What Should I Consider to Get the Most Out of My Employer-Provided Benefits?
- Megan Waters, CFP®
- 25 minutes ago
- 15 min read
Maximizing your employer-provided benefits requires a strategic approach to retirement accounts, health savings vehicles, insurance coverage, and equity compensation—especially for high earners approaching retirement.
Understanding tax implications, portability issues, and coordination strategies can potentially save you tens of thousands of dollars annually while building financial security.
Introduction
According to the U.S. Bureau of Labor Statistics, employer-provided benefits account for approximately 30% of total compensation for private industry workers—and can reach as high as 42% for union workers in manufacturing—yet many professionals approaching retirement leave significant value on the table.
Whether you're navigating 401(k) contribution strategies, evaluating high-deductible health plans with HSAs, or trying to understand RSU grants, the complexity of modern benefits packages demands a systematic approach.
For affluent professionals over 50, the stakes are particularly high.
At this career stage, you're likely in your peak earning years, which means benefits decisions have outsized tax implications. You're also approaching retirement, making portability considerations and catch-up contribution opportunities critical to your long-term financial security.
The 2025 benefits landscape offers unprecedented opportunities for wealth accumulation and tax optimization. Retirement account contribution limits have increased, HSA rules have evolved, and many employers now offer expanded fringe benefits from student loan assistance to fertility coverage.
However, these opportunities come with intricate decision points that require careful analysis.
This comprehensive guide walks you through the essential considerations across five major benefit categories: retirement plans, medical insurance and tax-advantaged accounts, life insurance, disability coverage, and equity compensation.
By the end, you'll have a clear framework for evaluating your current benefits package and identifying areas where strategic adjustments could significantly improve your financial position.
Key Takeaways
Maximize employer matches first – Contributing enough to capture your full employer match delivers an immediate guaranteed return that's difficult to beat with any other investment strategy
Leverage catch-up contributions – If you're 50 or older, additional contribution room in 401(k)s and IRAs provides accelerated retirement savings opportunities
Coordinate tax-advantaged health accounts strategically – Understanding the order of operations between HSAs, HRAs, and FSAs can prevent leaving money on the table while optimizing tax benefits
Evaluate portability before adding supplemental coverage – Employer-sponsored life and disability insurance often disappears when you leave your job, making personal policies worth considering
Review equity compensation with a tax-focused lens – ISOs, NQSOs, and RSUs each have unique tax treatment that dramatically affects your net benefit
Don't overlook lesser-known fringe benefits – Student loan assistance, mental health counseling, and fertility benefits can deliver substantial value when utilized strategically
Assess total benefits annually during open enrollment – Your circumstances change, and so do plan offerings; regular review ensures your elections remain optimal
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Table of Contents
Understanding Your Retirement Plan Options
Your employer-sponsored retirement plan represents one of the most powerful wealth-building tools available. For professionals approaching retirement, understanding contribution limits, tax treatment options, and investment selection becomes increasingly critical.
Contribution Strategy and Employer Matching
The foundation of any retirement plan strategy is capturing your full employer match. This represents free money that delivers an immediate 50-100% return on your contribution, depending on your employer's formula.
According to the Investment Company Institute, the average employer match is approximately 4.7% of salary when employees contribute enough to receive the full match.
For 2025, standard 401(k) contribution limits are $23,500 for individuals under 50, with an additional $7,500 catch-up contribution for those 50 and older. If your employer offers a 457(b) plan in addition to a 401(k) or 403(b), you may be able to contribute to both, as these accounts have separate contribution limits—a strategy that's particularly valuable for high earners looking to maximize tax-deferred savings.
"Many professionals focus solely on investment returns, but contribution strategy and tax location decisions often have a much larger impact on retirement outcomes," notes Mark Fonville, CFP®, CEO of Covenant Wealth Advisors in Richmond, VA. "For clients in their peak earning years, coordinating multiple account types—traditional, Roth, and after-tax with in-plan conversions—can create significant tax arbitrage opportunities."
