No Financial Plan is Complete without Assessing Your Employee Benefits

 

July 2018.

By Jeff Headrick, Financial Planner

One thing I have learned over the years is that you cannot begin a true financial plan without a deep assessment of your current employee benefits. But how fun is that? I mean, who really wants to spend several hours combing through employee benefit literature looking for strengths and weaknesses in their benefit package? Well, the answer is— not many of us. But while most of us would rather be out surfing, chillaxing poolside, or taking a nap, those that do the work get the reward.

My father was a victim of not understanding his employee benefits. By default, my mother was a victim also. Let me explain. Not long before my father passed away he commented to me that he had the best life insurance his employer offered. He worked for the United States Postal Service and they provided several life insurance benefits that employees could choose from. My father made the mistake of selecting what he thought was the largest life insurance benefit, and actually chose the smallest. I know he thought he had the best coverage for his family. But at the time of his death it was learned that he had made a mistake. I can tell you from experience that my mother suffered financially because of this misunderstanding. To understand USPS benefits in detail start here.

Why You Should Consider Evaluating Your Benefits

Assessing your employee benefits is where financial planning begins. I mentioned in the last article that I wrote: “Be Smart: Why Everyone Needs a Budget”, that creating a budget was important. And I believe it is. But another key step is examining the retirement benefits, the disability benefits, the life insurance benefits, the health insurance benefits, and many other employee benefits before you crack the nut on what to do next. How do you add anything to a financial strategy without examining what you already have? You can’t really. Not if your desire is to build a better and stronger “house” on the existing framework.

Here are a few reasons that you should assess your benefits:

1) How can your financial professional help you with your 401(k) allocations unless they see the details of your employer’s 401K plan?

2) How can your financial professional help you assess the strengths and weaknesses of your disability protection unless they see the details from your employer’s disability insurer?

3) If you are nearing retirement, often the best place to get long-term care insurance protection is with your employer. Since your employer coverage might be cheaper and transfer to personal coverage once you leave--wouldn’t it make sense to assess this first?

These are questions that don’t pertain to your investments per se. The answers to these questions are not sexy. They don’t get you rich. And your colleagues don’t get stoked sitting around the water cooler or coffeepot at work talking about risk management topics. But that doesn’t mean they aren’t important.

Why Some Professionals Don’t Evaluate Your Benefits

Unfortunately, not all financial planners are created equal. We all have our own skill sets— our own systems and beliefs and convictions about how to best go about our task. Doctors, engineers, you name it—every profession’s professionals don’t go about everything in the same way. So, while many financial planners do a fantastic job of evaluating employee benefits, some do not.

I try not to be too hard on planners that “skip” evaluating a client’s employee benefits when doing a plan. It is very time-consuming. In addition, a lot of consumers don’t even know how to obtain their benefit information, and when they are asked to it creates yet another thing for them to have to do in their already busy lives. I’ve found that many financial planners are focusing so intensely on building their book of business through investments, that they gloss over the employee benefits and risk management altogether. It’s a problem in our industry and it’s starting to be spoken about more often. But that’s a conversation for another day. All I’m saying is that someone should do the work—it is work worth doing--- and doing well.

No Plan is Complete without an Employee Benefit Assessment

I think it’s great that most of us focus so intensely on our investments, the economy, the stock market, etc. These are fun and exciting topics. If they weren’t I never would’ve got into this business in the first place. But as a tribe elder, I think most of us would admit that we need to pony up and focus on a more well-rounded plan of attack that includes an evaluation of a person’s employee benefits.

If you are working with a financial professional, let them know that you think a review of your benefits is important. Use your voice and tell them what you want and most likely they will do exactly that. If you have the wherewithal to do all this planning on your own, then hats off to you. Just make sure that you don’t skip a few of the steps that we have mentioned in this article. They can make a world of difference in your life, and perhaps in the lives of the people that you love the most.