Open enrollment 2020: Make the most of next year's benefits right now
It’s open enrollment season—that time of year when you check in with your employer-sponsored benefits to adjust and update coverage.
Maybe you’re updating coverage because of an exciting life change, or maybe you’re starting a new job. Whatever your situation, recent IRS changes have altered the landscape for some popular benefits. And those changes could be in your favor.
Your 401(k), 403(b), or other employer-sponsored retirement plans
The IRS has increased the contribution limits for self-directed retirement plans—like 401(k) and 503(b) plans—for the last several years. Look at your current contribution levels. Since the IRS has bumped contribution limits by $1,500 since 2014, if you haven’t made adjustments in recent years, you may not be getting the most out of your plan. If the IRS makes another increase—they’ve typically made those announcements in October or November—take that into account, too.
One of the biggest IRS changes of the last decade was the tax law that went into effect in 2018. As part of the change, the IRS adjusted how it calculates tax withdrawals. This left many Americans with a little more money in each paycheck. If you’re one of them, consider contributing more toward your employer-sponsored retirement plan. That extra money will go in before taxes, so it might even help reduce your tax bill.
Getting allergy shots next year? Due for an eye exam? Doc advise a knee surgery in the near future? Good news for holders of a high-deductible health plan (HDHP) with a health savings account (HSA). If your contributions will help cover medical expenses in the coming year, you’ve now got extra room to maneuver with increased HSA annual contribution limits in 2020.
For self-coverage, you’ll now be able to put away $3,550 a year.
For family coverage, the new limit is $7,100.
And if you’re already maxing out your retirement contributions, you might consider putting that tax-cut money toward your HSA.
Need a refresher on health insurance to get ready for open enrollment? Check out our webinar (password: Principal) to understand your health insurance options and the costs related to healthcare.
While you’re at it, check in on your disability insurance and life insurance.
As you’re signed in to your company’s benefits page, take a look at your disability coverage and life insurance. If you’ve had big life changes—marriage, kids, job change—you may need to increase your coverage for both disability and life insurance to help protect those you love. Also, check the beneficiaries on your life insurance policy to make sure they’re still up to date.
What to do next?
- Have a retirement account from your employer with services through Principal®? Log in to principal.com to see if your contribution rate can be boosted in 2020. First time logging in? Get started.
- Stay in the loop by checking the IRS website to see if they announce increases to the annual contribution limits on retirement plans. If they do, you can adjust your contributions accordingly.
- Not sure how much protection you might need? We’ve got life insurance and disability income calculators to help you out.
The subject matter in this communication is educational only and provided with the understanding that Principal® is not rendering legal, accounting, investment advice or tax advice. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, investment or accounting obligations and requirements.
Increasing your 401(k) contribution does not guarantee you put yourself in a better spot
Disability insurance has limitations and exclusions. For costs and coverage details, contact your Principal Life representative.
Insurance products issued by Principal National Life Insurance Co (except in NY) and Principal Life Insurance Co. Plan administrative services offered by Principal Life. Principal Funds, Inc. is distributed by Principal Funds Distributor, Inc. Securities offered through Principal Securities, Inc., 800-247-1737, member SIPC and/or independent broker/-dealers. Referenced companies are members of the Principal Financial Group®, Des Moines, IA 50392.