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Written by: Gilles Hudelot, Director of Education

When examining your healthcare options, you should always make sure to have as much information as possible. By understanding the plans available, you can make an informed decision to either keep your existing insurance or switch to a new policy. In either case, you should ensure that you make an open enrollment checklist to consider all the most important factors. In today’s guide, we will help you craft your own open enrollment checklist for 2023.

Look at Your Past & Future Medical Care

Many employers have multiple plan types, making it difficult to sort through all of the current options. Ideally, you want to narrow down the scope of your choices to make the process of enrolling in a plan a bit easier. To do this, first look at your preexisting conditions, medications, preferred doctors, planned operations, additional dependents, or pregnancies. This will help you see which plan has the best coverage based on both your past and future needs. Also remember to look into using your spouse or partner’s employer plan to see if it works better for you.

Examine Your Emergency Savings and Deductibles

The amount you have in savings as an emergency fund can influence the type of plan you choose, as you may be able to afford higher deductibles and low-premium plans if you have enough savings available. If you don’t have much in savings, you may not want a high deductible plan. Alternatively, if you do have savings, you might choose a higher deductible, lower premium plan since you have more room to pay medical costs upfront. You will also need to determine how much your employer contributes to your deductible before making a decision.

You may have emergency funds tucked away in a savings account, or you could have a Medical Savings Account (MSA), Health Savings Account (HSA), or Flexible Spending Account (FSA) to save money to pay for your healthcare costs and provide some tax benefits. Typically, MSAs maintain a “use it or lose it” structure. In other words, if you don’t spend the money, you’ve set aside in contributions for that year, you can’t carry those assets over to next year and you will lose the remaining balance. Alternatively, HSAs are limited to high-deductible insurance plans and may have to spend more to receive care but are more flexible because you don’t have to spend the money set aside in the account year to year. You can eventually rollover any unused funds into a retirement account. Lastly, an FSA gives you more flexibility to use your savings for things beyond medical expenses.

Coordinate With Your Spouse’s Insurance

The dates for open enrollment vary from one employer to another. It often depends on how quickly your employer gets the necessary info from insurance providers. If the dates between your employer and your spouse’s employer differ, you might have to make decisions before knowing what your spouse will be able to access. If you don’t make any choices, your employer will typically roll over your insurance from the previous year. However, you will want to pay attention to any potential changes to the costs, providers, and benefits that they use. We recommend checking your plan every year, but if there have been few or no changes, you likely don’t need to spend a lot of time assessing your insurance.

Download Your Carrier App

These days, most insurance providers offer mobile applications to pay bills, view account details, and reach out to customer support. Downloading the insurance provider apps and telemedicine apps can make your life easier by ensuring that both your insurance provider and your doctor are far more accessible. It may not be as useful for emergencies, but many of these apps have resources to help reduce costs or get preapproved for routine procedures.

Decide on Dental & Vision Care

Most people need some kind of dental coverage, but vision may not be as essential, especially if you are younger. However, as you get older, you will most likely want both vision and dental care. Once again, examine your past healthcare needs and think about what you might need in the near future to determine if dental and/or vision coverage are right for you.

Additional Considerations

In addition to those already listed, there are various additional factors to consider and things to remember when enrolling in a new insurance plan:

• Determine contributions to other tax-advantaged accounts (dependent care accounts, transportation savings accounts, etc.)
• Make sure that your beneficiary info is up to date
• Evaluate the life insurance and disability insurance offered by your employer
• Decide if you want employer-sponsored insurance or outside coverage
• Consider supplemental disability coverage
• Determine if you want to increase your 401k contributions based on employer matching, or if you want to use a Traditional or Roth IRA
• Update direct deposits to send some of your money to other places (savings accounts, pay down debts, etc.)
• Consider other elective services offered by your employer
• Remember that the new cost of living numbers are typically announced by late October or early November, adjusting retirement coverage limits and HSA limits for the following year

If you want to learn more about making an open enrollment checklist of 2023 and its impact on financial wellness, be sure to contact the experts at Mentoro today!

