Understand your employee benefits

At this time of year, employees are given the opportunity to enroll in benefits programs at work such as health insurance and retirement savings. Taking advantage of benefits at work can make a significant impact not only on your current finances but also on your ability to retire comfortably.

The following are some of the potential benefits that you should be considering carefully each year.

401(k) options

If your employer offers a 401(k) plan option — especially with an employer match — you should definitely make at least the minimum contribution necessary to receive the maximum employer match.

Even if it will stretch your budget, you should make sure you are receiving the highest contribution from your employer. The employer match is free money. Even if you are a conservative investor, there is no reason not to make the contribution that maximizes the employer match.

Even if you have to borrow the money on a short-term basis to ensure the maximum employer match, it makes sense to do so.

If you are 50 or older in 2023, you may contribute up to $30,000 to a 401(k) plan in 2023. If you are younger than 50, the maximum contribution is $22,500 in 2023. Each of these limits will increase by $500 in 2024.

Medical spending accounts

If you enroll in a high-deductible health care plan, you are allowed to open a health savings account (HSA), which has significant tax advantages and is useful in retirement.

With an HSA, your contributions are deductible from your federal taxes, and the income and growth are also tax-free if your withdrawals are used for medical expenses, which include copays, deductibles and health insurance premiums.

You are not required to spend your contributions, earnings or growth in one year; you are allowed to carry the balances forward from one year to the next, and even into retirement. Once you are eligible for Medicare, you can no longer make contributions, but you are allowed to maintain the account, and make withdrawals for medical expenses tax free.

If you make withdrawals for non-medical expenses, the withdrawals are taxable. Your spouse can inherit the account and use the funds for medical expenses tax free. So, the HSA has many advantages during your working life and into retirement.

In 2024, the maximum contribution is $4,150 for an individual and $8,300 for family coverage. For 2023, the limits are $3,850 for individual coverage, and $7,750 for family coverage.

If you don't have a high-deductible health care plan, you can use a flexible spending account, or FSA. Contributions are tax free.

However, there is a significant limitation in comparison to an HSA; you are required to withdraw the contribution, earnings and growth on a yearly basis. In 2023, you can contribute up to $3,050.

Student loan and tuition coverage

Tuition coverage for high school and college tuition are offered by many employers. Such coverage varies greatly; some employers offer assistance with student loan repayments.

If the employer offers education benefits, any benefits over $5,250 are taxable to the employee.

Insurance assistance and other benefits

Many employers off er supplementary insurance coverage available to the employee at group rates that are significantly lower cost than individual rates would be.

This insurance can cover disability, long-term care, critical-illness care and pet insurance.

These sorts of coverage are voluntary to the employee.

Many employers off er wellness programs, assistance programs that cover alcohol addiction, substance abuse and mental health.

Other options can include free or low-cost advisory services for financial and retirement planning, estate planning, divorce counseling, and college saving.

Bottom line: Employer services for employees cover a wide range. Many of these services are much more cost-eff ective than services available on an individual basis.

Many of these services have significant advantages both while you are employed and in retirement. It is to your advantage to understand these options and to use them when it benefits you.

Elliot Raphaelson welcomes your questions and comments at raphelliot@gmail.com.