Understanding Benefits

Benefits are a part of your compensation, and you need to make sure know exactly what you're getting.

Benefits packages could include: health and dental insurance, tax-free parking and transit allowances, 401k, health and wellness discounts, life insurance, PTO (Paid time off), stock options, and child planning options.

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• Premium: A monthly bill you pay to the insurance company.
  
  That is not how much you pay for actual services, that is just the cost of having access to the insurance plan. If you have a lower premium, you most likely will have to pay more out of pocket for appointments.
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• Deductible: How much you have to pay out of pocket before your insurance will help out.
  
  So if your deductible is $100 and your procedure costs $300, you are going to pay $100 and insurance will cover the remaining $200.
  
  Plans with lower premiums usually have higher deductibles.
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• Co-pay: A fixed amount you would pay for specific medications and procedures.
  
  For example, your plan might say that your co-pay for the flu shot is $10. So you only have to pay that in order to get your shot.
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• Co-insurance: Part of the medical cost that you split with the insurer after you’ve paid your deductible.
  
  This is usually dictated by a percentage of the medical procedure cost, rather than a fixed rate.
  
  For example, Your coinsurance is 15% and deductible is $500. You get a knee surgery that costs $10,000. You would pay the $500 first. And then split the remaining $9,500 with your insurer. So you would pay $1925 total.
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• Out of pocket maximum: The most amount of money would would be expected to pay for medical expenses.
  
  This includes the cost for deductibles, copays, and co-insurance.
  
  It’s basically to make sure there’s a limit on expectations of you to pay so you’re not stuck with endless amounts of bills.

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If you're living in America, it's expensive - I know. But healthcare costs can ruin people's lives because the bills are so high.

Anything can happen at anytime, no matter how healthy you you. You could get hit by a car, get cancer, fall off a ladder, break your leg playing pick up soccer, slip and fall and fracture your shoulder.

A single night in the hospital on average is over $10,000.
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Employers can offer benefits that are tax deductible, like retirement, and commuter and health spending options.

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For example, they'll say that you can get "$500 every month pre-tax dollars to use for health-related expenses like contact lenses." And you make a $50k salary.

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To be clear, the company is not giving you $500, you are still paying it.

Since the money is still coming from your paycheck, how is this a benefit?

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That the company will set aside some of your salary before they give it to you in your paycheck to cover the costs for the lenses.

Only money in your paycheck is taxed.

So in the eyes of the government, it looks like you're paid less - because you pocket less, and therefore are TAXED LESS.

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So instead of paying taxes that are 20% of a $50k income, you're paying 20% of a $44k salary.

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Either way, you're spending money for contact lenses, but if you use this benefit, you get the lenses AND pay less taxes.
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When it comes to investments and retirement, you have one huge advantage on your side: time.

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It might feel like retirement is so far in the future that you don't want to think about it - but you 100000% need to be contributing - even if it's just alittle.

Retirement plans are a form of investment, and grow over time, even if you're not contributing alot.

If you contribute only $100 a month for retirement (with a 5% rate of return) this is how much you'll make by the time you retire at 67:

• Starting contribution when you're 22 years old: $204,467
• 25 years old: $172,688
• 30 years old: $129,235
• 35 years old: $95,377
• 40 years old: $68,995

In theory, as you make more money you'll be contributing much more than $100, since you'll need alot more to actually retire on.

‍But look at those numbers. Look at how much more you'll have if you start when you're young, even if it's just $100 a month.

Now imagine what those numbers would look like when you start to contribute more.

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Play around on this calculator to see how much retirement you can grow overtime.

This all happens because of compound interest. You make interest on the total amount you have in the account, and as it keeps growing, the total becomes more and more. This video does a great job at explaining compount interest.

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You can learn about retirement and timing with this article.

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Traditional 401k

• You pay into this fund before income taxes are paid. That means that your tabable income appears lower. For example, you make $50k/year and decide to contribute 5% of your income towards retirement. So only $47,500 of your income is taxable.
• Taxes are paid when you withdraw the money to retire.
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• Who this is best for: This is a good option if you think you'll be making less money when you retire and will be in a lower tax bracket than you currently are.

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Roth 401k

• You pay into this fund after income taxes are paid.
• You don't need to pay taxes on the amount that you withdraw at retirement because you already paid it when you first contributed.
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• Who this is best for: This is a good option if you think you'll be making more money when you retire and will be in a higher tax bracket than you currently are.
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Learn more about other retirement options here.

I am NOT a financial advisor, so definitely consult a professional regarding financial and investment decisons. What I personally prefer is options where I am taxed when the money is added. I certainly hope that by the time I retire, I will have gotten a pay bump from when I first graduated college.

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Money that is vested means it is fully yours.

If you contribute money for stocks or for insurance, there can sometime be repercussions for leaving the company. A "vesting period" which is how long you need to work for the employer in order to actual fully own the money in the contribution without penalty of losing it.

Many employers will match your contribution to retirement - which means that if you devote 5% of your income to retirement, they will also give you that exact amount. For example, if you make $50k and opt for 5% to insurance and your company will match it, you'll be contributing $2,500 and then so will your employer - for a total of $5000.

With vesting, there are times where you only get to keep their match if you stay at the company for 3 years - otherwise you lose it.

So just make sure you understand what that means.

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You are not a selfish or bad employee if you use your Paid Time Off (AKA PTO). Please use every single day you have, unless you choose to get paid out.

This is a part of compensation, it is not a gift.

Common types of PTO could be holidays, sick leave, or vacation.

Some companies will group them all into one category and just call it PTO.

You may also see companies that offer "Unlimited PTO" - don't jump immediately. Often you might be taking just as much (or little) time as you would if you have limited PTO. If you're interviewing with a company, hit up other employees and get the scoop on how they actually handle and police PTO.

When a company offers stock options as a benefit, they are allowing employees to buy shares of the company for a specific price, typically a discount.

Equity is ownership of part of the company, through the form of stocks.

You might see this alot for start-ups. They might offer a lower salary in addition to equity. So if the company becomes a success and goes public (meaning public people can also purchase stocks) then you could actually get a pretty big payout.

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You'll need to evaluate the potential for success. If you have a bunch of stocks and the company doesn't go anywhere, that doesn't benefit you at all.

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The point of insurance is for the unexpected. We don't expect to get into a freak accident, or die when we're young, but sadly, it does happen.

Companies will offer these benefits at a significantly discounted rate than it would be if you were buying independently.

• Disability Insurance - Covers part of all of your income if you get hurt or sick and cannot work anymore.
• Short term is for incidents where someone just needs to recover for a few weeks.
• Long-term helps an employee that gets a permanent illness or injury where they can't continue to work.
• Life Insurance - Protects your family if you die. Money is paid out to whichever beneficiary you choose to have, which could be a parent, spouse, children, or someone else.

If your employer is offering it, it will probably be pretty cheap. I personally would recommend taking it since it doesn't hurt to have $100,000 in coverage if you get into a weird accident and it only costs $10 a month.
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