Written by: Danny Kofke, Motivational Mentor

As we pass the halfway point and approach the final quarter of each year, we often take a more scrutinizing dive into our financial outlook — and for good reason. The end of the year offers everyone time to reassess and see what changes they can make for the next year. Fortunately, financial wellness does not need to feel like rocket science. There are various common-sense methods to help you end the year better than you started it. So, let’s take a look at 6 things to do now in order to finish the year financially strong!

Assess your financial goals

Some people don’t have clear goals in place, while others are meticulous about drawing a financial roadmap. If you fall in the former category, try to come up with specific, attainable goals that align with your financial aspirations. Assuming you already have financial goals, and the end of the year is approaching, take steps to ensure that you meet those goals by the time December rolls around. This way, you can check these goals off your list and begin making new goals for the upcoming year.

Take a look back and see what you did well

It is very easy to get overly focused on mistakes you have made with your money. Perhaps you spent too much on non-essential expenses or you didn’t do enough to track your retirement contributions. While it is important to take note of missteps, you should also look back over the year thus far and figure out what you did right.

Ask yourself: What did I do well? What goals did I accomplish? Which financial achievements am I most proud of this year? By asking these questions, you can identify actions that improved your financial circumstances. In doing so, you can also highlight strengths of your own and turn one-off victories into habitual behaviors going forward.

Ask yourself: where can I improve?

As previously mentioned, it is not a good idea to dwell too much on your shortcomings. However, ignoring problems will not make them go away, either. So, be on the lookout for potential weak areas in your finances. Maybe you didn’t save as much as you wanted the past few months, or you have found unnecessary expenditures in your budget. Regardless of the issue, you want to finish the year strong and start the next year even stronger, so you will need to make some changes. This way, you will have found methods to improve that will make meeting your next set of goals even easier.

Review employer benefits package

Employer benefits like 401k programs, retirement plans, as well as different types of insurance offerings can play an important role in your financial plan. If you want to enroll in insurance or change your existing insurance, make sure to mark the dates for open enrollment on your calendar. During the enrollment window, try to sign up early so that you don’t risk missing the deadline and you have plenty of time to ask questions and make changes as needed.

When it comes to all the different benefits offered by your employer, you should make an effort to know your options and talk to HR to learn more. Then, look at your personal situation to see if you need to make any additions or subtractions. For example, you may have a life event that encourages you to increase your life insurance (like getting married) or even lower your life insurance (like paying off your mortgage). This requires you to know your personal finances to better understand what you need and make the best decisions for your life.

Take one positive step on something you’ve been putting off

Procrastination is a common thorn in the side of financial strategies. It could be saving for retirement, setting up an emergency fund, or paying down credit card debt. Whatever it is that you have been putting off, simply set a short-term goal and make a step toward reaching it. This will allow you to feel greater relief and, in many cases, have greater freedom to address other financial issues as they arise.

Determine your net worth

To determine your net worth, just look at what you own (assets) and subtract what you owe (debts and liabilities). Doing this lets you see the progress you’re making from year to year. In many cases, people solely focus on retirement or savings goals, but it can be beneficial to look at the bigger picture. Evaluating your net worth can help you see if you are making positive gains, and if you’re not, implement new changes for the remainder of the year and beyond.

The Bottom Line

Improving your financial circumstances by year’s end begins with knowing where you stand now. You are the one who cares the most about your money. So, empower yourself with knowledge and know that you can meet your goals and improve your finances. To get started, see where you stand today so that you can move forward to finish the year strong and, just as importantly, start the next year even stronger!

If you want to learn even more about finishing the year financially strong, be sure to contact the experts at Mentoro today!

By now, the Great Resignation may feel like old news, but it is still having a profound impact on the U.S. and global economies. There is a lot of conflicting information on exactly how much the sudden wave of resignations has impacted the larger economy, but there is no doubt that it has forever changed the relationship between employers and employees.

