Use “Mise en Place” When Electing Employer Benefits
When taking a cooking class a few years ago, I learned about the concept of “mise en place.” In cooking, this term means to lay out all the ingredients and supplies you need before you start cooking. It makes so much sense—be sure you have eggs BEFORE you cream together butter and sugar, for instance, or else your cake could end up a disaster. It helps you be organized and efficient.
I think of any open enrollment period—where you pick your company’s benefits for the following year—very much like “mise en place” in cooking. Don’t wait until 11:50 the night the elections are due to decide what your elections should be. Lay it all out ahead of time, and know all your needs and challenges so your decisions are carefully thought out, giving yourself time to make adjustments before the “cake goes into the oven.” Here are a few retirement planning items to lay out and review ahead of submitting your benefit selections to the employer. Your answers to the following five questions will help with your open enrollment choices.
Have you reviewed your 401(k) investment options?
It’s been another volatile year in the markets, and your portfolio may be out of balance. Depending on where you are in your career, it may be time to change your asset allocation (i.e., the mix of stocks, bonds, etc. that you hold). It’s also a good time to review all of your investments and look for opportunities. For instance, with interest rates currently at high levels, some of the bond funds may be more attractive than they have been in a while.
Are you maximizing your 401(k) match?
Some companies will stop their match once you max out your contribution for the year or hit an income limit. You don’t want to miss out on any employer match, as it’s essentially "free money" that can help better grow your long-term wealth. Do the math (or have your Corient Wealth Advisor do it for you) to confirm that you’re maximizing the employer match.
Are you contributing after-tax dollars that you can roll into a Roth IRA?
If you reach the pre-tax contribution amount, and your 401(k) plan and cash flow allow, consider contributing after-tax dollars to your 401(k). Many plans allow for an in-service withdrawal at year-end, enabling you to take those after-tax dollars and contribute to a Roth IRA. For high-income earners, this “mega backdoor” Roth strategy can result in significant Roth contributions that may be used tax-free in retirement.
Is there a deferred compensation or other non-qualified plan in which to participate?
If your cash flow allows and you’re in a high tax bracket, you may want to find out if there’s a non-qualified plan to which you can contribute additional dollars. Non-qualified plans have risks that traditional qualified plans do not, so it’s important to understand the nuances of the plan before contributing.
Is there a discount on an employee stock purchase plan?
If your company offers a discount on employer stock, you may want to consider purchasing some. Again, it could be seen as "free money" that may help you compound growth more effectively. However, be mindful of how much employer stock you hold, given that a significant portion of your livelihood is tied up in one company, and maintaining good diversification is important to help manage overall risk.
Answering these five questions takes considerable thought and planning. Don’t wait until the last minute to decide to bake the cake, only to discover you’re missing some key ingredients. By laying everything out ahead of time and carefully weighing your options, we think you can rest assured that you have made the right open enrollment decisions for your unique situation. Remember: mise en place!
The decisions you make during the open enrollment period may impact your long-term wealth. This article is the first in a three-part series on open enrollment. Click the links below to read the other two articles:
ABOUT THE AUTHOR
Abigail Rosen, MS Financial Planning
Abby is a Partner, Wealth Advisor in our Morristown, NJ, office. She is a CERTIFIED FINANCIAL PLANNER™ professional with over 17 years of experience in the financial industry. Prior to her career in finance, Abby was an officer in the United States Navy. Abby specializes in working with corporate executives to help them take full advantage of their available benefits, implement with respect to employer stock concentrations and manage their stock option strategies. She has a designation in Global Financial Planning. Previously, she served at legacy firm RegentAtlantic as a Wealth Advisor and Co-Head of the Corporate Executives Group.
She graduated with a Bachelor of Arts from the College of the Holy Cross and received a Master of Science (distinction) in Financial Planning from Bentley University. She was 2020 Citizen of the Year for her work as treasurer of the New Jersey Psychological Association Foundation and is treasurer of the Harding Township Educational Foundation (HTEF) and a Girl Scout troop leader.
This information is for educational purposes and is not intended to provide, and should not be relied upon for, accounting, legal, tax, insurance, or investment advice. This does not constitute an offer to provide any services, nor a solicitation to purchase securities. The contents are not intended to be advice tailored to any particular person or situation. We believe the information provided is accurate and reliable, but do not warrant it as to completeness or accuracy. This information may include opinions or forecasts, including investment strategies and economic and market conditions; however, there is no guarantee that such opinions or forecasts will prove to be correct, and they also may change without notice. We encourage you to speak with a qualified professional regarding your scenario and the then-current applicable laws and rules.
Our clients must, in writing, advise us of personal, financial, or investment objective changes and any restrictions desired on our services so that we may re-evaluate any previous recommendations and adjust our advisory services as needed. For current clients, please advise us immediately if you are not receiving monthly account statements from your custodian. We encourage you to compare your custodial statements to any information we provide to you.