Written by: Raquel Guss
When you’re considering a new job and staring at an offer letter, your eyes typically fall on the big number: your salary. If you gloss over the rest of the letter, you might miss all of the great extras that come with that salary: your benefits, your work perks, and potentially a 401(k)-company match.
While it’s easy to fixate on your regular paycheck, there’s more money on the table that you could be missing if you aren’t taking advantage of your employee benefits. When I did a deep dive into my medical, lifestyle, and financial benefits, I was able to squeeze an extra $10,000 with a little help from my employer. You read that right. Five. More. Figures.
With a record number of employees leaving their job over the last two years, employers have gotten more creative with their benefits, including:
Whether you’re starting a new job, or you just want to maximize your current benefits package, it’s important to take advantage of your employee perks. Otherwise, you’re literally leaving money on the table — to the tune of as much as $12,000 a year, depending on your salary (and state).
Here’s how you can get more bang for your buck with your financial, medical, and lifestyle employer benefits.
Employer Financial Benefits
When we look at financial employer benefits, we’re usually talking about retirement plans like 401(k)s. Eighty-two percent of employers agree that retirement is integral to a benefits package, so this is another common work perk.
In 2022, you’re allowed to save $20,500 of your pre-tax income in a 401(k) — and if your employer offers a match, it’s basically free money.
And did we mention that 401(k)s can help reduce your taxable income, too?
It’s tough to start thinking about how to save for retirement, especially when you need the money right now, but if you can use your employer’s 401(k) program with a match, the math works out in your favor (we’re based in Hawaii, so this math includes local taxes):
Yearly Earnings: $52,000
401(k) Contribution: $0
In your pocket (Take Home): $40,011.50
Total Net Income: $40,011.50
Yearly Earnings: $52,000
401(k) 10% Contribution: $5,200
In your pocket (Take Home): $35,846.30
Total Net Income: $41,046.30
Total saved from taxes: $1,035
See that? If you contribute to a 401(k), you’re actually saving money because of the tax benefits. And yes, your take home is a bit lower, but you’re saving money for the future! So, if your job offers a 401(k), consider enrolling, especially if they offer a match.
And if your company matched you 4%, you’d be looking at an additional $2,080 of “reward” money.
Here’s what I did:
- 401(k): I contributed 10% of my income, helping me save $5,200 before taxes. In addition, you can see there is a $1,035 difference in taxes saved just because I contributed (baddah bing baddah boom!). Employer Match (4%): $2,080
Employer Medical Benefits
Fifty-eight percent of employers offer health insurance, which makes it the most common employee benefit in the U.S. In Hawaii, this number is much higher due to the Hawaii Prepaid Healthcare Act, which requires private sector employers to offer health care coverage to eligible employees. Since most healthcare plans cover preventive visits, you absolutely should take advantage of these benefits if you have them:
- Dental cleanings
- Cancer screenings
But did you know there’s another type of benefit you can use? Special savings accounts can help you save money for healthcare expenses while reducing your tax liability (hello, juicy tax refund!).
More often than not, you’ll need to choose between an FSA or HSA*:
- FSA: Flex Spending Accounts are a tax-free way to pay for deductibles, prescriptions, and medical devices. FSAs are great because you can use them to pay for things like daycare while reducing your taxable income. You can only enroll in FSAs during your company’s open enrollment period, though. This type of account is mostly use-it-or-lose-it, though some may allow you to roll over a portion of your allocation to the following year. Be sure to read the details of your company plan offering, and to be safe, make sure you can use all the money in the account before the end of the year.
- DCFSA: Dependent Care FSA Accounts are designed specifically for care programs, like daycare, before and after school care, preschool, day camps, and even adult daycares if you are caring for an older loved one. Just like a regular FSA, this money is deposited into your account pre-tax, so you’ll be able to pay for care services and lower your taxes each year. While you can’t have an FSA and an HSA at the same time, you can have a DCFSA and an HSA at the same time.
- HSA: Health Savings Accounts also help you save pre-tax money for medical expenses. The IRS allows these accounts because they help folks save and pay for high-deductible healthcare plans, where you tend to pay more out of pocket. Although you can’t use your HSA to pay for daycare, a great differentiator between FSA and HSA is that HSA funds do roll over from year to year.
So, which option should you go for? It depends on your deductible and your total yearly out-of-pocket maximum.