According to the Bureau of Labor Statistics, about 60% of traditionally employed, full-time employees have stayed at their jobs. However, the same agency noted that voluntary attrition increased by approximately 800,000 employees, while involuntary attrition decreased by 400,000. [1] This left many companies with the sense that they had lost their best employees and are continuing to struggle to fill empty positions with quality talent. This has turned what started as the Great Resignation into the Great Attrition.

A Brief Overview of the Great Resignation 2022

The Great Resignation is a continuing phenomenon that began in early 2021, during which millions of workers across the world voluntarily left their jobs in pursuit of better opportunities. The COVID-19 pandemic served as a substantial catalyst, ebbing away at public trust in the economy and even governmental responses to the crisis. Many workers saw a lack of stability in their jobs and a sense that, regardless of their own dedication to the company, they were not valued by their employers.

At first, this led many employees to take up freelance work and short-term jobs. However, a growing number of workers are looking out for full-time positions with better pay, benefits, and company values. This has led to a stand-off between some companies that are unwilling to extend their employee benefits too far and unemployed workers digging their heels in with their demands.

The Great Attrition: What Happens Next?

The Great Resignation and the Great Attrition are largely the same; the difference is simply how we view the same trend. At first, cultural pundits saw the Great Resignation as a good wake-up call to companies that had failed to raise wages for decades and only offered paltry benefits packages. However, as supply chains screeched to a halt and many businesses went under, the phenomenon turned from a social movement into a social dilemma. After all, how can the economy function when companies cannot fill positions or keep employees on the payroll for the long term?

As a small company, Mentoro has been fortunate to avoid many of these impacts. However, no company is completely immune to the Great Resignation because it is so pervasive. This means that our employees — and employees all across the country — increasingly want hybrid work schedules, work-from-home benefits, mental health benefits, and more. While these are not unreasonable requests at the individual level, they can be overwhelming when all or most employees are asking for the same things.

There is no way to predict the future with 100% certainty, but it stands to reason that the tides will eventually turn. The workforce gaps in dozens of industries will start to have too many negative impacts on the overall labor market. There are only so many accommodations a company can make before it eats into its bottom line. So, at some point, there will be a shift back to a more balanced state between employer resources and employee demands, most likely presenting itself differently than before. It’s not so much a matter of “if” but “when.”

Understanding the Complex Labor Market With Mentoro

The pandemic allowed employees to reevaluate how they view work and the role that work plays in their lives. Today they are realizing not that they don’t need a job, but that they need a better job, with better benefits, and a better sense of feeling valued. As time has shown, this can have a negative impact on employers because they don’t have the processes in place to support that. But what are the processes they need to accommodate some or all of these new demands?

Mentoro’s financial mentors have highlighted three key areas in which companies can improve for their current and future employees:

1. Work to understand your employee base. What are workers thinking and feeling? Because many are not thinking or feeling the same way they were 5 years ago. We are in the new normal. Therefore, employers have to listen to their employees through surveys, focus groups, or even water cooler talk to learn as much as possible. From there, companies must be willing to use that information to change the profile of their organization or their talent (if necessary).
2. Be proactive instead of reactive. Companies that are struggling with the Great Resignation are often those that decided not to address it quickly enough. A pandemic is hard to plan for, but transparency is not. Addressing exhaustion and capacity issues will help avoid burnout and keep employees more content with their current positions.
3. Consider the employee experience. There are generally two big reasons people leave a company: either their job interferes with their lifestyle (long hours, low pay, etc.) or they don’t feel valued or part of a bigger purpose within the company. Employers must think about how they can improve the employee experience to reduce voluntary attrition and build a stronger, happier, and more productive workforce. A few common solutions could include mental health days or financial wellness benefits.

If you want to learn more about the Great Resignation and its impact on financial wellness, be sure to contact the experts at Mentoro today!

Sources:

1. Bureau of Labor Statistics

https://www.bls.gov/jlt/

On Wednesday, the White House and the Department of Education announced the Student Loan Debt Relief Plan. This will significantly affect individuals and families with federal student loans.

This program affects student borrowers that have government sponsored loans, but would not apply to Parent PLUS loans, loans originated through private lenders and loans refinanced or consolidated through private lenders.

