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When Benefits are Cut, Watch Health Costs and Retirement

pair of scissors cutting costs

If your employer has recently reduced or eliminated your benefits, you are not alone. Following the Great Recession, 40 percent of working adults had their benefits packages reduced or eliminated entirely, according to a study by the National Endowment for Financial Education (NEFE).

However, there are steps you can take to improve your financial well-being and maximize your bottom line.

Control Health Care Costs

NEFE’s survey finds that 7 in 10 of those who have experienced cutbacks say health insurance coverage was hardest hit, resulting in higher deductibles, higher co-pays, and premiums. To help offset your out-of-pocket expenses:

Consider switching to a health savings account (HSA).

If you are in a high-deductible health care plan, check with your benefits manager or human resources department to see if an HSA option is available to you. These accounts allow you to contribute pre-tax dollars into an account that can be used for individual or family medical expenses. Unlike flexible spending accounts (FSAs), which usually must be spent within a calendar year, money in HSAs does not go away and can build from year to year, providing an opportunity to accumulate savings for large medical expenses. Check the Internal Revenue Service website for the most up-to-date information.

Take advantage of free or low-cost public health programs.

If you find it difficult to pay medical expenses or lack insurance coverage entirely, take advantage of free health services such as immunizations, cancer screening tests, and well-baby clinics. Call 2-1-1 or visit www.211.org to find resources in your area.

Use credit as a last resort.

Before you charge medical bills to a high-interest credit card, try to work out an installment plan with providers.

Continue to Save for Retirement

The NEFE survey finds that 33 percent of workers who have experienced benefits cutbacks had their employer decrease or end to matching contributions to their employer-sponsored retirement savings plans. If your employer stops matching:

  • Keep saving. Unless the money you are contributing could be used to help you avoid an extreme financial setback — like losing your house or a car — it is a good idea to keep contributing to your 401(k) or 403(b) plan to maintain savings growth.
  • Review your contribution. If your employer has decreases their match, you may consider adjusting the amount you contribute to at least meet the minimum required to get your employer’s match. Even if you are saving a smaller amount than you have been accustomed to, you are taking advantage of tax savings and are building a nest egg.
  • Get informed about other retirement decisions. Take a holistic approach to retirement savings, and you’ll find opportunities to make the most of your assets and optimize your retirement paycheck.

Keep Your Job

According to the NEFE survey, more than half (53 percent) of employed U.S. adults agree with the statement that they are staying in their current jobs instead of looking for new ones, even though they are unhappy with certain aspects of their jobs, such as salary, benefits and/or hours.

If you have experienced cutbacks in your current employment you may be tempted to think the grass is greener in another job. But it's easier to find a job when you have a job.You might not have as much time to look, but at least you won't be stressed about paying bills while you search.

[Any reference to a specific company, commercial product, process or service does not constitute or imply an endorsement or recommendation by the National Endowment for Financial Education.]

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