Why Most Employees Make Up to 30% Less Than They Should -- Is It Happening to You?

if you were offered a raise at work simply for being there and requiring no additional tasks, would you accept it?  of course you would.  with no downside risk, most people would jump at the chance for additional compensation, but the reality is the raise was there all along.  you just didn’t realize it.  many people forfeit a generous raise by not fully taking advantage of the benefits packages provided by their employer. employers provide an additional 30% or more in benefits above and beyond salaries listed on a w-2. many people even choose between prospective employers specifically for better benefits packages but after their new hire paperwork is filled out and the core benefits are chosen, maximizing that extra 30% in compensation falls by the wayside.  performing in the new job is top of mind.

health savings account or taking advantage of a company legal benefit could result in unnecessarily high out-of-pocket expenses for yourself and your family. there are also many free perks that could add value or enjoyment in life that are often simply overlooked.

there are reasons for this.  hr departments can’t give personalized advice to employees on benefits, but they can provide education, communication, and tools for employees to use, but that is the extent of it. the financial planning field doesn’t always incorporate employee benefits such as health insurance into financial plans, or does so at a minimal level.  their expertise lies in the insurance and retirement products they sell or provide to their clients, not in the ones provided in the workplace. americans who work with financial planners that do not take a comprehensive look at their total financial life aren’t truly getting the whole picture and a full value of working with an advisor.  for better or worse, most americans are in a situation where they have to rely on themselves when it comes to benefits decisions.  this can be tough with our hectic lives, but the good news is that you know you have your own best interests at heart, which isn’t always the case with outside financial experts who may care more about their own commission.  plus, getting more out of your benefits is probably easier than you think.  we’ve created a three-step process for employees to maximize their benefits and recapture some of the “lost raise” they were missing.  below are the steps we share with the employees we counsel that you can use on your own with your spouse or loved ones:

step 1:  maximize your core benefits– this is where you stand the most risk of leaving money on the table and, ultimately, jeopardizing your health or retirement in the process.  core benefits are a major drive to long-term financial success, and if mishandled, can lose virtually all their value.

the biggest mistakes we, as educators, see employees making are to miss out on the complete company matching contributions and to not withhold enough of their paycheck.  in a company with 5,000 employees and an average salary of $50,000, the wealth generated just from employee matching contributions would be about $7.5 million dollars a year.  employees often stop there however and only save to the matching percentage.  a common company match is 50% of the first 6% of contributions.  if employees only save 6%, they may not be saving enough to be on track to retire since the rule of thumb is to save 10% of income from the beginning of their career.  maximize this benefit by taking full advantage of every dollar of matching contributions from your employer and increase your savings contribution percentage to the maximum allowable contribution over time.  better yet, if your company offers auto-escalation through your retirement plan, sign up for it.  auto-escalation automatically increases your savings rate over time, in small increments that you set—at say 1% or 2% per year.  this can make a difference of hundreds of thousands of dollars over the course of your working career—simply by filling out a form!   quite a payoff for 5 minutes of your time.

in terms of health care plans, one of the biggest mistakes we see is employees renewing their coverage year after year without doing a full analysis of the plans.  employees may have compared plans when they first started at the firm, but the plans themselves have probably changed as well as the employees need.  consider the high-deductible health care plans and compare them to the full service plans, using your past medical history as a starting point to see what plan is the best value for you.  your hr department may have an online calculator or other tools to show the true cost of the plan side by side.

step 2:  take advantage of your free benefits– here’s where employees are overwhelmingly missing the boat and spending thousands, in some cases tens of thousands, of dollars a year out of their own pocket on services their companies will actually pay for.  in our experience, the most expensive and common company-subsidized benefits that employees miss out on are tuition, legal and financial services, counseling, day care, adoption services, and moving expenses.  to avoid this obtain a list of benefits from your hr department or review your benefits portal on your company intranet.  sit down with your spouse or significant other and review the benefits you have available.  many people don’t even realize the benefits they have!  then earmark the most valuable benefits and put them to use.

step 3:  determine which voluntary benefits are right for you–these are benefits that you have to pay for but might (and i stress the “might”) get a discounted rate from your employer.  some may be very important to your overall financial plan and ultimate financial security.  others may, quite frankly, be a complete waste of money.

while health insurance is usually a given that there will be a cost savings, some other benefits such as life insurance or disability may be better purchased separately.

consider the cost savings first, but also ask yourself these questions:

is it portable? do you own the policy or is it tied to the workplace?  if the policy is tied to the workplace and you plan on leaving soon, it might be better to purchase coverage outside of work.

is it accessible outside of work?  in other words, can you obtain the benefit outside of the workplace?  people with health problems may not be able to qualify for life insurance or disability in an individual plan, so getting the benefit through work may be the only answer.

is it convenient or easy to use? voluntary benefits through work are often more convenient than those purchased outside of work since they can often be paid for through payroll deduction—so if convenience is important, this may make a work policy more attractive.

lastly, is it a quality benefit? quality sometimes matters much more than cost—so it’s critical to make sure the work benefit is the quality you need before purchasing the benefit through work.  for example, discounted legal services provided through a work pre-paid legal plan may give basic estate planning documents, but if you need complex trusts drawn up, the benefit at work may not be of the quality needed to fill your need.

next time you look at your paycheck or log on to your company’s benefits portal, try reading between the lines and take a deeper look at what benefits you’re utilizing. there is most likely money hidden between them that you can find without having to hassle the boss for a raise.

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From:  www.forbes.com

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