There are Three key parts of the program:

1. Final Pause through 12/31/2022

In March of 2020, due to the economic challenges created by the pandemic, the prior administration directed the Department of Education to implement a reduction of federal student loan interest rate to zero and allowed automatic deferment of loan payments.  This pause has been extended several times by both the prior and current administrations.

As part of the Student Loan Debt Relief Plan, the administration has extended the payment pause a final time through December 31^st, 2022.  This will allow the Department of Education to ensure a smooth transition to repayment and prevent unnecessary defaults.

The White House announced that borrowers should not expect a further extension and they should plan on resuming payments in January 2023.

Borrowers should plan on resuming payments in January 2023.

What does this mean for you and what should you do next?

Although the extended pause will occur automatically, you may want to continue paying some or all your monthly payments. Why? Since the Department of Education is not requiring payments and has reduced interest rates to zero, any payment you make will apply directly to principal and speed up the time that it will take to pay off your loans. 

Alternatively, you may want to use the monthly amount you would otherwise be using to repay your student loans towards other goals such as increasing your emergency fund or paying down other debts.

2. Loan Forgiveness – Up to $10K for borrowers making less than $125k ($250K for married couples), and up to $20K for Pell grant recipients

The Department of Education will provide up to $10,000 in debt cancellation with loans held by the Department of Education. Borrowers are eligible for this relief if their individual income is less than $125,000 or $250,000 for households.  Pell Grant recipients are eligible for up to $20,000 in debt cancellation.

Your relief is capped at the amount of your outstanding debt. For example: If you are eligible for $20,000 in debt relief, but have a balance of $15,000 remaining, you will only receive $15,000 in relief.

Debt relief will not be treated as taxable income for federal income tax purposes.

What does this mean for you and what should you do next?

Nearly 8 million borrowers may be eligible to receive relief automatically because relevant income data is already available to the U.S. Department of Education (DoE).  If the U.S. Department of Education doesn’t have your income data, the Administration will launch a simple application which will be available by early October.

• Sign up to be notified of when the application is open at the Department of Education’s subscription page. https://www.ed.gov/subscriptions
• If the DoE does not have your income information, you should apply before November 15^thto receive relief before the payment pause expires on December 31, 2022.  Once a borrower completes the application, they can expect relief within 4-6 weeks.
• Even if you wait, the Department of Education will continue to process applications as they are received, even after the pause expires on December 31, 2022.

3. Reduced Income Driven Repayment Programs in half – from 10% to 5%.

Income-based repayment plans have long existed within the U.S. Department of Education. The administration is proposing a rule to create a new income-driven repayment plan that will substantially reduce future monthly payments.  The rule would:

• Require borrowers to pay no more than 5% of their monthly discretionary income monthly on undergraduate loans. This is down from the 10% available under the most recent income-driven repayment plan.
• Raise the amount of income that is considered non-discretionary income and therefore is protected from repayment, this guarantees that no borrower earning under 225% of the federal poverty level—about the annual equivalent of a $15 minimum wage for a single borrower—will have to make a monthly payment.
• Forgive loan balances after 10 years of payments, instead of 20 years, for borrowers with loan balances of $12,000 or less.
• Cover the borrower’s unpaid monthly interest, so that unlike other existing income-driven repayment plans, no borrower’s loan balance will grow as long as they make their monthly payments—even when that monthly payment is $0 because their income is low.

What does this mean for you and what should you do next?

If you are in an income driven repayment program, once the amounts are adjusted, use the additional income that is freed up to work on other financial goals such as increasing savings, reducing debt, saving towards retirement, or funding your children’s college education.

Special situation:

Borrowers who are employed by non-profits, the military, or federal, state, Tribal, or local government may be eligible to have all of their student loans forgiven through the Public Service Loan Forgiveness (PSLF) program. There is a time-limited change that waives certain eligibility criteria in the PSLF program that expires on October 31, 2022.   More information on eligibility and requirements is available at PSLF.gov.

