Tips to optimize this year’s open enrollment season

by Sarah Hodge, CFP®

Open enrollment is easy to treat as a routine workplace task: review last year’s selections, click through the employer portal, and move on. It’s worth more attention than that, because these choices touch cash flow, taxes, retirement savings, and how well you’re insured against the unexpected. That makes open enrollment a natural financial planning checkpoint.

Start with the basics: pull up your employer’s enrollment materials, plan summaries, and payroll information, and have a few questions ready for HR. Then think about what’s actually changing for you this year: a new job, a marriage or divorce, a child, a move, a change in income, or a change in a spouse’s coverage. That’s what should drive your elections.

As you review your options, focus on four key areas.

1. Health insurance

Health insurance is usually the first decision people consider, but the mistake is focusing only on the premium. A lower-cost plan often comes with a higher deductible, a narrower provider network, greater out-of-pocket exposure, or less favorable prescription drug coverage. Dental and vision coverage should also be reviewed separately, since they are often unbundled from medical coverage.

If you expect limited medical expenses, a high-deductible plan can be a good fit, particularly if it allows you to contribute to a Health Savings Account (HSA). A high-deductible plan assumes you could cover the full deductible if a significant expense arises, so it works best alongside a well-funded emergency fund. If you manage a chronic condition, expect a procedure, or anticipate significant prescription or specialist needs, a plan with higher premiums but lower out-of-pocket costs may better serve your household. Employer comparison tools and online calculators can help you estimate the total annual cost of each option.

2. HSA or FSA

Once you choose a health plan, your HSA or Flexible Spending Account (FSA) options become clearer. HSAs require enrollment in a qualifying high-deductible health plan, and you generally cannot contribute to both an HSA and a general-purpose healthcare FSA in the same year.

For 2027, the IRS has set HSA contribution limits at $4,500 for self-only coverage and $9,000 for family coverage, plus a $1,000 catch-up contribution for individuals age 55 or older. The 2027 healthcare FSA limit has not yet been released; for now, the confirmed 2026 limit of $3,400 is a useful planning reference. Dependent care FSAs are separate: the limit is currently $7,500 for single filers or married couples filing jointly, and $3,750 for married individuals filing separately.

The key difference is how the accounts work over time. HSA dollars roll over and can be invested, so they support both current and future healthcare expenses. FSA dollars are generally “use it or lose it” within the plan year, though some employers allow a limited carryover or grace period.

Before choosing a contribution amount, think through what you’ll likely spend on prescriptions, orthodontia, contact lenses, or a scheduled procedure. Also review your plan’s eligible-expense list. These accounts generally cover more than many people assume, including over-the-counter medications, sunscreen, thermometers, blood pressure monitors, and other health-related items.

3. Life and disability insurance

If your life has changed, your insurance elections should be reviewed. Marriage, divorce, the birth or adoption of a child, a home purchase, a change in income, or updated estate planning goals can all affect how much life insurance you need and who should be named as beneficiary.

Employer group life coverage provides a useful foundation, but it is often not enough on its own. Group coverage is frequently tied to a multiple of salary, may not continue if you leave your employer, and may not match the liquidity your estate plan assumes. Reviewing workplace coverage alongside any individual policies you own, as part of an annual insurance review, helps close gaps and avoid paying for overlapping coverage.

Open enrollment is also a good time to confirm that your beneficiary designations on insurance policies, retirement accounts, and HSAs are current and coordinated with your broader estate plan.

Disability coverage deserves the same attention. For many people, the ability to earn income is one of their most important financial assets. Short-term or long-term disability coverage helps protect against the financial impact of an illness or injury that limits your ability to work. Many group long-term disability plans replace only a percentage of base salary up to a monthly maximum, and some exclude bonuses or incentive compensation. For higher earners, that can leave a meaningful gap, so supplemental coverage may be worth evaluating.

It is also important to understand how disability premiums are taxed. If premiums are paid with after-tax dollars, benefits are generally received income-tax-free if you make a claim. If premiums are paid by the employer or with pre-tax dollars, benefits are generally taxable. Some employers let you choose how premiums are paid, and plan rules vary, so review your options carefully and consult a tax advisor as needed.

4. Retirement contributions

Open enrollment is also a natural time to revisit retirement savings. Depending on your plan, you may be able to change your contribution rate at other points in the year, but reviewing it alongside your other elections keeps the full picture in view. Start by confirming that you are contributing enough to receive the full employer match. Otherwise, you leave employer-provided retirement savings on the table. If you expect to reach the annual contribution limit early in the year, check whether your plan provides a year-end “true-up” of the match. Without one, front-loading contributions could reduce the match you receive.

Beyond that, review whether your contribution rate still fits your cash flow, especially if your income, expenses, or savings goals have changed. If your plan offers both traditional pre-tax and Roth options, consider whether your current allocation still makes sense. Traditional contributions reduce taxable income today, while Roth contributions use after-tax dollars and can provide tax-free qualified withdrawals later. The right approach depends on your current tax rate, expected future tax rate, time horizon, and broader retirement strategy. Holding both pre-tax and Roth savings can also give you more flexibility to manage taxable income in retirement.

Catch-up contributions for higher earners

If you are 50 or older, note a SECURE 2.0 change that took effect in 2026. Employees whose prior-year FICA wages from their employer exceeded an inflation-indexed threshold ($150,000 for 2026 contributions) must make any catch-up contributions on a Roth basis. If your plan doesn’t offer a Roth option, you may not be able to make catch-up contributions at all, so confirm how your plan handles this before finalizing your elections.

How open enrollment fits into your broader financial plan

Open enrollment decisions do not happen in a vacuum. For individuals and families with trusts, concentrated assets, or multigenerational planning goals, benefit elections can intersect with estate planning, tax planning, liquidity needs, and long-term financial security. Pre-tax HSA, FSA, and retirement contributions, for example, reduce taxable income in the current year, which can be especially valuable in a year with a large bonus, equity compensation, or another income event.

Taking time during open enrollment helps ensure your benefits support both your near-term household needs and your broader financial plan. At Nixon Peabody Trust Company, our advisors work alongside Nixon Peabody attorneys and tax professionals to help clients coordinate decisions like these within a single, integrated plan.

Frequently asked questions:

Why should I treat open enrollment as a financial planning checkpoint?

Because your elections affect cash flow, taxes, retirement savings, and insurance protection, not just healthcare.
What should I review before open enrollment starts?

Your employer’s enrollment materials, plan summaries, and payroll information, plus any life changes such as marriage, divorce, a new child, a move, or a change in income

How can open enrollment elections help reduce my taxable income?

Pre-tax HSA, FSA, and retirement contributions lower current-year taxable income, which is especially valuable in a year with a large bonus or equity compensation.

Should I choose traditional or Roth 401(k) contributions?

It depends on your current and expected cash flow needs, future tax rates, time horizon, and retirement strategy; holding both adds flexibility to manage taxable income in retirement.

How does the SECURE 2.0 Roth catch-up rule affect high earners?

Since 2026, employees 50+ whose prior-year FICA wages exceeded $150,000 must make catch-up contributions on a Roth basis and may not be able to make them at all if their plan lacks a Roth option.

Can an HSA be used as a long-term investment account?

Yes. If you can pay current medical costs from cash flow, you can invest HSA balances and let them grow tax-free for healthcare costs in retirement.

Sarah Hodge, CFP®
Trust Advisor
Office: +1 617.345.1158
shodge@nixonpeabody.com