Pre-Tax, Roth, and After-Tax Contributions
Understanding the three contribution types available in many plans is essential for tax optimization:
Pre-tax contributions reduce your current taxable income and grow tax-deferred, with distributions taxed as ordinary income in retirement
Roth contributions are made with after-tax dollars but grow and distribute tax-free in retirement
After-tax (non-Roth) contributions can be converted to Roth through in-plan conversions or rolled to a Roth IRA, creating a "Mega Backdoor Roth" strategy
Your current and anticipated future tax brackets should guide this allocation. High earners in peak earning years often benefit from traditional pre-tax contributions now, while those expecting similar or higher tax rates in retirement may favor Roth contributions.
Investment Selection and Fee Management
Review your plan's investment menu for appropriate diversification options and expense ratios. According to the Department of Labor, even a 1% difference in fees can reduce your account balance by more than 25% over 35 years on a $25,000 initial investment.
Consider whether your plan offers:
Low-cost index funds across major asset classes
Target-date funds aligned with your retirement timeline
Stable value or money market options for conservative allocations
Self-directed brokerage accounts for expanded investment access
Vesting Schedules and Portability
Understanding your employer contributions' vesting schedule is crucial if you're considering a job change. Vesting schedules typically range from immediate to six years graded or three years cliff vesting.
If you're close to a vesting milestone, the timing of a departure could mean forfeiting tens of thousands in employer contributions.
Rollover Opportunities
Many plans accept rollover contributions from previous employer plans or traditional IRAs. Consolidating old 401(k)s can simplify management, and rolling traditional IRA balances into your 401(k) can enable Backdoor Roth IRA contributions by eliminating pro-rata tax complications.
Pro Tip: If you have highly appreciated company stock in your 401(k), investigate Net Unrealized Appreciation (NUA) treatment before rolling over to an IRA. This strategy can convert ordinary income tax rates to long-term capital gains rates on the appreciation.
Optimizing Medical Insurance and Tax-Advantaged Accounts
Healthcare represents one of the largest expenses in retirement, making strategic benefits decisions during your working years increasingly important. The coordination between insurance plan selection and tax-advantaged savings vehicles can create significant long-term value.
Health Plan Selection Framework
When choosing between high-deductible and low-deductible health plans, consider these factors:
Current health status and anticipated medical expenses – Chronic conditions or planned procedures may favor low-deductible plans
Risk tolerance and emergency fund adequacy – High-deductible plans require covering more costs before insurance kicks in
HSA eligibility and contribution appetite – Only high-deductible health plans (HDHPs) qualify for HSA contributions
Prescription drug coverage – Compare formularies, particularly for expensive or specialized medications
For healthy individuals with adequate emergency reserves, HDHPs paired with HSAs often provide superior long-term value due to the triple tax advantage.
Health Savings Account (HSA) Optimization
HSAs offer a unique triple tax benefit: tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. For 2025, contribution limits are $4,300 for individual coverage and $8,550 for family coverage, with an additional $1,000 catch-up contribution for those 55 and older.
"Many of our high-net-worth clients treat their HSA as a stealth retirement account," explains Matt Brennan, CFP®, at Covenant Wealth Advisors in Reston, VA. "By paying medical expenses out of pocket during working years and letting the HSA grow tax-free, they create a powerful tax-free income source in retirement. You can reimburse yourself for those expenses decades later with no documentation time limit."
Strategic HSA approaches include:
Maximizing contributions annually regardless of current medical expenses
Investing HSA balances in diversified portfolios for long-term growth
Keeping detailed records of unreimbursed medical expenses for potential future tax-free withdrawals
Coordinating HSA withdrawals with overall retirement tax planning
After age 65, HSA funds can be withdrawn for any purpose without penalty (though non-medical withdrawals are taxable as ordinary income), essentially functioning like a traditional IRA.
Health Reimbursement Arrangement (HRA) Considerations
HRAs are employer-funded accounts that reimburse employees for qualified medical expenses. Unlike HSAs, HRAs are owned by the employer, creating portability limitations. Key considerations include:
Understanding how unused balances are treated when you leave employment
Determining whether you must exhaust HRA funds before using FSA dollars
Maximizing employer contributions tied to wellness activities
Planning withdrawal order to optimize tax benefits
Flexible Spending Account (FSA) Strategy
FSAs allow pre-tax contributions for medical or dependent care expenses, but most operate under "use-it-or-lose-it" rules (though some employers offer small carryovers or grace periods). Strategic FSA management includes:
Carefully estimating annual expenses to avoid forfeiture
Front-loading large, planned expenses early in the plan year
Understanding that you can use the full annual election immediately, even though contributions are made ratably throughout the year
Coordinating with HSA usage if your employer's HRA documents require HRA exhaustion first
For dependent care FSAs, the 2025 limit is $5,000 per household, which can provide significant tax savings for families with childcare expenses.