StudentAid.gov/debtrelief

Written by: Danny Kofke, Motivational Mentor

Very few companies offer pensions these days, which has given rise to employer-sponsored 401k programs. These allow employees to contribute a percentage of their paycheck each pay period and have that money invested in long-term growth funds. In some cases, your employer may match your contributions (up to a certain annual maximum), potentially doubling your retirement savings. Just remember that since traditional 401k contributions are invested pre-tax, it means that you will need to pay taxes whenever you withdraw the funds in retirement.

However, if you have an existing 401k, you might already know all of this information. That said, it is always a good idea to understand exactly how your 401k works and what you can do to get the most out of it. In today’s article, we are going to take a closer look at 5 things you probably don’t know about 401k!

You may need to put in more than the default contribution

Numerous companies have started auto-enrolling employees in their 401k programs. So, if an employee prefers not to invest, they have to opt out of the benefit. This means that more employees are staying in because it is the easier (and more lucrative) option, which is a good thing for the financial wellness of America’s workforce. In fact, about 62% of businesses with 401k benefits used auto-enrollment as of 2020, greatly increasing participation and helping replace the outdated pension system.

Auto-enrollment typically starts at 3% (i.e., the employee contributes 3% of each paycheck). This may work well for some employees, but it may not be enough for others. Since you are saving for retirement with a 401k, it is important to run the numbers to make sure you are growing your savings and reaching your retirement goals. In some cases, this may require you to contribute more than the default amount.

What you are investing in may not be right for you

With auto-enrollment, your employer chooses a default fund. Many companies pick a “target date fund” that reallocates investments each year to become increasingly conservative as retirement approaches, thereby reducing risk over time. If you are someone who is willing to take on more risk, you may want to choose a different type of fund for your portfolio. Alternatively, if you want to take on virtually no risk, you will need to know exactly what you are investing in and choose low-risk funds from the start (though this will likely reduce your long-term growth potential).

An employer 401k is not free

Unbeknownst to many employees, 401k plans charge fees to participate. Therefore, it is very important to check out the fee structure when you enroll. Oftentimes, bigger companies incur fewer fees, but this is not always the case. Each employer must check how much goes toward fees to help save costs for themselves and their workforce. Usually, these fees are reasonable, but investment management and administrative fees can still take a substantial chunk out of an employee’s retirement savings.

There might be an option to invest in a Roth 401k

With a Roth 401k, funds are invested after taxes have already been taken out. Many people prefer this option because withdrawals during retirement are tax-free, making a Roth 401k a good hedge against the risk of higher taxes in the future. That said, no one knows exactly what the tax bracket will look like years from now, so there is no guarantee that it will save you money on your taxes. In any case, if you prefer to pay the taxes now, a Roth 401k is the better option for you. Even if you prefer to stick with a traditional 401k, it is always good to know when you have alternative options. You may change your mind in the future, in which case you can roll your 401k over into a Roth account.

You can take a loan on your 401k

At Mentoro, we don’t necessarily recommend taking out loans on your 401k unless it is absolutely necessary. In fact, some 401k plans will not allow loans unless you qualify for a hardship withdrawal due to financial setbacks, medical bills, or similarly high expenses. You can usually take up to 50% of your balance or up to $50,000.

But again, this does not apply to all plans. With most plans, you will have to pay back the loan within 5 years. You will have to pay it back in post-tax dollars, and you may have to pay interest. If you have a traditional 401k, you will still have to pay taxes when you withdraw funds during retirement, which can make 401k loans a very costly option. Consequently, taking a loan on your 401k should only be reserved for emergency situations.

The Bottom Line

More than anything else, both employees and employers need to be informed about 401k programs and how they work. It is especially important for employees to empower themselves with knowledge and really get to know their own investment and savings plans. When you understand the benefits at your disposal, you are far more likely to make informed decisions that will help keep you financially stable and grow your wealth for the long term.

If you want to learn even more about 401k programs and benefits, be sure to contact the experts at Mentoro today!

