Imagine this: You show up to work one day to find an unexpected $100 check made out to you from your employer on your desk. You glance at it and then toss it in the trash.
Crazy talk, you think? Think again. Chances are, you’re essentially doing this every day you walk into the office. You just don’t realize it.
That’s because the “free” money your employer gives you comes in the form of extra perks and employee benefits that are available to workers who want them, but too few take advantage of — mostly because they think it’s all too complicated, not worth their time or they just don’t know how to take advantage of those programs. But add them up and these benefits can raise your salary well beyond the dollar amount you see every paycheck.
Here’s a look at 10 popular employee benefit programs employers offer that amount to free cash. If your employer offers any of these benefits, make sure you’re getting the most out of them. Otherwise, you’re just throwing money into the garbage.
Ok. This is not an employee benefit. But there’s a reason we’re starting with the one program on our list that employers don’t technically offer. This is because your W-4 form, which determines how much money is withheld from your paycheck for taxes, is one of the easiest and most sensible ways to increase your paycheck — without cheating yourself or Uncle Sam. Too often workers unnecessarily limit the amount of allowances they can take (the section where you enter “1” for various scenarios that might apply to you, such as your marital status). This can result in a big tax refund every year, but it also reduces your monthly income. Here’s another way to look at it: if more taxes are being withheld from your paycheck than necessary because you haven’t taken enough allowances, you’re essentially giving the taxman an interest-free loan.
Some employers offer commuter benefit programs to cut the cost of getting to and from work, whether by car, bike or public transit. Employers will either pay you a tax-free subsidy directly each month or deduct the benefit from your paycheck before calculating the amount that needs to be withheld for taxes (some employers offer a combination of these two types). So, let’s say you spend $600 a year on parking near your office. If your income tax rate is 25 percent, you’ll save about $150 a year if your employer offers a commuter benefit program that gives you pre-tax payroll deductions.
Taxes and retirement contributions get deducted from your paycheck, and so do premiums for all kinds of insurance programs you may have signed up for — including medical, dental, vision, long-term disability and life insurance. But you may not need all of this added protection, especially if you’re healthy. For example, you probably don’t need a health plan with a low deductible and higher monthly premium if you don’t go to the doctor often. You’ll want a plan that has a high deductible and lower monthly fees instead. Take the time to review all of the insurance plans you’re paying for and adjust or eliminate the ones you don’t need. And if you’re married, be sure to compare his or her employer’s plans to your own. You might find that it’s cheaper to sign up for your spouse’s insurance plan instead of the ones from your employer.
You’ve probably read about Flexible Savings Accounts, and maybe you’ve heard about Health Savings Accounts or Health Reimbursement Accounts, too. With so many acronyms — FSA, HSA and HRA — and rules to keep track of, they might seem like more trouble than they’re worth. Trust us: they’re not. If your employer offers any of these programs, consider taking advantage of one of them. They all involve setting aside money each year that is either tax-free or tax-deductible to cover medical expenses that your health insurance won’t, including copays and deductibles. These savings tools differ in some key ways, including whether you or your employer funds, owns and controls the account and how the money is spent (you can use FSA dollars, for instance, to pay for childcare). But their tax benefits mean more money for you.
If your employer offers a 401(k) retirement savings plan and you haven’t signed up, enroll as you soon as you can. Here’s why: the money you decide to contribute to a 401(k) is taken directly out of your paycheck before you pay any taxes on your income. This lowers the amount of income taxes you’ll owe (although it will reduce your take-home pay). So you’re essentially trading a short-term gain for long-term security. What’s more, many employers will match a portion of an employee’s contribution to his or her 401(k). If your employer matches your contributions, be aware that this is free money to you. Let’s repeat: through 401(k) matching, your employer is handing you a bag of cash to fund your future that’s completely separate from your salary. Don’t pass it up.
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