Late fall marks the beginning of the holiday season, which probably means that you'll have a lot going on over the next couple of months.
However, busy as you are, you'll want to take the time to review your employee benefits package, since November also is a popular month for employers to offer open enrollment. And the decisions you make now could have a big impact on your financial outlook for years to come.
So, if you are in an open enrollment period, here are some steps you may want to take:
Boost your 401(k) contributions. It's almost always a good idea to put in as much as you can, up to the contribution limit, in your 401(k) or similar retirement plan. After all, you typically contribute pre-tax dollars, so the more you put in, the lower your taxable income. Also, your money can grow on a tax-deferred basis, which means it has the potential to grow faster than an investment for which you paid taxes every year. At the very least, contribute enough to earn your employer's match, if one is offered. For example, if you work for an organization that will match 50 percent of everything you put in up to, say, 6 percent of your salary, then you should contribute 6 percent of your salary — which is like getting a 3 percent raise.
Rebalance your 401(k) portfolio. You may have a dozen or more investment options in your 401(k). Ideally, you'll want to spread your money among these options in a way that's appropriate for your risk tolerance, time horizon and long-term goals. But over time, your 401(k) portfolio can become "unbalanced," even if you made no changes. For example, if you've invested in a couple of aggressive-growth accounts, and these accounts have gained significantly in value, they may now be taking up a greater percentage of your portfolio than you had originally intended, exposing you to more risk than you'd like. Consequently, if your plan doesn't offer an automatic rebalance option, you may need to rebalance your portfolio by moving some of your assets into less aggressive vehicles.
Be cautious about adding company stock. You may be loyal to your employer, but try not to hold too much company stock in your 401(k). After all, your company, like all businesses, may go through ups and downs, and if your portfolio is dominated by this single stock, you may experience considerable volatility. And if your company matches your 401(k) contributions with its own stock, you may want to invest all your own money in vehicles other than company stock.
Take all the insurance that's offered. Typically, when employers offer life insurance as a benefit, it's at little or no cost to you, so you'll probably want to take all that's offered. However, this amount may still be less than what you really need to fully protect your family, so you may well need to purchase an individual policy to supplement your employer's coverage. And always be aware if your employer reduces or eliminates the insurance that's offered as an employee benefit, because you'll then need to adjust the policy that you've bought outside work.
You can review and improve your financial picture during open enrollment — so take advantage of this opportunity.
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Edward Jones Financial Adviser Michael Quinn submitted this column. Quinn's Edward Jones office is at 25 Railroad Square, Suite 201, Haverhill. He can be reached at 978-372-8453. Join the discussion. To comment on stories and see what others are saying, log on to hgazette.com.