Mellody is President of Ariel Investments, a Chicago-based money management firm that serves individual investors and retirement plans through its no-load mutual funds and separate accounts. Additionally, she is a regular financial contributor and analyst for CBS News.
TOM: You are joining us today with another round of seasonal tips.
MELLODY: That’s right! We all need some gentle pushes or reminders once in awhile to keep us on track, and that’s what I want to do today. Fall is always a busy time – the holiday season is just around the corner, our kids are getting back into school activities – so it can be difficult to remember that it is also an important time for everyone to think about their household finances as well.
TOM: What is going on in the fall that impacts our money?
MELLODY: Some of the biggest items on the docket during fall are healthcare and other benefits. In terms of these benefits, fall is the open enrollment season, the period when employers offer employees a chance to make changes to their health insurance plan and other benefits for the New Year, but you have to take action during within the enrollment period! In many cases, making some smart choices can save you some green!
So what should you do? First, make sure you are aware of the enrollment period for your company. Depending upon where you work, the time frame can vary. Second, consider changes to your healthcare needs. If you are never at the doctor, and only go if an ambulance has to take you, look at the lower premium plans. If you or your dependents have had a change in their health status that requires more visits, or you check in with your doctor regularly at the first sign of a cold, you may want a higher premium but lower deductible plan. Overall, just make sure you look at your needs and your coverage, and consider changing if it is necessary.
TOM: Are there other healthcare items we should think about?
MELLODY: if you use a flexible spending account, which allows you to save money before taxes to spend on healthcare, there have been some changes on that front. While you used to have to spend that money by the end of the year or lose it, some employers will now let you roll over amounts up to $500. FSA’s are a good way to save money if you have higher healthcare costs, particularly for children or prescriptions. And if you already have one, and you cannot roll it over, it is probably time to get those glasses or check in at the dentist before that money disappears!
Finally, if you have high deductible plan, consider a health savings account (HSA). Like flexible spending accounts, contributions are also made pre-tax, but with HAS’s, what you don’t use in a given year will carry over to the next plan year. You can even take your HSA with you when you change jobs. You can enroll in an HSA even if your employer doesn’t offer one. The only caveat is that you must be enrolled in a high-deductible health plan.
TOM: Is the enrollment period the same for the Affordable Care Act?
MELLODY: if you are going through healthcare.gov, you enroll in a qualified health plan in the marketplace. For coverage starting in 2015, the open enrollment period is November 15, 2014–February 15, 2015, unless you qualify for special enrollment periods outside of open enrollment, if they experience certain events.
TOM:You also mentioned other insurance. What should we think about on that front?
MELLODY: This is a big one that so many people forget to think about. Along with health insurance, open enrollment is also the time that you are allowed to adjust your life insurance coverage and your disability insurance coverage – both short-term and long-term. You want to check your life insurance coverage to make sure it coverage all of your financial obligations in the event of an accident – things like credit card debt or any loans – and your house if you are married. And, as we have talked about on Money Mondays before, disability insurance is really very necessary, as 1 in 4 Americans will have an accident or emergency that will prevent them for working for a period of time at some point during their career. So the annual open enrollment period is important for your financial future in terms of this insurance coverage as well.
TOM: OK, we have covered open enrollment. What else should we be thinking about this fall?
MELLODY: Fall is a great time to develop a budget for the upcoming year, tom. Sitting down and drafting a budget with your financial goals for 2015 is a great way to get ahead of the game. Start by tracking your expenses so far in 2014. Go through your bank statements, your pay stubs, your bills, everything. Once you have all of your expenses in front of you – even the smallest ones – you can start thinking about how you can reallocate your money for next year’s financial goals.
Fall is also a good time to reach out to your financial advisor, or consider getting one. Since we are 3 quarters of the way through the year, you will have a good idea of where you stand in terms of your retirement savings and your investments for the year, and having a conversation with a financial expert, or just reviewing the progress you have made on your 401(k) can help you make the necessary adjustments to do better in 2015!