Written by: Gilles Hudelot, Director of Education

Unless you have a few years’ worth of expenses stored away somewhere, your financial plan will never be 100% recession-proof. However, this does not mean that you should just wait and hope for the best. There are ways to prepare and hedge yourself against potential windfalls in the years or even months leading up to a recession.

Sometimes recessions come on unexpectedly, and sometimes financial experts warn of impending recessions well in advance. Either way, recessions are normal and are bound to happen at least once or twice in your lifetime. Consequently, you should prioritize learning how to prepare for a recession as soon as possible.

The Current Economic Climate

As of this writing, the United States is not experiencing a recession. However, even economists cannot always pinpoint exactly when a recession begins, as it is measured using various factors contributing to the larger economy. For this reason, understanding the relevant terminology is extremely important.

Market corrections, bear markets, and recessions are often used interchangeably, despite the fact that they have very different meanings. A market correction is a 10% drop from the market peak, while a bear market is a 20% drop that lasts over two months. Alternatively, a recession is a drop in the broader economic output, measured by things like the GDP. For example, if the GDP drops for two consecutive quarters, then it will likely be defined as a recession.

The economy can experience a market correction without descending into a bear market. Similarly, a recession can happen without the occurrence of a bear market, though the two often go hand-in-hand. That said, it is not uncommon for the stock market to be negatively affected by the onset of a recession (or even pre-recession indicators). Therefore, recessions and market volatility can often put an even greater financial strain on individuals and businesses.

How to Prepare for a Recession

At Mentoro, our financial mentors always return to the fundamentals of financial health when advising others before, during, or even after a recession. First and foremost, you should be most concerned with and focused on the things you can control. Unfortunately, you cannot control whether or not a recession occurs. However, you can control how you prepare for a recession.

In the event of a recession, some of the biggest concerns are layoffs or sudden reductions in income. For example, if you are self-employed, you may not make as much money as would when the economic outlook is better. Alternatively, if you work for a large company, you may become the victim of cutbacks. After all, businesses have to keep an eye on the bottom line, too. In a recession, many companies find themselves overextended and exposed to risk. To stay afloat, they give themselves more cushion by cutting costs and reducing the size of their workforce.

So, what can you do to prepare for potential income reduction or job loss during a recession? In essence, you should do the same thing that many companies do. You should provide yourself with some “cushion.” This cushion usually takes the form of personal savings. We recommend having at least 3-6 months’ worth of savings on hand (i.e. you could still pay all of your bills and live for 3-6 months without an income). In addition to providing a financial safety net, ample savings give you much more time to make level-headed decisions in the event that you need to make career or life changes.

If you have a lot of debt, a recession can be very impactful, especially if you get laid off or you are making less money. You could end up missing payments and hurting your credit score. For this reason, you should try to save up as much as you can before and during a recession. Additionally, monitor your spending to find areas where you could cut back on non-essential expenditures and, if possible, put any additional funds toward savings or debt payments.

Using the Benefits of a Recession to Your Advantage

Though it is strange to consider, there can be some benefits of a recession. In many cases, a recession can take some pressure off price hikes. For example, housing cost increases could slow down or even reverse during a recession. Part of the reason the Fed is raising interest rates is so that people will spend and demand less, adjusting the supply and demand back to a manageable level. This also brings prices back down.

Moreover, assuming you have the funds and financial security to do it, a recession could also be a good time to invest. This is particularly true if the recession is accompanied by a market correction or a bear market. If you see a significant drop in the value of stocks and you have cash on hand, you can invest at a much lower price (this is called “buying on the dip”).

Get One-on-One Help With Mentoro

You may not know that a recession is on the horizon until it is too late to do much about it. For this reason, you should start preparing for economic hard times now. In fact, it is never too soon to start building a cushion and making yourself less susceptible to risk.

Fortunately, if you are not sure exactly how to proceed, Mentoro can help. In addition to our online tools to help you track spending and savings, we offer one-on-one consultations with experienced financial educators. With our help, you can develop a strong financial plan to prepare yourself for the next recession.

If you want to learn more about how to prepare for a recession, be sure to contact the experts at Mentoro today!