MANAGING YOUR MONEY : PREPARE YOURSELF : How to Get the Most Out of Your Job Benefits : Salary is important, but maximizing your ‘hidden paycheck’ will make a major contribution to your financial security.


You probably worry often about whether you make enough money at work. But do you worry equally about your “hidden paycheck”--employee benefits such as a pension plan, 401(k) and health insurance?

If you’re not taking full advantage of these and other benefits, you could be missing out on opportunities to add considerably to your financial well-being.

Here are some steps to help you maximize your benefits:

* Contribute the maximum to your 401(k) company savings plan.

These accounts, offered by virtually all large companies and many small ones, are arguably the best employee benefits around. You contribute income on a before-tax basis, and most employers will match your contribution--usually with company stock--by as much as 50 cents for every dollar. Where else can you get an automatic 50% return on your money?


“Employees should definitely maximize the company match,” says Duane C. Bollert, manager of the Los Angeles office of Hewitt Associates, an employee benefits consulting firm.

Further, assets in your 401(k) can gain value and not be taxed until withdrawn, usually when you retire or leave the company. And many employers allow you to borrow from your account with no restrictions on what you use the money for.

* Open a flexible spending account.

These accounts also are highly useful, but many employees don’t take advantage of them. These allow you to contribute before-tax income into accounts that you can draw on to pay expenses. With one type of account, you can pay for child care; with another, you can pay for medical expenses not covered by insurance.

These accounts in effect allow you to pay for these expenses with funds that otherwise would have gone to taxes. There’s a catch: You forfeit any money in the accounts that you don’t use by year-end. That scares off many employees, but it shouldn’t. As long as you don’t wildly overestimate your expenses, chances are that money you forfeit would have gone to the government in taxes anyway. And dependent-care expenses, in particular, are fairly predictable.

* Consider the impact on your pension of leaving a job or retiring.

Most pension plans don’t allow you much leeway to change provisions while you are working. But many workers don’t fully analyze the impact on their pensions of leaving a company, joining a new company or retiring.

Think carefully about leaving an employer with a good plan for one with an inferior or nonexistent one. A typical plan, Hewitt’s Bollert says, is one that provides monthly benefits of between 40% and 60% of your monthly pay at retirement--including any adjustments for Social Security--provided you put in 30 years of service.


Also, frequent job-hopping can significantly reduce your pension nest egg upon retirement. If you stay at the same company for 30 years, you’ll receive an annual income at retirement from the typical pension that is almost 50% greater than what you’d get if you worked for four different firms for five years each and one firm for 10 years, according to Hewitt Associates.

Also, examine your options about how to receive your pension upon retirement. Many companies offer payment through annuities that provide fixed, regular payments. But you might be better off with other variations; some companies, for example, allow both you and your spouse to share in payments, or allow your spouse to receive your payments if you die.

Also, ask what you gain by taking early or delayed retirement. Many pension plans, for example, have built-in subsidies for early retirement, Bollert says.

* Adjust your health insurance to fit your needs.

Feel fortunate if you have company-provided health insurance, particularly in this time of rapidly rising medical costs. But is your plan best suited for you and your family?

Consider these questions:

How much must you contribute, and can you contribute before-tax dollars? Fewer and fewer employers are willing to foot the whole bill. How much financial risk must you bear? Coinsurance, which makes you liable for a fixed percentage of your medical bills, could expose you to a big payment in the event of a catastrophic illness.

Do you have flexibility in selecting plans? A growing number of firms have established flexible benefit plans that, for example, may allow you to opt for less medical insurance and more dental coverage. Are there limitations on doctors and hospitals you can use? Many companies are instituting managed-care networks that limit choices if you want the highest benefits.


* Inventory your other benefits.

Other benefits available include employee-paid life insurance, long-term disability insurance, employee counseling, child care, elder care and other family-oriented benefits.