How to squeeze every last penny out of your employee benefit package
Remember, your paycheck is only one part of your overall compensation
Young workers have plenty on their plates when they leave college and land their first jobs. At the office, they're meeting new people, trying to get the hang of new responsibilities, and sizing up the boss, while at home they're doing everything from outfitting the kitchen to getting the internet hooked up.
It's understandable how many wind up going through orientation day in a fog, quickly forgetting what the folks in HR said about the company's benefits. You might catch the bit about how much vacation you get, but not much else. If this sounds like you, make arrangements to drop in on HR for a refresher. Otherwise, you might be leaving a big chunk of your compensation package on the table.
If you're lucky, you'll have to sift through what can be a dizzying array of perks. Here's a look at some common and not-so-common ones, and why you might want to take advantage of them.
1. Maximize your 401(k) match
Lots of employees are contributing to their retirement plans, but many are not contributing enough to take full advantage of their employer's 401(k) match. That might be a 50 percent or higher match on everything you contribute up to 6 percent of your pay. If your employer has such a match and you're not taking advantage of it, you're turning down a 3 percent bonus, every paycheck (granted, it's one you can't touch for years, but still). It might take some belt-tightening in the short run, but setting yourself up to contribute up to your company's maximum 401(k) match is like giving yourself a modest raise.
Match or no, your 401(k) plan "could actually be the best benefit your company has," says Tanza Loudenback at Business Insider. You'll have a set percentage of your pay automatically deducted from your paycheck and deposited in a retirement account. Set it up right away and you won't miss the money, plus your pay won't drop by quite as much as the amount you put into the account, because the money comes out pre-tax. Remember, you wouldn't have seen all of that 6 percent going into your 401(k), anyway, because some of it would have gone to the IRS.
If that's unclear, take a look at a Bankrate calculator: If you're single and make $1,000 a week, and contribute 6 percent of your pay, your check will go down by just $41, not $60, because of the tax savings. And if your employer matches half of your contribution, you're getting $90 in savings for that $41 chunk of your take-home pay. Not bad.
The younger you are when you start, the more you'll get to see your money snowball, making gains this year, and next year making gains on those gains, and so on, until not too far into your career you check your balance and you find you're building a tidy little retirement nest egg. "Even if you only put a few percent away and your employer matches it, it's better than nothing," Katharine Perry, a Pittsburgh-based financial consultant with Fort Pitt Capital Group tells Business Insider. "Even if it only equates to $20 or $30 a paycheck ... it's still better than nothing, you're still invested, and that's the important part."
2. Tap into your flexible-spending account
If your company offers you the chance to start a Flexible Spending Account (FSA), check it out. Chances are, says Barbara Friedberg at MSN Money, "it can save you big bucks in unexpected ways." You can set aside money from each paycheck to spend on specific purposes, including health care and transportation. Then you can use the money to pay for allowable medical expenses, such as co-pays and some drugs, or work transportation costs such as bus passes and parking.
What's the big deal, you might ask? "The money comes out of your check pre-tax, reducing your taxable income and, therefore, your tax bill," Friedberg notes. So if you have $100 taken out to cover your monthly parking fee, or bus pass, your pay might drop by just $70 or $80, because your taxes will be calculated based on your slightly reduced taxable pay. The pre-tax salary reduction limit for health FSAs increased to $2,600 for plan years on or after Jan. 1, 2017. Parking and transit limits are $255 a month. The catch: You need to calculate carefully when determining how much to put into your FSA, to avoid losing money you don't spend.
3. Sign up for workplace financial planning
If all this sounds confusing, your employer might offer some help. "Ask your HR department if your employer provides any form of unbiased financial advice or guidance," Erik Carter, a senior resident financial planner at Financial Finesse, says at Forbes. "Often at no cost to you, a qualified financial planner can help you decide how to make the best use of your benefits and when and how to supplement them with outside financial services."
4. Ask about everything else
The list goes on. Ask whether you're entitled to reimbursement for your gym fees, or whether your company has a stock purchase plan, which might let you buy discounted shares in your own company. Or maybe you can choose cheaper health insurance with a higher deductible, and prepare for a health emergency by contributing to a Health Savings Account.
As you can see, your paycheck is only one part of your overall compensation, Carter says. "It's also important to understand your benefits to make sure you're taking full advantage of them. Remember, you’ve earned them."