Evaluating Life and Disability Insurance Coverage
Employer-sponsored insurance provides convenient, often affordable coverage, but portability limitations and coverage gaps make personal policies worth considering for many professionals.
Life Insurance Assessment
Group term life insurance through your employer typically offers coverage at attractive rates, particularly for younger, healthier employees. However, several factors warrant careful evaluation:
Portability challenges: Most employer policies terminate when you leave the company. If your health deteriorates during employment, you may become uninsurable or face significantly higher premiums for personal coverage.
Coverage adequacy: Employer policies typically offer coverage ranging from one to five times your salary, which may fall short of your actual needs. According to the American Council of Life Insurers, the average life insurance coverage gap is approximately $200,000.
Cost comparison: For professionals in excellent health, personally-owned policies often cost less than employer coverage, particularly as you age. Underwriting classifications can dramatically impact premiums, with preferred elite ratings offering rates 40-50% lower than standard classifications.
Consider purchasing a personal policy if you:
Have significant coverage needs exceeding employer limits
Expect to change employers before retirement
Have experienced recent health improvements (weight loss, smoking cessation, etc.)
Want permanent coverage for estate planning purposes
Disability Insurance Evaluation
Disability insurance replaces a portion of your income if you become unable to work due to illness or injury. For high-income professionals, this coverage is often more critical than life insurance, as you're far more likely to experience a disabling condition than premature death during your working years.
Key considerations for employer disability coverage:
Definition of disability: Group policies typically define disability as inability to perform your "own occupation" for a limited period (often 24 months), then transition to "any occupation." True own-occupation coverage through personal policies provides stronger protection for specialists and high-income professionals.
Benefit taxation: Disability benefits are taxable if your employer pays the premiums, potentially creating a significant gap between gross and net benefit. If you pay premiums with after-tax dollars, benefits are tax-free.
Coverage limits: Group policies typically replace 60% of base salary but may cap benefits at $5,000-$10,000 monthly, creating substantial income gaps for high earners. Bonuses and equity compensation are generally excluded from benefit calculations.
Portability: Like group life insurance, employer disability coverage typically terminates when you leave the company. Some policies offer conversion options, but rates are usually less favorable than obtaining coverage while healthy.
For professionals with specialized skills or high incomes, supplementing employer coverage with a personal own-occupation policy often makes financial sense. The elimination period (waiting period before benefits begin) should coordinate with your emergency fund to avoid coverage gaps.
Pro Tip: If you're considering supplemental disability insurance, apply while you're healthy and employed. Pre-existing conditions and unemployment can make obtaining coverage difficult or impossible, and discounts are often available for professionals in certain occupations.
Maximizing Equity Compensation Benefits
Stock options, restricted stock units (RSUs), and other equity compensation represent significant wealth-building opportunities for executives and key employees. However, the tax complexity and timing considerations require careful planning.
Stock Option Types and Tax Treatment
Incentive Stock Options (ISOs): These options provide favorable tax treatment if holding period requirements are met. Exercise triggers no immediate regular tax, but creates alternative minimum tax (AMT) exposure. Qualifying dispositions (selling shares at least two years from grant and one year from exercise) allow the entire gain to be taxed at long-term capital gains rates.
ISO planning considerations include:
Timing exercises to manage AMT exposure
Exercising early in the year to allow same-year sales if needed for AMT planning
Coordinating with other income to stay below AMT thresholds
Understanding disqualifying disposition consequences
Non-Qualified Stock Options (NQSOs): Exercise triggers ordinary income tax on the spread between exercise price and fair market value. Subsequent gains or losses are capital in nature.
