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Making Your Employer a Partner In Your
Financial Planning
People who look to their employers for nothing more than a
weekly paycheck and basic health care insurance are missing the
boat.
It makes the most sense to ask a future employer about
benefits before you agree to come to work. But even if you have
been working for the same company for years, it's never too late
to go to human resources to make sure you're getting the most
mileage out of your current benefits and maybe pick up a new
perk or two. See if you have the following options available,
and check with your tax professional or a financial adviser
before you make a selection:
Look at health savings accounts: If your employer has
converted to a high-deductible healthcare plan, you may have the
option of starting a health savings account (HSA). These
accounts help workers to save and spend money tax-free for
medical expenses not covered by the plan or your deductible. Why
are they a good idea? Because you can sock away money tax-free
that will cover the amount of the deductible (at least $1,050
for individuals, $2,100 for families) if you need it, and it
will grow tax-free over time if you don't.
See if a Roth 401(k) works for you: In 2006, the
government gave employers clearance to offer Roth 401(k)s,
employer-sponsored retirement plans that allow workers to put
all or part of their 401(k)s into a Roth, which allow after-tax
money to grow tax-free. Roth 401(k)s allow higher contribution
limits — $15,500 in 2007 plus an additional $5,000 if you're
over 50 — compared to traditional Roth IRAs that limit annual
contributions to $4,000 with an extra $1,000 for those over 50.
Look for a finders' fee: Companies rarely like to give
away money unless they know they're saving some in the process.
Many companies are now offering finders' fees to employees who
successfully bring new workers in the door. Why? Because it
costs considerable money and time to hire people, and employers
are happy to see their best employees bring friends and former
co-workers in the door. Also, some companies give away special
bonuses for bringing in new clients, so don't miss a chance to
earn them. However, keep in mind that substantial bonuses may
change your tax liability, so keep an eye on that issue.
Check your target bonus amounts: This is usually not a
problem for most people who receive annual bonuses, but it makes
sense to double-check the minimum bonus you should earn annually
and what it will take to exceed that limit.
Get flexible: If your company has a flexible spending
account for medical, commuting or child-care costs, estimate
carefully what you'll need to spend and get on board. While
workers can get a chance to spend out their accounts into the
next tax year, it's very important to project exact numbers so
you won't lose funds at the end of the eligibility period.
Get smart: More than three-fourths of U.S. companies
offer education benefits, so if you have the time and
inclination, finish that degree or complete a particular course
of study to prepare you for your next job or for your enjoyment.
Most companies will ask you to stay a certain length of time
after receiving such benefits, which is only fair. But education
is worth far more than the dollar cost of tuition, so don't pass
it up.
Get fit: Some companies negotiate membership discounts
to gyms and other fitness facilities, and that's a worthwhile
benefit. But these days, with company health care premiums going
through the roof, some employers are actually paying employees
to lose weight, quit smoking or take other steps to improve
their health and lower their boss's costs.
Have some fun: Companies get discounts to a variety of
entertainments — the local amusement park, sports events,
theaters, restaurants, auto shows, and other local events. If
they interest you — and particularly if they interest your kids —
you'd be foolish to pass up such discounts.
Be proactive: If you hear friends or clients boasting
about particular benefits or incentives at their companies, quiz
them to find out as much as you can about how their companies
afford those benefits. If the story checks out, then go to your
own company and ask them if they might consider it.
May 2007 — This column is produced by the Financial
Planning Association, the membership organization for the
financial planning community, and is provided by Don McCarty of
Financial Decision Partners, a local member of the FPA.
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