2022 High-Deductible Health Plan Rules
The gist of this table shows that if your deductible is $1,400 or more as a single person ($2,800 for family plans) and your out-of-pocket maximum is $7,050 or more, you qualify for an HSA. If you don’t meet these numbers, your employer will probably offer a FSA.
Whether your job offers a FSA or HSA, you can use it for all kinds of tax-advantaged stuff, as long as it’s healthcare-related:
- Massage guns
- Over-the-counter flu meds
- Menstrual Products
- KT tape
- Foam rollers
- Breast pumps
- Pregnancy tests
- Neck pillows
Yes, that’s right, prescription sunglasses can count as a medical device! But make sure you’re following the rules: check your FSA or HSA guidelines, so you’re clear on what counts as a qualifying purchase.
Here’s what I did:
- I assessed how much I anticipated to spend in the upcoming year of eligible medical expenses. I did this by looking back at my previous year’s bills. From there, I decided to contribute $2,500 into a Flexible Spending Account, which allowed me to pay for an additional $600 worth of qualified expenses for free. (Co-pays, chiro, acupuncture, medication, sunscreen, dental visits, etc.)
*Not sure if you should use FSA or HSA? Look through your expenses for the past year. How much did you spend at the doctor, on prescriptions, or at the pharmacy? If you spend more than $200 per month on eligible medical expense, you’re missing out on a huge opportunity — plus, it can help you pay less in taxes.
Employer Lifestyle Benefits
Many employers offer benefits that go above and beyond expected benefits such as health insurance and retirement plans. These benefits are sometimes called “Lifestyle Benefits,” and are meant to enhance an employee’s wellness and other part of their lives.
These perks will vary depending on your company’s size, culture, and location, but they can often include:
- Gym reimbursements
- Internet reimbursements
- Pre-tax commuter plans
- Pet insurance
- Phone discounts or cellphone allowances
- Tuition assistance
- Movie passes
- Museum memberships or discounts
- Student loan matches
- Professional development stipends
- Home office stipends
According to SHRM, only 46% of U.S. organizations see value in offering wellness benefits, but they are definitely a win for both employees and employers.
Some offices will even provide a generic “wellness stipend,” which you can spend on anything wellness-related like gym clothes, yoga mats, or hiking boots.
When it comes to lifestyle employer benefits, it’s important to take advantage of what you’ll actually use. For example, a free gym membership is a nice perk, but if it’s for a gym that’s across town, the added commuting costs might not make sense for you.
But hey, if your employer benefits now cover something you were previously paying for yourself, that’s a big win, so make sure you use it — that’s part of your compensation, after all.
Here’s what I did:
- Pre-Tax Commuter Program: I can use pre-tax funds to pay for my daily office parking of $85/month, which saves me about $15/month and $180/year of post-tax dollars
- Fitness Reimbursement: $30/month (with proof of receipt that I got my sweat on!)
- Pet Insurance: $35/month vs $131 I was originally paying, which saved an additional: $1,152/year
So here is the epic math summary:
Pre-Tax Commuter Plan: $180
Gym Membership: $360
Pet Insurance: $1,152
Taxes Saved by Pre-Tax Investing: $1,035
Employer Match: $2,080
Employer Benefits are Part of Your Pay — So Use Them
Forty-nine percent of employees will leave their job in the next 12 months because their benefits aren’t great. Here are three things you can do today to bank the perks that are rightfully yours:
- Revisit your company’s benefits package. Are you taking advantage of everything? This means verifying your wellness perks, too, so you know what’s available when it’s time for your annual screenings. What lifestyle benefits are available that you maybe glossed over in your offer letter? If Denise in customer service is using them, you should be, too.
- Review your receipts. What are you spending money on that you could use your HSA or FSA card for? Chapstick, people, it’s covered.
- Consider your future. Let today’s income take care of your future lifestyle. Find out if your employer provides 401(k) options (if you work for a non-profit or a school, it would be a 403(b)), and if they don’t (some employers don’t), find a financial planner who can discuss your options so that you can start investing some pre-tax dollars.
Making an extra $10K might be the top of the scale, depending on your salary and where you live. But wouldn’t even $4,000 or $5,000 go a long way right now? When you understand how to use your employee benefits, this is extra money straight into your pocket.
This information does not constitute financial, investment or tax advice. Be sure to consult with a CPA, certified financial planner, or tax consultant before making any major financial decisions.