you to apply to work with me in my five month partnership. You can go to www.wealthovernow.com/appointment and grab a time on my calendar. We will spend 45 minutes on a consult and I will ask you a lot of questions, but it’s really to get to know more about you and talk with you about how financial coaching and working with me can be a benefit for you. So I look forward to hearing from you. Have a great one. Thank you so much for listening to Money Files. If you’re ready to take the next step to reach your financial goals, head to www.wealthovernow.com/appointment. And let’s get started.
