6 Reasons to Integrate Your Employer-Sponsored Benefits into Your Financial Plan

Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) are two of the most underutilized benefits offered by employers. These accounts allow you to set aside pre-tax dollars for qualified healthcare expenses, lowering your taxable income in the process. HSAs offer triple tax benefits: contributions are tax-deductible, the funds in the account grow tax-free, and withdrawals for qualified medical expenses are tax-free.

Consider an example. John, an engineer, was reviewing his employer’s benefits during open enrollment and discovered he was eligible for an HSA as part of his high-deductible health plan. After consulting a financial advisor, he learned that by contributing $3,000 to his HSA, he could lower his taxable income by the same amount, saving $720 in taxes as someone in the 24% tax bracket. Unlike FSA, any unused funds in his HSA would roll over year after year, allowing him to accumulate savings for future medical expenses, including those in retirement. This case demonstrates how utilizing an HSA can lead to immediate tax savings while providing long-term financial advantages for managing healthcare costs.

Employer-sponsored retirement plans, such as 401(k)s, are powerful tools for building long-term wealth. At a minimum, contributing enough to your 401(k) to get the full employer match is crucial, as this is essentially “free money” that boosts your retirement savings. If you’re able, it’s even more beneficial to max out your contributions, enabling your savings to grow tax-deferred and taking full advantage of compound interest over time.

Consider two individuals: Sarah starts contributing to her 401(k) at age 25, contributing $4,000 annually with a 6% employer match. Assuming an average annual return of 7%, by age 65, Sarah’s account could grow to approximately $960,000. Meanwhile, John starts contributing at age 40. He adds $15,000 annually with the same 6% match. Despite contributing more each year, by age 65, John’s account could grow to around $730,000. Even though John makes higher contributions, Sarah’s earlier start gives her more time for compound growth, leading to a larger retirement fund.

This example illustrates how starting early, even with smaller contributions, can have a significant impact on your long-term financial future. A Cerity Partners advisor can play a crucial role in guiding you through 401(k) contribution strategies based on your age, salary, and retirement goals, ensuring you balance current expenses with future savings. They can also guide you in choosing between pre-tax and Roth contributions by evaluating your current tax bracket, expected retirement income, and overall financial picture. This personalized advice helps ensure your retirement strategy aligns with your long-term wealth-building goals.

When considering your total rewards package, it’s essential to look beyond base salary and consider the full range of benefits. For example, Sarah, an experienced executive in the tech sector, weighed two job offers. The first offered a base salary of $180,000; the second offered $120,000. While the first offer appeared more attractive initially, the second offer included stock options, performance bonuses, a 5% 401(k) employer match, and a Health Savings Account (HSA) contribution made by the employer.

Upon closer evaluation, Sarah realized the additional benefits in the second offer provided substantial long-term value. The $30,000 in annual stock options had the potential to grow significantly, while the performance bonus of up to $25,000 offered extra income based on both her and the company’s success. The 401(k) match and HSA contribution offered additional inducements by providing tax-deferred savings.

By integrating these benefits into her overall financial plan, Sarah saw that the second offer, though lower in base salary, would likely lead to greater wealth accumulation over time. This example demonstrates the importance of considering total compensation—including equity, bonuses, and retirement contributions—when making career decisions, as they can provide opportunities for long-term financial growth that a higher base salary alone may not offer.

Many companies offer Non-Qualified Deferred Compensation (NQDC) plans that allow high-income earners to defer a portion of their salary and bonuses. This provides significant tax advantages, particularly if you’re in a high tax bracket. We work with clients to design tax optimization strategies around their NQDC plans, ensuring these deferrals align with their overall cash flow and retirement goals. By strategically managing the timing of deferrals and distributions, you can reduce your tax burden while securing future income.

Employer-sponsored insurance benefits like life, disability, and umbrella policies provide essential protection, but are they enough? To truly safeguard your financial future, it’s important to integrate these benefits into a broader risk management strategy. We perform a detailed needs analysis to ensure your employer-sponsored insurance works in conjunction with additional personal policies, helping you protect your assets from unexpected events and liabilities. Our holistic approach also includes asset protection strategies, giving you peace of mind knowing you’re fully covered.

Your employer-sponsored benefits should not only help you build wealth, but they can also play a key role in securing your financial future. To ensure that wealth is protected and passed on to future generations, having a comprehensive estate plan in place is essential. By integrating your benefits with your estate plan, you can ensure that your assets are efficiently transferred to your beneficiaries. Our team reviews your estate documents, evaluates beneficiary designations on accounts like your 401(k) and life insurance policies, and implements wealth transfer strategies to ensure a smooth transition of assets according to your wishes.