5 Ways to Maximize Employer Benefits Before Year-End

As the year comes to a close, many employees overlook opportunities to make the most of their employer-sponsored benefits. These benefits often include perks like retirement account contributions, flexible spending accounts (FSAs), and health savings accounts (HSAs) that can help bolster your financial security. With many of these benefits operating on a “use-it-or-lose-it” basis, it’s crucial to act before December 31 to avoid leaving money on the table.

This article explores five often-overlooked strategies to maximize your employer benefits before year-end, with a focus on financial wellness, retirement planning, and tax savings.

1. Max Out Retirement Account Contributions

Retirement accounts, like a 401(k), 403(b), or other employer-sponsored plans, are one of the most valuable benefits employers offer. These plans allow you to save for your future while taking advantage of tax savings and, in many cases, employer matching contributions.

Key Steps to Maximize Contributions

• Contribute Up to the IRS Limit: For 2024, employees can contribute up to $23,000 to their 401(k) accounts. If you’re 50 or older, you’re eligible for an additional $7,500 in catch-up contributions.
• Take Full Advantage of Employer Match: Many employers match contributions up to a certain percentage of your salary, effectively doubling your savings. Ensure you contribute enough to receive the full match, as failing to do so is like leaving free money behind.
• Check Your Year-to-Date Contributions: Review your pay stubs or online account to determine how much more you can contribute before the year ends.

IRA Contributions

If you’re already maxing out your employer-sponsored plan or don’t have access to one, consider contributing to an Individual Retirement Account (IRA). The contribution limits for 2024 are $6,500 ($7,500 if you’re 50 or older). Even though IRA contributions can be made until April 15 of the following year, contributing now can help maximize compounding growth sooner.

2. Use Unspent Flexible Spending Account (FSA) Funds

Flexible Spending Accounts (FSAs) are an excellent way to pay for qualified healthcare or dependent care expenses with pre-tax dollars. However, they often come with a strict “use-it-or-lose-it” policy, meaning unspent funds at year-end may be forfeited.

How to Make the Most of Your FSA

• Check Your Remaining Balance: Log into your benefits portal or contact HR to find out how much FSA money you have left.
• Spend on Eligible Expenses: Use remaining funds for eligible expenses like prescription medications, medical devices, or even over-the-counter items such as bandages and thermometers.
• Schedule Last-Minute Appointments: Book appointments for vision exams, dental cleanings, or specialist visits before December 31.

Understand Grace Periods or Carryovers: Some employers allow a grace period of up to 2.5 months into the new year or a carryover of up to $610. Verify your company’s policy to avoid losing funds.

3. Leverage Health Savings Accounts (HSAs)

Health Savings Accounts (HSAs) offer one of the best opportunities for tax-advantaged savings. If you’re enrolled in a high-deductible health plan (HDHP), HSAs allow you to contribute pre-tax dollars, invest those funds, and withdraw them tax-free for qualified medical expenses.

Key HSA Benefits to Explore

• Contribute the Maximum: For 2024, HSA contribution limits are $4,150 for individuals and $8,300 for families. If you’re 55 or older, you can add an extra $1,000.
• Invest HSA Funds: Unlike FSAs, HSA balances roll over annually and can be invested for long-term growth, making them a powerful tool for retirement healthcare costs.
• Plan for Future Needs: Use your HSA as a supplemental retirement savings account by letting funds grow tax-free for future medical expenses, including Medicare premiums and long-term care.

4. Review and Use Paid Time Off (PTO)

Many employees underestimate the value of Paid Time Off (PTO). Whether you’re planning a vacation, need a mental health day, or simply want to relax, PTO is a benefit you should maximize before year-end.

Making the Most of Your PTO

• Understand Your Company’s Policy: Some employers have a “use-it-or-lose-it” policy, while others allow PTO to roll over into the next year or offer a cash-out option.
• Plan and Schedule Time Off: If you’re at risk of losing unused PTO, schedule some time off in December to recharge.
• Consider Cash-Out Options: If offered, take advantage of cashing out unused PTO to supplement your year-end finances.

Using your PTO not only ensures you’re taking full advantage of your benefits but also supports your mental and physical well-being.

5. Update Beneficiary Designations and Review Other Benefits

Life events such as marriage, divorce, the birth of a child, or even the death of a loved one may require updates to your beneficiary designations for employer-sponsored retirement accounts or life insurance policies.

Steps to Ensure Your Beneficiaries Are Up to Date

• Review Your Current Beneficiary List: Check your employer portal or contact HR to ensure designations reflect your current intentions.
• Align with Estate Planning: Coordinate beneficiary designations with your estate plan to avoid conflicts or unintended distributions.

Additional Year-End Benefit Considerations

• Check for Year-End Bonuses: If your employer offers year-end bonuses, confirm the details and how they will be paid. Use these funds to contribute to retirement accounts or pay down debt.
• Professional Development Funds: Some employers provide a budget for education or certifications that expire at year-end. Utilize these funds for professional growth.
• Charitable Matching Programs: If your company matches charitable donations, make contributions before December 31 to maximize this benefit and support causes you care about.

The Bottom Line

Maximizing employer benefits before the year ends is a powerful way to improve your financial health and prepare for the future. By taking full advantage of retirement contributions, FSAs, HSAs, PTO, and other often-overlooked benefits, you can ensure you’re making the most of what your employer offers.

Act now to lock in these opportunities before the clock strikes midnight on December 31, and set yourself up for financial success in the new year.

Sources: irs.gov, dol.gov, healthcare.gov, fidelity.com, shrm.org, investopedia.com, americanfidelity.com, hsabank.com, cnbc.com, nerdwallet.com

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🧑‍💼Authored by Brent Meyer, founder and president of SafeMoney.com, with over 20 years of experience in retirement planning and annuities.