Maximizing Employee Benefits

Employee benefits may represent a significant portion of your total compensation - often worth 30% or more of an employee's total compensation. Yet many of us don't take full advantage of everything that's available.

As the year winds down, it's a great time to review your employee benefits and plan for coming year. From retirement contributions to health savings options, maximizing your employee benefits can set you up for financial success next year and beyond.

Retirement Contributions

One of the most valuable employee benefits is access to tax-advantaged retirement accounts, such as a 401(k) or IRA. Maximizing your contributions before the year ends may reduce your taxable income and will certainly boost your long-term savings.

The contribution limit for 401(k) plans in 2025 is $23,500 (or $31,500 if you're 50 or older and eligible for catch-up contributions - which increases to $34,750 for those aged 60 - 63). Check your year-to-date 401(k) contributions to see how close you are to the limit. If you're behind, consider increasing your contributions for the final pay periods of the year to maximize your tax savings or increasing it for next year. Remember, if your employer offers a contribution match, you may leave free money on the table by not maximizing your contributions.

If your employer offers a Traditional IRA or Roth IRA, you can contribute up to $7,000 for the year ($8,000 if you're 50 or older). While certain income limits apply, contributions for many people can either lower your taxable income (for a Traditional IRA) or grow tax-free (for a Roth IRA).

Health Savings and Flexible Spending Accounts

If you're enrolled in a Health Savings Account (HSA) or Flexible Spending Account (FSA), now is the time to ensure you've maximized these tax-advantaged accounts. Both accounts help cover healthcare costs with pre-tax dollars, but there are key differences in how they work.

HSAs are available to individuals enrolled in a high-deductible health plan (most plans qualify) and offer immediate tax savings and long-term growth potential. Contributions to an HSA are tax-deductible, earnings grow tax-free, and withdrawals for qualified medical expenses are tax-free. In 2025, the HSA contribution limit is $4,300 for individuals and $8,550 for families, with an additional $1,000 catch-up contribution allowed for those 55 and older.

If you haven't maxed out your HSA contributions, consider adding funds before the year ends. Unlike FSAs, HSA funds roll over from year to year, so there's no pressure to spend the money immediately. If you don't have an HSA yet, look into it - the tax benefits are more generous than any other savings vehicle.

Using FSA Funds Before They Expire

As discussed in the previous article, FSAs generally follow a "use it or lose it" rule, meaning any unused funds may be forfeited at the end of the year. Now's the time to check your FSA balance and make sure you've spent it on eligible medical expenses.

Reviewing Health Insurance and Wellness Benefits

Open enrollment often occurs toward the end of the year, giving you a chance to review your health insurance plan and other benefits. This time is an opportunity to ensure your current coverage meets your needs and make changes for the upcoming year.

If your life circumstances have changed - such as getting married, having a child, or you're dealing with new health issues - consider adjusting your health insurance plan during open enrollment. Compare premiums, deductibles, and coverage options to ensure you get the best value for your health needs.

It can also be helpful to look at how much you've spent on healthcare over the year. If you've had high medical expenses that are likely to recur in the future, it might make sense to switch to a plan with lower out-of-pocket costs, even if the premiums are somewhat higher.

Wellness Programs and Other Benefits

Many employers offer additional benefits, such as wellness programs, gym memberships, mental health support, or even financial planning services. If you haven't taken advantage of these perks, now is the time to explore them. Who knows - you may be eligible for reimbursement for something you already buy, like a gym membership.

Using Paid Time Off and Vacation Days

Another important benefit to consider is Paid Time Off (PTO). Some companies allow unused vacation days to roll over into the next year, but others have a use-it-or-lose-it policy. If you have vacation time left, plan how to use it before the year ends.

If you can't take a full vacation, another approach to consider is taking a few long weekends to use up your PTO. That way, you don't lose vacation days that you've earned.

The Takeaway

Maximizing employee benefits before the year ends can significantly enhance your financial well-being. Whether you're boosting your retirement contributions, spending FSA funds, or making the most of your health insurance options, these benefits help you save money and protect your financial future. So take advantage!