November is open enrollment season. This could be for your employer, Medicare or the Affordable Care Act Exchange. But it is not just health insurance you need to consider. Employees may also have options for life and disability insurance as well as retirement plan contributions.
There is a lot to consider when planning for the next full year. It helps to have your financial plan in order so you know how to budget for the premium costs, what types of insurance you need and how you are tracking on your retirement goals.
Health insurance is usually the first thing we tackle in signing up for benefits. Your employer may also offer a health savings account or HSA. You will want to learn about using pre-tax dollars to help fund future medical costs. This is always associated with a high-deductible insurance plan. Consider what you expect your out-of-pocket medical costs to be for the year to determine if this is better than a lower-deductible major medical plan.
Major medical plans may also be offered in certain networks of providers. You should determine how many specialists you may need and if you will be using services that are considered out of network. In this case, the coinsurance is smaller, and the deductible may be higher.
Disability insurance premiums may be offered as pre-tax or post-tax. It is nice to get the premium paid with pre-tax dollars but keep in mind the benefits then will be taxable.
Life insurance usually comes with a basic plan, perhaps $15,000 may be included with your medical coverage. Then you may have the option to pay extra for additional life insurance on yourself, your spouse and your children. Consider that this insurance stays with the employer when you leave but also may not require underwriting or insurability. It is usually less expensive because it is group insurance rather than individual. Refer to your financial plan to determine how much permanent insurance you need and get your own policy for that amount. Consider using the employer plan for the short-term needs.
Retirement savings is also crucial in planning for 2023. Limits will be increasing in 2023 to $22,500 for most employer-sponsored qualified plans such as a 401(k). The catch-up provision for those over age 50 will be $7,500. Therefore you may want to increase your 401(k) contribution to get the maximum allowed. The annual limit on IRA plans increased to $6,500, but the catch-up remains at $1,000.
The income phase-out range for taxpayers making IRA contributions to either a deductible IRA or a Roth also increased. Check with your advisor or IRS.gov to plan for your 2023 tax strategies. Couples earning less than $73,000 may be eligible for the Retirement Savings Contributions Credit.
Anyone changing jobs or planning to retire next year may benefit from a Roth Conversion. This type of preplanning could substantially improve your retirement income in the future. It is important to take the time to learn about your options to make sure you enroll for what is best for you and your family.
Patricia Kummer has been a Certified Financial Planner professional and a fiduciary for over 35 years and is Managing Director for Mariner Wealth Advisors.