Get Your Bennies!
Angelique is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
You may have more income right at your fingertips and not even realize what you’re missing out on. See if any of the benefits listed below apply to you. Not sure? Make an appointment to talk to the person in charge of benefits at your company. If you started your job more than a year ago, there may be new benefits that you don’t even know about.
By far the easiest way to earn more cash is to take advantage of matching 401(k) contributions. Yes, you have to contribute some of your own money to your retirement, but many employers offer a 50% - 100% match on your contributions and if you’re not taking advantage of it, you’re literally leaving FREE money sitting on the table. If you don’t think that you can afford to contribute to your 401(k), I’d encourage you to use this calculator at bankrate.com to see how much contributing will really affect your net pay. I’ll bet it comes out to less than you think.
Using the calculator, I entered the data of someone who grosses $2,000 per paycheck twice a month ($48,000 per year), who is 35 years old, files their taxes as “single” claiming one exemption and expects an annual increase of 3%. Going forward, I’ll call him Bob. I assumed that the employer makes a 50% match up to the first 6% of salary that Bob contributes. I entered that Bob went from making no contribution to a 6% contribution so that he could get the full benefit of the employer match.
Using these assumptions, Bob’s take home pay will go down by $83 per paycheck, but he’ll be contributing $120 to his 401(k) and his employer will be adding an additional $60 per paycheck. Therefore, he’s putting $180 per paycheck into savings for a “cost” of only $83. If he continues down that path until retirement at age 65 (assuming a 6% return), he’ll have roughly $500,000 in his retirement account versus zero. Half a million dollars to work with versus zero seems like a pretty wise investment to me and I think that most of us can figure out where to cut roughly $40 a week in expenses out of our budgets to ensure we have some retirement savings. Let’s assume that Bob skips the weekly happy hour at Buffalo Wild Wings (NASDAQ: BWLD) which may make his retirement healthier as well!
Found Annual Income: $1,440 non-taxable
Flexible Spending Accounts
Flexible Spending Accounts (also called section 125 cafeteria plans after the section of the tax code that governs their rules) allow you to set aside money on a pre-tax basis to cover out of pocket expenses for either medical costs or dependent care expenses. Usually employers will cap Medical Flexible Spending at somewhere between $3,000 and $5,000 per year and the IRS caps Dependent Care Flexible Spending at $5,000 per year per family. New health care reform is supposed to cap the Medical Accounts at $2,500 as of 1/1/2013, but that limit has been postponed once already, so that remains to be seen.
Using the above example and this handy-dandy calculator from cpasitesolutions.com let’s say that Bob knows that he usually has to meet his annual $300 deductible in his health plan and also has some dental work coming up that he expects will cost him about $500 and pays $45 a month in prescription co-pays. So, at a minimum, he’s most likely going to have $1,340 a year in out of pocket medical expenses. If he splits that over 24 paydays, that’s roughly $55 per paycheck that he’s going to contribute to his Flexible Spending Account. However, because it’s taken on a pre-tax basis, his net pay is only going to decrease by about $20 per paycheck.
Found Annual Income: $840 non-taxable
You have to budget carefully when determining what to set aside in these accounts because they are “use it or lose it” and you also have to remember to turn in receipts. As a former HR Professional, I can tell you that I’m always amazed at how many people lose their money just because they fail to turn in receipts. If you can’t count on yourself to get around to doing the paperwork, these accounts may not be a good idea for you.
Know Thy Medical Plan
Many people end up spending a lot more in medical expenses that they need to because they aren’t familiar with the provisions of their medical plans and they don’t ask questions of the medical professionals or their insurance companies. Some common things to watch out for:
- Make sure you’re using your plan correctly. If you’re on an HMO, you’ll have to pick a primary care physician who is in-network and get referrals to see specialists, otherwise you’ll be paying out of pocket. Other types of plans (there are a slew of them these days) have their own special provisions. Don’t know the difference between a PPO, EPO, POS or HMO? Visit this glossary provided by The Bureau of Labor Statistics.
- Utilize your network! Usually in-network services are covered at a much higher rate and the doctor has agreed to charge less overall. And, you usually don’t have to meet an annual deductible before costs are covered. You can save a lot of money by staying in-network.
- Go generic. Generic medications are supposed to work just as well as the name brand. So, at least give them a try and you’ll pay a lot less out of pocket.
- Make sure to get pre-approvals where needed. Usually non-emergency surgical procedures and any associated hospital stays will require a pre-approval. Make sure that you get them or you could be slapped with costs that you didn’t expect.
- There’s no guarantee that it’ll help, but make sure to stress to the hospital that you need to make sure that any provider associated with providing any kind of medical service to you in the hospital is in-network or you could have to pay out-of-network rates for their services, even if the hospital itself is in-network. This happens a lot with anesthesiology and surgical assistants.
- Go over your medical bills and explanations of benefits (the reports you get from the insurance company after they’ve paid – or not paid – one of your medical bills) with a fine-toothed comb and question anything that looks out of whack. Both doctors’ offices and insurance companies make mistakes all the time. The people processing those claims are human, after all!
- Many health insurance companies also provide discounts to alternative medical providers like acupuncturists, who are not typically covered under the health plan, and discounted gym memberships. Look for those benefits if you are using those services.
Tuition Assistance or Reimbursement
Tuition Assistance or Reimbursement, if offered, can be provided as a tax-free benefit for up to as much as $5,250 per year. If you’re taking classes, make sure that you’re utilizing the program and if you’re not taking classes, maybe you should be! Learning new skills will help your career – which means more moolah, baby! Read your employer’s plan carefully. Many plans require a length of service requirement either before you’re eligible or after you’ve taken your classes and will often have a series of approval steps that you’ll need to go through before taking your classes. You don’t want to be denied for failing to follow directions.
HR departments are hard at work all the time trying to figure out how they can bring you benefits. It helps keep the company competitive in the employment marketplace and many times they can get benefits like special discounts at no cost at all. Some things to look for include:
- Employee Assistance Plans (EAPs) often provide free counseling and referrals, but may also provide bennies like free weight-loss programs and discounts at online merchants like 1-800-Flowers.com. (NASDAQ: FLWS)
- Legal services plans usually include provisions for getting a will done for free and may include discounts for services like closing and title services when buying a house or refinancing as well as representation in traffic court.
- If you take public transportation to work or have to pay for parking, your employer may have benefits relating to your commuting expense.
- Back-up child care. If your employer offers this benefit, make sure to get your kids enrolled before you actually need to use it. Benefits may include in-center or even in-home child care for a deeply discounted rate or co-pay and some may even offer elder care options.
- Discounted gym memberships, car rentals, travel services and even pet insurance. Companies like Zipcar (UNKNOWN: ZIP.DL2) often offer a corporate rate to an employee population.
- Mobile phone or internet connection expenses. If not offered as a regular benefit, talk to your boss, you may be able to make the case, depending on your job, that these expenses should be picked up in part or in whole by the company. If you’re going into a new job, this may be something that you can negotiate into your package.
- Employee discounts. And of course, most companies provide their own products or services at a discounted rate or even free of charge to employees. Here at The Motley Fool, we all have free access to each of our newsletter services, a benefit that can be priced $5,000 per year (the cost of our Duke Street “all access” membership).
Motley Fool newsletter services recommend Buffalo Wild Wings and Zipcar. The Motley Fool owns shares of Buffalo Wild Wings and Zipcar. TMFHRFool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.