What workers can do before their benefits are cut
— -- Given all the employee benefits changes, it's vital for all workers — even those with jobs and still-intact perks — to prepare for company cutbacks by stashing away more money, says Brad Kimler, an executive vice president in Fidelity's Benefits Consulting group. "Have a long-term plan."
While it's tough to save enough to pay bills, much less bulk up saving for health care costs or retirement, The Cure for Money Madness author Spencer Sherman, says creativity helps.
"Necessity is the mother of invention," he says. "Maybe you can do more potluck dinners and less eating out, working out with a friend instead of joining an expensive health club, swapping vs. buying clothing, renting out a room in your home."
Among his advice on what not to do: Don't take "huge risks" to recover any losses. "In general, investing in a diversified portfolio with steadier returns has a much higher probability of making more money than concentrating your portfolio in one or two stocks or asset categories."
OTHER TIPS ON COMBATING THE BENEFITS BLUES
If retirement benefits are slashed
One in eight companies have cut their 401(k)/403(b) matches — and another 12% say they'll do that in the next 12 months, according to a February Watson Wyatt survey.
When a match is suspended, employees shouldn't stop adding their own money to a retirement fund, Sherman says. But they should take the extra step of examining options outside the 401(k) — such as a Roth or regular IRA instead — to see if they provide better investment choices.
Retirement expert Alicia Munnell offers up advice that she knows is hard to follow: "In theory, you should actually increase (contributions)" to a retirement account to make up for the lost match, she says.
If employee health care contributions rise
About one-fourth of the employers surveyed by Watson said they'll increase employee contributions to health care premiums during the next year. Another 22% had already made such a change.
Workers who have to pay more should consider other insurance options, says National Association of Insurance Commissioners President Roger Sevigny. For instance, he suggests checking out the price and benefits of a spouse's plan.
Watson Wyatt's Tom Billet says that employees who stick with their company plan should take the time to do some homework before simply picking an insurer. Often, workers pick a high-priced plan without checking out other options, simply because they think it's the best choice. Instead, an employee should focus on the cheapest plan that meets their needs.
"There are a lot of people out there that are willing to pay $110 for $100 worth of coverage," he says. "That's not a good equation."
If severance is pitiful
There's "a lot more wiggle room" than many people think in negotiating a severance package, says Barbara Barra, executive vice president for field sales and operations for human resources consulting firm Lee Hecht Harrison.
Not only can employees ask for more money, they can also negotiate how they receive that money — for instance, in a lump sum or a longer-term payout. In addition, they should haggle to get longer-lasting health and life insurance benefits.
Barra advises employees to not sign any legal documents, or make any rash decisions, on the day they are terminated.
"If you've just been told the news, even if you're expecting it, there is an emotional element there," she says. "Going away and thinking about it gives you a chance to consult a lawyer and prioritize the things that you want to ask for."