Benefits is such a strange words

Okay, so we’ve talked about choosing where to live,¬† the paperwork that comes along with getting a job, and we’ve touched on the benefits thing. But now it’s time to go even further into what is called, “benefits.”
It’s such a strange word, really. If you say it too many times, it doesn’t sound like a word anymore. Word or not, medical benefits and retirement benefits are extremely important to being a grown up. If fact, you might find someday that accepting or rejecting a job will depend heavily on the kinds of benefits you receive as an employee. Let’s break down the options that are out there:
1. No benefits. This one sucks, but coming out of college, you might have to have this kind of job. Part-time, waitresses, retail, contract jobs, self-employed/freelance. We’re all probably going to have to pay our dues in the benefits-less world. No medical coverage and no retirement options and no paid vacation or sick leave or maternity leave. The kind of places that don’t offer benefits are the kinds of places that lose and gain employees at a high rate. There’ no reason to have benefits–it would be too costly and too much of a hassle. What this means is, you’re going to have to fend for yourself. Fortunately, you can. Start your own Roth IRA account at a bank or banking institution to put away some money for the later years. If you’re not on your parent’s health care plan, shop around and get your own. There are plenty of companies with low-premium, high-deductible and/or short-term plans. They won’t cover your doctor visits, but if you get in a car accident and break all your bones, you’ll be covered!

2. Partial benefits. This one is okay. Usually it’s a retirement plan. If so, use it. The company matching your contribution will make you more money than you investing in your personal account. Partial benefits usually don’t mean medical, but if they do, (lucky) you’ll get some bare-bones medical plan that doesn’t cover dental/vision and probably doesn’t cover a lot of other things. Beware. It might be more cost-efficient to get your own health care plan or stay on your parents. Find out what the medical plan from your job would cover and what it wouldn’t. If accepting the mediocre medical plan is your only option for coverage, take it. It depends on the company as to whether you get sick leave, vacation days or maternity/paternity leave; but usually it’s not available.

3. Full benefits. Bam. You’ve hit the job-jackpot. You’ve got a salary, a retirement plan, medical coverage that most likely covers EVERYTHING (including dental/vision/preventative care) and you probably even have the option to opt-in to a life/accident insurance plan, too, not to mention paid sick days, paid vacation days and if you or your lady-friend get knocked-up, you can take of weeks and weeks and still get paid. NICE. TAKE IT ALL AND CELEBRATE YOUR SUCCESS BY GETTING A FULL BODY SCAN. If you want to wait until you absolutely have to be off your parents healthcare, that’s fine. Make sure to send them a Thank You flower arrangement.
Now, obviously, we’d all like to have option number three basically as soon as we get finished walking across the graduation stage. However, that’s not very likely if you got a degree in History, English, Theatre… basically anything that doesn’t fall under the “Science” category. Lame.

You might say, that’s fine. I’m young and healthy, no need to think about retiring. No need to have healthcare (if you’re not on my and dad’s plan).

YOU’RE SO WRONG I AIN’T LAUGHING.

(Now, see, if you have a theatre degree, you’ll be able to say the name of the play and playwright where that quotation comes from, but, chances are you don’t have benefits. Don’t worry, this is me, too.)

You NEED health coverage. You NEED to plan for retirement right now. You’ll thank yourself when you’re 60, rolling around in your money pile and joyous that you’re only on one prescription medication.

You can do both these things for less than $150 a month. That’s $5 a day. Next week, we’re gonna shop around for healthcare. The week after, we’re gonna talk about opening a personal retirement account and funding it.

Until then, imagine the year 2072 looks like.

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Human Resources

I always thought that the phrase “human resources” was a strange one. And when I was younger, I was confused about what exactly happened in human resource departments. It seemed scary.

As I graduated and found jobs, human resources became even scarier. When you get a job offer from a fancy place, you get lots of paperwork.

Job Offer letter–explains what you’re being offered. Requires signature.

Benefits letter–sometimes included in the offer letter; this details your benefits like medical, retirement, life insurance, etc. It’s maybe one of the most important documents you’ll receive as a grown up.

W4– this is a federal government tax document. You’ll fill out the bottom portion letting your HR coordinator and payroll office how much money you want (I repeat, WANT) taken out of your paycheck for taxes.

Retirement enrollment– READ THIS. It delineates plan options (401k or Roth?), who coordinates it (let’s hope Merill Lynch), what the different choices for investing are (conservative or high risk) and what the plan invests in.

Insurance enrollment– medical, dental, vision, life, accident. There are lots of options and different companies offer different things. Find out your responsibilities (how much comes out of your pocket and paycheck), the plan options, the limits, and rights.

All this paperwork alone is enough to make you want to get in a time machine and go back to freshman year of college where the most difficult paperwork you had to fill out was your FAFSA.

But don’t worry. You’re a grown up. You can handle it. And here are some tips:

Job Offer Letter: pretty simple. Read, know what you are responsible for. Sign. Most importantly, remember that the amount your salary is is going to be reduced thanks to taxes. Take home pay, remember?

Benefits letter: Read. Write down on a separate piece of paper in simple terms what you’re getting. Medical insurance? Retirement plan enrollment? Insurance enrollment?

W4: You hold¬† a lot of power when you hold this piece of paper in your hand. You basically decide how much take-home pay you’ll be getting. Now, you have to pay taxes if you have a job. Unless you want to go to jail at some point for tax evasion. But that’s dumb. Don’t do that. So if you have to pay taxes, you should at least decide how much. HR coordinators automatically have you down on their payroll as putting away the most money for taxes ( 0 allowances) and then getting a refund for anything you paid over. But the thing is, you don’t get everything you paid over back in that refund. You’re loaning the government money– interest free– and they’re not paying it back in full with a refund. So when you fill out your W2 there’s this little part called “withholding allowances.” You can choose 0-4 allowances. For young, single people with one job, you should have 1 or 2 allowances. Never put 0. Put one and get a little more take-home pay and not owe any taxes, but you also won’t get a big refund. Put 2 and get more take home pay, but be aware that you may owe taxes later. 1 is the safest. If you have another job, put 0 on that W4, just to be safe.

Retirement enrollment: Enroll. Period. Contribute the minimum amount needed to trigger your company’s match. Since you’re younger, choose a moderate to risky investment plan. I’ll explain this in a future post, but if you’ve got years and years until retirement, you want to make riskier investments so you might get better gains. You can choose 401k or Roth– they both have pros and cons. Since you’re younger, Roth might be better. Again, I’ll explain this in a future post.

Insurance enrollment: If your company offers insurance and you’re not on your parents insurance, take it. If you’re still on your parents–stick that out. However, when the time comes to enroll in your company’s insurance, make sure you know how much you’re paying for it, what kind of plan it is (HMO, PPO, or other) and know what your co-pay and deductible is. There will be a future post about insurance, since it can be super confusing. If your company offers you accident and life insurance, I’d recommend saying no to life (because you’re in your 20s and have no dependents. Life insurance is for people who will be leaving someone behind.) Instead, opt in to accident insurance, as it’s way more likely for you to get into a car accident and be left unable to work– accident insurance will make sure you get your salary for a limited time.

That pretty much sums up the scary paperwork that the HR lady will give you and talk you through at rapid speeds. If you’ve got questions, don’t be afraid to talk to your HR person. You can change any of the decisions you’ve already. You can fill out a new W4 and change your deductibles. You can change your retirement plan at some point in the year depending on your company. You can change your insurance choices at re-enrollment time. If your HR person says you can’t, they’re just trying to get you out of their office because they’re busy. So smack them… with some knowledge about your rights as an employee! Get it?