For high earners, your employee benefits package is not just a list of perks—it’s a critical component of your overall financial strategy. Employee benefits like life insurance, disability coverage, and retirement plans can help protect your income and build wealth. During open enrollment, prioritize aligning your benefit elections with your short- and long-term financial goals, considering your family needs, wealth preservation, and future planning.
Life Insurance
Employer-provided life insurance is often insufficient for high earners who want to protect their families. Standard policies typically offer coverage that equals one or two times your annual salary, but these policies often have caps limiting the amount of coverage. If you have dependents, consider supplementing with a term life insurance policy that fits your financial situation. In many cases, individual term life policies offer more comprehensive coverage at a lower cost than employer-sponsored group insurance, and you can customize the amount and duration of coverage to fit your financial situation.
Disability Insurance
Your ability to earn an income is perhaps your greatest asset. Be sure to carefully evaluate your long-term disability (LTD) insurance options. Often, these plans only pay out if you’re unable to perform any job, which may not be sufficient if you’re a specialized professional. If your employer’s LTD plan only covers you if you are unable to perform any job, not just your own, consider an individual policy that offers “own occupation” coverage. This ensures you’re protected even if you can still perform some types of work.
Don’t overlook the importance of disability insurance—protect your income and lifestyle with a policy that works for your unique situation.
Retirement Contributions
For high earners, maximizing retirement contributions is key to tax-efficient wealth building. Take full advantage of employer-sponsored plans like 401(k)s or 403(b)s by contributing up to the maximum allowed. If your employer offers matching contributions, make sure to contribute enough to capture the full match—this is essentially free money.
Health Savings Accounts
High-income individuals often overlook the tax benefits of Health Savings Accounts (HSA). HSAs allow for tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. Over time, this account can double as a powerful retirement savings vehicle, as unused funds roll over year after year. Read more about Health Savings Accounts (HSAs) The Best Tool in Your Retirement Portfolio.
Beyond the Basics
Some employers offer critical illness coverage, legal assistance, and even pet insurance. For high earners, these add-ons may seem minor, but these employee benefits can offer real value depending on your life stage and needs. Don’t forget to look for financial planning assistance, wellness programs, and even tuition reimbursement. With tuition costs rising, tuition reimbursement benefits can be a smart way to offset costs if you or your dependents are considering higher education.
Final Thoughts
Your benefits package is part of your overall compensation, and choosing wisely during open enrollment is essential for protecting your wealth and planning for the future. By reviewing your options carefully and aligning them with your financial goals, you can make informed decisions that will pay off in the long term.