With a change of season imminent, a refreshing breeze (hopefully) ahead, you don’t need to look far to begin autumn on strong financial footing.
As colorful as the season is, the following moves will add more color (green) to your life.
Consider these four during fall:
Explore Your Company Healthcare Benefits
Annual benefits enrollment season is right around the corner. It’s an opportunity to fine-tune, add, or re-engage with benefits you employer has to offer.
According to the Kaiser Foundation annual employer health benefits survey for 2015, annual premiums for employer-sponsored family health coverage is up 4%, which is twice the rate of reported inflation. Workers on average pay $4,955 towards the cost of their coverage.
Unfortunately, the future costs of health coverage including that of employer-provided coverage will continue to increase as a result of health insurer losses due to the Affordable Care Act. A growing number of companies are adding high-deductible plans and adding health savings account options that need to be considered this enrollment season.
A Health Savings Accounts is a powerful savings vehicle that allows triple tax benefits. Contributions are tax deductible, and if an employee they’re funded pre-tax from payroll contributions. Growth or income is tax-free (yes, you should have mutual fund investment selections like in a company retirement plan,) and last but not least – distributions for qualified medical expenses are tax free. HSA contribution limits (employer and employee total), for 2017 is $3,400 for a single filer, $6,750 for a family.
If you only see a doctor once or twice a year, it may be beneficial to switch to your employer’s high-deductible plan option with employer match (hopefully available) and save as much as possible in a Health Savings Account.
If you don’t have a high-deductible with HSA option yet, it’s coming. Over time, your employer is going to shift the burden of healthcare premium costs to you, the employee.
Think of a HSA as healthcare retirement plan. It’s not a ‘use or lose it’ account, either like a Flexible Spending Account. In other words, in a HSA, you can stockpile money, allocate across investments, usually mutual funds, that fit your personal risk attitude, allow the money to grow tax-deferred, then withdraw at retirement to subsidize rising healthcare costs or even pay Medicare premiums.
For a couple retiring in 2016, lifetime healthcare costs are estimated to be $260,000 based on Fidelity’s latest report. A third of the expenditures will be Medicare Part B premiums. In my opinion, healthcare costs are difficult to assess but one thing is certain – the healthcare cost burden is rising.
A recent study published in the Journal of The American Heart Association outlines that making time for exercise pays off. Literally. Researchers discovered how walking 30 minutes five days a week can save people $2,500 a year. A monetary outcome of reduced medical costs.
There are documented benefits of fully funding a HSA as a priority. Even over a company retirement account as HSA benefits may be pre-tax, grow tax-deferred, and withdrawn tax free. A strong combination that does not exist in other savings and investment vehicles.
Fall Is Prep Season For Savvy Holiday Spending
The full-blown holiday season will be here before you consider carving a pumpkin.
A smart first step is to reacquaint yourself with holiday gift expenditures from last year. How would you rate your spending? Was it in line with a formal budget? Did you overspend? Regardless, cut your current holiday spending allowance by 10% for 2016.
Next, make a list of gift recipients by name. Use a smartphone, or daily planner to maintain the list. Be as specific as possible to dollars you’re seeking to spend on each recipient. Make sure to take the list or keep it near when shopping to stay on track.
Use technology to your advantage and begin a proactive deal-seeking strategy before the first cold front hits. One of my favorite free smartphone/tablet applications is Brad’s Black Friday where a user can create and save a shopping plan, receive instant notifications when a new Black Friday ad arrives, and purchase deals direct from a phone.
Black Friday ads are rumored to leak as early as November 9 so preparing now is a formidable money-saving action for fall.
Rake Up Dead Financial Leaves
With three quarters of the year gone, spend an hour to determine where your money went. Now is the time to identify the weaknesses in your discretionary, i.e. fun stuff spending and devise a plan to improve and closely monitor progress in 2017.
Consider a free, secure online financial tracking system like www.mint.com. Mint automatically tracks spending by category, allows you to see all your financial information holistically in one place and formulates a personalized budget based on spending patterns. You can determine spending habits year-to-year or month-to-month and easily identify financial weaknesses.
It’s Fall Tune-up Portfolio Season
When it comes to fall, think of it as a harvest opportunity for your investments. Work with a financial professional to review your portfolio and identify actions (if any) you need to take.
Your company retirement plan allocation – the investment mix among stocks, bonds and cash, most likely, warrants attention. Do you know what your target allocation is supposed to be? Do you know how the portfolio has changed from the beginning of the year?
It’s fine if you’ve lost track, however, before the upcoming holiday rush, spend time with a financial professional, preferably on an hourly fee basis, to determine if investments need to be rebalanced or sold to manage risk. It’s a great time to sell losers to offset realized portfolio gains, if you have them.
In addition, plan to increase retirement plan contributions, those from payroll deductions, by 1% at the beginning of 2017. I know. It doesn’t sound like much. However, consider this small action a confidence builder that eventually leads to a big financial boost. After all, there’s minimal impact to household cash flow with a 1% move. Once people understand how effortless it is, they begin to ‘stretch their saving muscle’ and challenge themselves to continue to increase percentages.
If you’re bold, take on a 1% increase in the spring.
Fall is not only about cool breezes, a change in the air, and a bounty of colors. It’s also about a new, clean perspective to your household finances.
A fresh opportunity to bolster retirement and healthcare savings and eventually reap the harvest of a fruitful retirement.
Richard Rosso, MS, CFP, CIMA is the Head of Financial Planning for RIA Advisors. He is also a contributing editor to the “Real Investment Advice” website and published author of “Random Thoughts Of A Money Muse.” Follow Richard on Twitter.