NQSO strategies include:
Exercising in lower-income years when possible
Considering cashless exercises if capital is limited
Planning exercise timing relative to other income events
Understanding that the company receives a tax deduction equal to your ordinary income
Restricted Stock Units (RSUs)
RSUs vest according to a predetermined schedule, with vesting events creating ordinary income equal to the fair market value on the vesting date. Many companies withhold shares to cover taxes, often at flat rates that may be insufficient for high earners.
RSU management strategies include:
Understanding your company's withholding methodology and supplementing if necessary
Evaluating whether to hold or immediately sell vested shares based on diversification needs
Planning for tax payments on large vesting events
Considering charitable giving strategies for concentrated positions
Concentrated positions in employer stock create substantial risk to your overall financial plan. A systematic approach to reducing concentration risk while managing tax efficiency is essential for RSU recipients. Consider working with a financial advisor to develop a disciplined diversification strategy that balances tax considerations with prudent risk management.
Leveraging Additional Fringe Benefits
Beyond traditional benefits, many employers now offer expanded fringe benefits that can deliver substantial value when utilized strategically. These often-overlooked benefits can save thousands annually.
Student Loan Assistance: The SECURE 2.0 Act allows employers to make matching retirement contributions based on employee student loan payments. If your employer offers this benefit, ensure you're taking full advantage—it's essentially free retirement contributions while paying down debt.
Mental Health and Counseling Services: Employer-sponsored employee assistance programs (EAPs) typically provide 3-8 free counseling sessions annually. Given that private therapy often costs $100-250 per session, this benefit can deliver $300-2,000 in value.
Legal Services: Legal plan benefits often include will preparation, real estate transactions, and legal consultations. Estate planning documents alone can cost $2,500-5,000 when purchased privately.
Fitness and Wellness Reimbursements: Many employers now reimburse gym memberships, fitness classes, or wellness apps. If offered, these benefits can save $500-1,500 annually.
Fertility and Family Planning Benefits: Fertility treatments can cost $15,000-30,000 per cycle. If your employer offers fertility benefits and you're planning to expand your family, understanding coverage limits and coordination with medical insurance is essential.
Professional Development and Education: Tuition reimbursement and professional development allowances can total $5,000-10,000 annually. These benefits often have specific requirements about job-related education and maintaining employment post-graduation.
State-Specific Considerations: Some states have unique benefit requirements or tax treatment. For example, certain states mandate paid family leave, while others offer different tax treatment for specific benefits. Covenant Wealth Advisors works with clients across the United States to navigate these state-specific complexities.
Would You Like for Us to Just Do Your Retirement Planning For You? Schedule Your Free Retirement Assessment Today!
RETIREMENT INCOME PLANNING - Estimate when you might retire and what lifestyle your current savings could support.
TAX PLANNING FOR RETIREMENT - Identify ways to reduce taxes in retirement, including Roth conversions and RMD strategies.
INVESTMENT MANAGEMENT - See how a tailored portfolio can align with your retirement goals and risk tolerance.
Frequently Asked Questions
Q: Should I always choose the high-deductible health plan to access an HSA?
Not necessarily. While HSAs offer exceptional tax benefits, high-deductible plans aren't optimal for everyone. If you have chronic health conditions requiring frequent care or expensive medications, you might spend more out-of-pocket than you save through HSA tax benefits. Calculate your total cost (premiums plus expected out-of-pocket expenses) for each option. HDHPs work best for healthy individuals with adequate emergency funds who can afford to maximize HSA contributions and leave the money invested long-term.
Q: How do I know if my employer's life insurance coverage is adequate?
A common rule of thumb suggests coverage equal to 10-12 times your annual income, though this varies based on factors like outstanding debts, dependent needs, income replacement goals, and existing assets. Many employer policies offer only 1-3 times salary, creating substantial gaps. Consider your specific situation: mortgage balance, number of dependents, education funding goals, and how long income replacement is needed. If employer coverage falls short and you're in good health, obtain quotes for supplemental personal coverage while you're insurable.
Q: What happens to my employer benefits when I retire?
Most benefits terminate at retirement, though some employers offer retiree health insurance (increasingly rare) or allow you to continue life insurance at your own expense. Health coverage can continue through COBRA for 18 months post-employment, though premiums are typically expensive. You'll need to plan for Medicare enrollment at 65 (earlier if disabled), supplemental Medicare coverage, and replacing any desired life or disability insurance with personal policies. Start planning at least 2-3 years before retirement to understand gaps and costs.
