Understanding Your Employee Benefits
Whether you are starting your first job or looking for a new one, it is very important to consider the benefits that each company offers. You should add the benefits into your salary consideration, because you may be surprised that a lower paying job with great benefits can put you financially ahead when compared to a higher paying job. Here are the most common benefits and things you should consider about them as you consider your new job. Taking advantage of your benefits can reduce your taxable income and add additional savings. You should also review your benefits each year during open enrollment. Starting a new job is a great time to establish good financial habits.
The most common benefit is health insurance. Many companies have different policies about when you qualify for health insurance. Generally, if you are working full-time you qualify for this benefit. Some companies will completely cover you, and allow you to purchase insurance for your family. Other companies will have you pay a premium for yourself and your family. Some companies allow you to cover your significant other as well. You should consider the out-of-pocket costs as well the premium costs when comparing health insurance benefits. Companies are required to offer health insurance plans that meet the Affordable Care Act guidelines. Generally, it is cheaper to purchase insurance through your employer for yourself, but you may save money looking for independent health insurance for your family members. If you do this, be sure that the policies meet the guidelines for the Affordable Care Act.
Employer match is another great benefit. Many employers will match your 401K contributions up to a certain percentage of your salary. This is something that you should take advantage of because it increases your earning and savings potential. If you leave the company before you are vested in the 401K program you will lose the amount your employer put in. Generally, it takes five years to become vested. Your human resources representative can tell you how long you need to work in order to be vested. You should make an effort to always invest up to the amount your employer will match because it basically doubles your contributions up to that point.
Paid Vacation and Sick Time
Paid vacation and sick days are another great benefit. Generally, you earn a set number for each month you work. These days will accrue as you work. Many employers also give additional days once you reach the five or ten-year mark. When changing jobs you may want to consider the things that you will give up when it comes to seniority. Additionally, when you leave, your company should pay you for the sick days and vacation days that you have accrued, but not used.
Life insurance is another common benefit. Generally, your employer will pay for the amount of one year's salary, while giving you the option to purchase additional coverage. This is a great benefit and can help your loved ones pay for burial expenses in the event of your death. You should be prepared to name a beneficiary when you fill out your initial paperwork. This does require a social security number for the person you are leaving the money to. You can also change the beneficiary by contacting your human resources department. Your primary life insurance coverage should not be through your work, because you will lose coverage if you lose your job. Look for a term-life insurance policy that you purchase separately for your primary insurance coverage. However, if you have a condition that will stop you from qualifying for life insurance, you may want to maximize the amount you have through your job.
Your employer may offer stock options, as well. Stock options allow you to purchase stock at a set price. There is a waiting period set by the company as to when you can sell the stock. Generally, you receive the stock options a lower price, and then sell them when they are worth more. Using your stock options is a great way to increase your savings and a great benefit offered by many start-up companies.
Flexible Spending Accounts
Another common benefit is a flexible spending account. These are regulated by the government, and so the rules are pretty much the same across the board. A flexible spending account will allow you to set aside pretax dollars to pay for medical and daycare expenses. Flexible spending accounts are a great way to decrease your taxable income, you should take advantage of one if you can.
Other Insurance Options
Your company may offer many other insurance options. These may include dental, vision, and disability insurance. You should determine whether or not you need all of these additional insurance benefits. Disability insurance is a great benefit since it will protect if you were suddenly injured. If you are considering dental and vision insurance you should carefully look at your insurance plans before you make a decision.