Boost Your Benefits
High-deductible health insurance plus a health savings account is a winning combination.
The biggest perk on your employer’s benefits menu is likely to be health insurance, but you’ll probably have to share the cost. If you have several options, consider a high-deductible policy, especially if you’re healthy. These policies generally have the lowest premiums and, in 2015, if your deductible is at least $1,300 for single coverage or $2,600 for family coverage, you may qualify to make contributions to a health savings account. You don’t pay taxes on contributions to an HSA, and you can use the money tax-free to pay health insurance deductibles, co-payments and other medical expenses.
Most high-deductible policies provide preventive care (certain checkups and tests) that is free of deductibles and co-payments. Many employers contribute money to the account, in addition to your own contributions. For example, employers offering Fidelity HSAs contribute an average of $860 a year to employees' accounts; you could get even more if you participate in a wellness program.
If your boss doesn’t offer an HSA-eligible high-deductible policy and you have a lot of out-of-pocket medical expenses, make use of your employer’s flexible spending account (FSA). In 2015, you can set aside up to $2,550 in a medical FSA, which isn’t nicked by taxes and may be used tax-free for out-of-pocket medical expenses. Most employers let you carry $500 from one year to the next.
What if you don’t have workplace health insurance? You can buy a policy on your state health insurance exchange (see HealthCare.gov for links). If your income is below 400% of the federal poverty level (about $47,000 for an individual and $63,000 for a couple), you can get a subsidy to help cover your premiums. The Affordable Care Act allows you to stay on your parents’ plan until age 26, but if you live in a different city without access to their network of providers, consider buying a policy on the exchange.
Sign up for pretax commuter benefits, if they’re offered. You can set aside up to $130 per month for public transportation and up to $250 per month for parking (and $20 per month if you bike to work). If you have children younger than 13, you can contribute up to $5,000 pretax to a dependent-care FSA for day care, preschool, after-school care, a nanny or day camp while you and your spouse work (or if one works and the other is a full-time student).
Don’t worry about life insurance—your employer may offer extra coverage for a fee—unless you have a spouse or children who depend on you financially. You may be able to add extra disability insurance, but this coverage can be pricey. Calculate whether your employer’s group disability benefits are enough to cover your bills.
This story was originally published in the June 2014 issue of Kiplinger's Personal Finance.