Q: Can I contribute to both a 401(k) and a 457(b) plan in the same year?
Yes. Unlike 401(k) and 403(b) plans which share a combined contribution limit, 457(b) plans have separate limits. For 2025, you could potentially contribute $23,500 to a 401(k) and another $23,500 to a 457(b), plus catch-up contributions if eligible. This strategy is particularly valuable for high earners at organizations offering both plan types, such as government entities or certain non-profits. However, ensure you have adequate cash flow since you're potentially deferring $47,000 or more annually.
Q: Should I roll my old 401(k) into my current employer's plan?
It depends on several factors. Rolling old 401(k)s into your current plan can simplify management and potentially enable Backdoor Roth IRA strategies by clearing out traditional IRA balances. However, compare investment options and fees between plans—some employers offer superior investment menus or lower costs than others. Also consider loan provisions if you might need to borrow from your retirement plan and whether your plan offers unique features like NUA treatment for company stock. Review your current plan's Summary Plan Description to verify it accepts rollovers.
Q: How should I prioritize contributing to HSA, FSA, and 401(k)?
Priority generally follows this order: First, contribute enough to your 401(k) to capture the full employer match (immediate 50-100% return). Second, maximize HSA contributions if you're in a qualifying HDHP, as HSAs offer superior tax benefits to almost any other savings vehicle. Third, return to 401(k) to maximize remaining contribution room. Fourth, fund FSAs carefully to cover predictable expenses without over-contributing due to use-it-or-lose-it rules. This hierarchy maximizes employer contributions and tax advantages while maintaining flexibility.
Q: What's the difference between group and personal disability insurance, and do I need both?
Group disability insurance through employers typically costs less but offers limited benefit amounts, restrictive definitions of disability (often "any occupation" after 24 months), and terminates when you leave. Personal policies cost more but provide own-occupation coverage, higher benefit limits, portability, and tax-free benefits if you pay premiums with after-tax dollars. For high-income professionals, supplemental personal coverage fills the gap between group policy limits and actual income replacement needs, protecting against the financial impact of career-ending disabilities in your specialty field.
Conclusion
Maximizing your employer-provided benefits requires a comprehensive, strategic approach that coordinates retirement savings, healthcare planning, insurance coverage, equity compensation, and often-overlooked fringe benefits. For affluent professionals approaching retirement, the decisions you make during your peak earning years can create or destroy hundreds of thousands of dollars in lifetime value.
The complexity of coordinating multiple account types, understanding tax implications, evaluating portability issues, and optimizing timing decisions makes working with a financial professional increasingly valuable.
At Covenant Wealth Advisors, we help clients across the United States navigate these decisions within the context of their complete financial picture—ensuring benefits elections align with retirement goals, tax strategies, estate plans, and overall wealth management objectives.
As you approach your company's annual open enrollment period, take time to review each benefit category systematically. Your circumstances change—income fluctuates, family situations evolve, health needs shift, and retirement draws closer.
Regular reassessment ensures your benefits package continues working as hard for you as you work for your employer.
Would you like our team to just do your retirement planning for you? Contact us today for a free retirement roadmap experience.
About the author:
Financial Advisor
Megan Waters is a CERTIFIED FINANCIAL PLANNER™ professional and Financial Advisor at Covenant Wealth Advisors. Megan has over 14 years of experience in the financial services industry.
Raised in Williamsburg, VA, Megan graduated from the Honors College at the College of Charleston with a BS in Economics and a minor in Environmental Studies.
Disclosures: Covenant Wealth Advisors is a registered investment advisor with offices in Richmond, Reston, and Williamsburg, VA. Registration of an investment advisor does not imply a certain level of skill or training. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax, or legal advice. If you would like accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs. This article was written and edited by a CERTIFIED FINANCIAL PLANNER™ professional with the assistance of AI. No advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place. Hypothetical examples are fictitious and are only used to illustrate a specific point of view. Diversification does not guarantee against risk of loss. While this guide attempts to be as comprehensive as possible but no article can cover all aspects of retirement planning. Be sure to consult an advisor for comprehensive advice.