/// By Jake Cole
When considering workplace compensation, most people focus on their salary and maybe a 401(k) plan, without much thought beyond that. But today’s workplace benefits can go much further with valuable tools for building long-term wealth that are often overlooked or underused.
If you’re not taking full advantage of your benefits package, you could be leaving serious money on the table.
In this blog, we take a look at a couple of the underutilized compensation options and how they might better answer the wealth building needs of you and your employees.
Hidden Gems in Your Benefits Package
Beyond equity and salary, many employers offer less obvious but potential high-value options:
- Health Savings Accounts (HSAs): Are essentially personal savings accounts for qualified medical expenses that offer tax-deductible contributions, tax-free growth, and tax-free withdrawals for an efficient means to pay for future healthcare needs.
- After-tax 401(k) contributions: Are a way for big savers to increase contributions to a 401(k) beyond the standard limit, using money that has already been taxed.
- Mega Backdoor Roth: Similarly, a mega backdoor Roth IRA allows high-income earners to use after-tax contributions to put more into Roth IRAs and Roth 401(k)s than the standard limit to maximize growth potential before taking tax-free distributions.
- Employee stock purchase plans (ESPPs): Are optional programs offered by publicly traded companies that allow eligible employees to purchase company stock at a discount, usually between 5% and 15%.
These tools and others can play a key role in a tax-efficient wealth-building strategy when thoughtfully integrated into your overall financial picture.
The Overlooked Power of Stock Options and Deferred Compensation
Equity compensation, such as stock options or restricted stock units (RSUs), can be a powerful lever for wealth accumulation if managed wisely. Likewise, nonqualified deferred compensation (NQDC) plans can offer significant tax deferral opportunities for high earners.
The challenge is that these tools can be complex and require closer management than many companies have the internal bandwidth for. Without thoughtful strategy, you could end up with an unexpected tax bill, or miss out on opportunities to align your compensation with broader financial goals.
A comprehensive financial plan and management approach helps to:
- Decide when and how to exercise options
- Adjust for concentrated stock risk
- Time deferred compensation distributions to minimize tax impact
Why You Need a Holistic Financial Plan
Maximizing workplace benefits isn’t just about checking boxes, but should be focused on coordinating each piece to support your specific goals. A holistically focused financial advisor outside of your HR team can often be the key to designing an approach to meet your specific plan and risk tolerance:
- Evaluate how each benefit fits into your financial roadmap
- Optimize tax strategy across income, savings, and investments
- Avoid costly mistakes from poor timing or lack of proper management
At the end of the day, your benefits should work as hard as you do to meet the direct needs of your stage in life and the future you want.
Build the Plan That Works for You
If you’re ready to take a more intentional approach to your compensation and benefits design, now is always the right time. Don’t leave money on the table. Let’s create a personalized wealth strategy that is optimized for your goals and works efficiently to reach them on your terms.
