Understanding benefits

Benefits are perks that you earn in addition to a salary.

Most full time positions offer these to their employees.

There is usually a lot of paperwork involved so it can be overwhelming especially when you don’t know what kinds of questions to ask. Benefits can be complex and change depending on the company and employee, but I’ve simplified them to make them easy to understand.

Be sure to read over your offerings carefully and ask HR as many questions as you have.

Retirement

Photo by Craig McLachlan on Unsplash

Photo by Craig McLachlan on Unsplash

  • You typically will see 2 types of standard plans: Traditional 401k and Roth 401(k) This is money you will be automatically be taken from your paycheck and collected so you have something to live off of when you retire in 50 years. This is SO important.

  • Many companies will offer an employer match, which means they will put in as much as you put in up to a certain amount.

  • That is free money. A typical amount is 4-5% of your salary.

  • Use this calculator to see how money you should be putting into your retirement.

  • Traditional 401k is tax-deferred, which means you don’t pay taxes until you withdraw the money in 50 years.

  • Roth IRA is funded by post-tax dollars, so the tax is already paid so you don’t have to worry about it when you withdraw.

Health insurance

Photo by Piron Guillaume on Unsplash

Photo by Piron Guillaume on Unsplash

Everyone should have health insurance because you never know when you will need it. A broken arm could rack up hundreds of dollars, and don’t even get me started at how expensive ambulances are.

Key terms to know:

    • Premium: A monthly bill you pay to the insurance company. That is not how much you pay for actual services, that is just the cost of having access to the insurance plan. If you have a lower premium, you most likely will have to pay more out of pocket for appointments.

    • Deductible: How much you have to pay out of pocket before your insurance will help out. So if your deductible is $100 and your appointment costs $150, you are going to pay $100 and insurance will only cover the remaining $50. Plans with lower premiums usually have higher deductibles.

    • Co-pay: A fixed amount you would pay for specific medications and procedures. For example, your plan might say that your co-pay for the flu shot is $10. So you only have to pay that in order to get your shot.

    • Co-insurance: Part of the medical cost that you split with the insurer after you’ve paid your deductible. This is usually dictated by a percentage of the medical procedure cost, rather than a fixed rate. For example, Your coinsurance is 15% and deductible is $500. You get a knee surgery that costs $10,000. You would pay the $500 first. And then split the remaining $9,500 with your insurer. So you would pay $1925 total.

    • Out of pocket maximum: The most amount of money would would be expected to pay for medical expenses. This includes the cost for deductibles, copays, and co-insurance. It’s basically to make sure there’s a limit on expectations of you to pay so you’re not stuck with endless amounts of bills.

Flexible spending accounts

Photo by  Stephy Miehle  on  Unsplash
  • You could be offered flex accounts for transit and health care. That means once a year you pick how much money you want taken from your salary and set aside.

    • The pro of doing this is that the money is pre-tax, so in the end you’ll pay less money.

  • You’ll have to anticipate what your costs are going to be for the year.

    • For the health spending, I calculated how much money I would spend during the year to buy 6 boxes of contacts, and new glasses. I would be spending the money anyways to buy those, so I might as well use pre-taxed dollars, that are collected for me.

  • You receive a debit card-like card to make purchases with that money, or you can submit online reimbursements.

  • Always keep your receipts, no matter what form you use to pay.

  • It might sound like you don’t want money taken from your paycheck, but this is a smart decision to make.

    • You’re actually saving money this way, and you’ll hardly notice if your company sets aside $15 a month, verses making a $180 purchase in one fell swoop.

  • Anticipate the transit price hike and add a few more bucks to your allocation.

  • After the year, all the money disappears so you’ll lose what you don’t use. So be sure to calculate beforehand what you think you’ll spend, and at the end of the year, you can always buy additional metro-cards to use later or an extra medication.

  • Be sure to check on your company’s approved procedure list of what you can spend the health money on. For example, you might be able to book a psychiatrist appointment but not an acupuncture. It changes depending on the plan and company.

This guide breaks down specific parts of benefits very well including paycheck, vacation days, personal days, summer fridays, and non-competes.