If you work for a medium-size or large organization, you may well be entering that time of year known as Open Enrollment. While it may not be as dramatic as the "other" election that's arriving in a few weeks, Open Enrollment will provide you with some choices that can have a big impact on your life.
Depending on how your organization administers its benefits program, you may be able to make changes to several important areas during open enrollment. Here are three of them:
•Life insurance—If your employer offers free or inexpensive life insurance, you should almost certainly accept it. But if your situation has changed since you first received life insurance as an employee benefit — that is, if you've gotten married or had children or bought a house — you may well need to supplement your employer's policy with outside insurance. Also, make sure the beneficiary designations on your employer's policy are still correct.
•Disability insurance — Almost everyone recognizes the need for life insurance. But that's not necessarily the case with disability insurance — which is unfortunate, because a worker's chance of becoming disabled is 2 to 3.5 times greater than dying, according to A.M. Best, the credit-rating company. If your employer offers disability coverage, you should probably take it — but, as is the case with life insurance, you may need to supplement your employer-sponsored plan with a policy of your own. To determine how much protection you need, add up your monthly living expenses and then compare the total to your current disability insurance coverage. You may well discover a "gap" that should be filled.
•401(k) plan — If you can make changes to your 401(k) or other employer-sponsored plan (such as a 403(b) plan for nonprofits or a 457(b) for state and local governments), you'll want to consider two key areas: your contribution amount and your investment mix. As a general rule, it's a good idea to contribute as much as you can afford to your retirement plan because your money can grow on a tax-deferred basis. So, if you can afford it, or if you're anticipating a salary increase for next year, consider bumping up your retirement plan contribution.
As for your retirement plan's investment portfolio, take a close look at it. Does it still reflect your risk tolerance and time horizon? These two factors will change over the years, so you'll want to make sure your investment mix keeps pace. Also, is your account properly diversified, or have you tended to concentrate your dollars in just one or two types of investments? While diversification cannot guarantee a profit or protect against a loss, it can help you reduce the impact of volatility on your holdings.
You should have several weeks in which to study your benefit plan options, so take the time you need to make the right choices. You may also want to consult with a professional financial advisor — someone who can help you determine your life insurance and disability protection needs as well as review your retirement plan's investment mix to ensure it's still appropriate.