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. Over the past five years, 40 percent of working adults have seen their employer benefits packaged 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.

Mitigate Health Care Costs

NEFE’s survey finds that seven in 10 of those who have experienced cutbacks say health insurance coverage has been hardest hit, resulting in higher deductibles, higher co-pays, and costly premiums. As a result, you may be absorbing more of the costs. 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 FSAs, money in HSAs 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 on contributing and using HSAs.

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.

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 have seen a decrease or end to matches from their employer-sponsored retirement savings plans. If your employer is cutting back:

  • 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 decreased 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 is important to keep yourself indispensible at work, whether you are looking for a new job now or waiting until the economy improves.