If you’re fortunate enough to work for a company that offers benefits, they’re a gold mine for savings. Most typically cost less in the workplace than if you purchased them on your own, and some also come with built-in tax savings.
“Whether it’s deciding to make pretax contributions to a 401(k) or a health savings account, there are many tax implications and advantages you get from employee benefits,” Says Ashley Shope, assistant vice president in Product and Market Development for Unum.
Here are six types of workplace benefits that can save you thousands
1. Health insurance
Even if you’re young and healthy, everyone needs health insurance. A quick trip to the emergency room for an illness or a broken bone could leave you with a substantial medical bill. Being uninsured and having a serious health condition could be financially devastating. That’s why health insurance is one of the most popular workplace benefits.
Depending on your health, choosing a high-deductible health plan can save you money with lower monthly premiums. However, if you have a chronic health condition or family who require frequent visits to the doctor, other plan options may be more affordable.
2. Medical savings accounts
Another advantage of enrolling in a qualified high-deductible health plan is that it makes you eligible for a health savings account. An HSA allows you to make pretax contributions for current or future medical expenses, such as doctor co-pays, prescriptions, dental care, and eyeglasses. Funds in an HSA roll over from year to year with no spending deadline.
Some employers may offer a flexible spending account, which allows you to set aside pretax contributions for medical and child care expenses. But unlike an HSA, you generally must empty an FSA each year.
If you know you’ll have specific health care expenses every year, using either type of tax-advantaged account is a smart way to save money.
3. Retirement accounts
When it comes to saving, you can’t beat the benefits of a workplace retirement account, such as a 401(k), 403(b) or 457 plan. Not only do they help you accumulate a nest egg, but they allow you to keep more of your hard-earned money by reducing taxes.
When you invest pretax money in a traditional, employer-sponsored retirement plan, your taxes get deferred. You skip paying income tax on contributions and earnings until you make withdrawals in the future.
Or you might choose the Roth version of a workplace retirement plan, which requires you to pay tax upfront on contributions but allows you to make tax-free withdrawals in retirement. Growth in a Roth account is never taxed, which could add up to massive savings.
Many companies provide retirement matching funds to encourage participation. A typical benefit might be a 100% match on amounts you contribute up to 3% of your salary. Contributing enough to max out a retirement match every year is a wise way to save more.
4. Accident insurance
Accident insurance is an often-overlooked workplace benefit that could save you thousands. It pays a lump sum to help you cover unexpected costs from treatment after a covered accident, such as ambulance rides to the emergency room, hospital stays or follow-up care.
Even if you have health insurance, paying out-of-pocket expenses may be financially challenging. You can spend money from accident insurance any way you like. The payments are made directly to you, so you can use the money for co-pays, deductibles or personal bills your health plan doesn’t cover.
5. Hospital insurance
Many workplace benefits include the option to enroll in hospital insurance. If you have an unexpected hospital stay, this policy can lighten your financial burden while dealing with an emergency.
As an inpatient or an outpatient, hospital coverage helps you manage expenses—such as hospital admission, diagnostic tests, and surgery—and fills gaps left by your health insurance. Just like with accident insurance, the benefit is paid directly to you. It gives you the flexibility to use the money any way you like, whether to cover medical costs or pay household expenses.
6. Disability insurance
Disability insurance is an important policy to have because it protects your finances if you can’t work. It pays a percentage of your salary or wages (such as 60%) if you suffer from a covered disability, illness or accident. Remember health insurance only addresses medical bills — it doesn’t pay everyday living expenses if you can’t earn money for an extended period.
“Your ability to earn future income is your greatest asset,” Shope says. “You should protect it with insurance, just like you do for other items of value, such as your car, home and personal belongings. If you save 10% of your income every year, it could be wiped out if a disability such as an accident, illness, or pregnancy prevents you from earning an income for 12 months.”
As with other types of insurance, getting disability through your employer typically costs less than buying a policy on your own.
While it’s not pleasant to think about what bad things could happen, managing them can be more comfortable with the right types of insurance. Use the workplace benefits you’re eligible for to save money and protect yourself from something unexpected jeopardizing your financial security and happiness.