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You can avoid nasty surprises if you know how things work.


If you’re self-employed, don’t have a job, or your employer doesn’t provide healthcare insurance, there are still ways to find affordable coverage. Many college alumni associations offer plans to recent grads, and professional associations and other organizations sometimes offer affordable group plans that are as reasonably priced as an employer’s plan.

If you don’t have access to any of these options, it’s sometimes possible to be covered under a parent’s plan until you turn 26. And of course, you can buy an individual policy, although you’ll pay a considerably larger premium.

If saving money on healthcare costs is more important to you than having everyday care covered, you might want to consider a high deductible health plan (HDHP) or a major medical only plan. The high deductible brings down your premium, so you’ll be able to protect yourself from major medical expenses without spending lots of money.

But be aware of what you’re getting into by adopting this strategy. If you end up having a lot of small- or mediumlevel medical costs, your checkbook may need even more care than you do. This type of insurance doesn’t usually kick in until you’ve spent $2,500 or sometimes more.


You might be tempted to have too much of your salary withheld deliberately so you’ll get a substantial refund when you file your tax return. Getting the check might feel good and might justify a vacation or give you the down payment on a car. But think about it this way: Uncle Sam has had free use of your money for up to 15 months. And you get back only the amount you put in. If you’re afraid you won’t save regularly on your own if you have a chance to spend the money first, ask your employer about having a certain percentage deposited directly into an investment or savings account. That way, the money has the potential to grow.


Some employers offer employee stock ownership plans (ESOPs). An ESOP is a trust to which the company contributes shares of newly issued stock, stock the company owns, or the money to buy stock. The shares go into individual accounts set up for employees who meet the plan’s eligibility requirements.

An ESOP can be part of a 401(k) plan or separate from it. If it’s linked, your employer may match your contributions to the plan by adding shares to your ESOP instead of cash to your investment account. The one drawback is that a large percentage of your total retirement portfolio may be in a single investment—your employer’s stock. That can make it harder to keep your account diversified, though it’s not a good reason to turn down the opportunity to participate in the plan.

If you leave your job, you have the right to sell your shares on the open market if you work for a publicly held company or back to the ESOP at fair market value if you work for a privately held company.


Each employer sponsored retirement plan may have slightly different rules about how you qualify to participate.

At some jobs, you can start contributing with the first paycheck you receive. At others, you sometimes have to complete a waiting period, sometimes as long as a year, to be eligible. Once the year is up, you may also have to wait for the next enrollment date, such as the beginning of each quarter or twice during the year. In the meantime, you can be putting the money you’d contribute to the plan into an IRA.

If you’re changing jobs and want to roll over the assets from your former job, ask if the waiting period must apply. Some plans are more flexible than others and have a shorter waiting

period for rollover assets. If you have to wait, you can open a rollover IRA for your old plan assets and contribute to a traditional or Roth IRA during the waiting period.


You may be able to borrow against the assets you’ve accumulated in your employer sponsored retirement plan. You generally have to repay the principal plus interest within five years.

There are some advantages to borrowing from your plan. There’s no credit check, there’s usually no delay in arranging the loan, and the interest you pay ends up in your account.

But there are limitations.

The amount you can borrow is capped, so you may not be able to access enough money to meet your needs. You may have to pay a substantial fee to arrange the loan. And you rarely earn as much from interest you pay back as you would if your account value was fully invested.


If you start making more money, should you change your withholding? The answer depends on whether anything else is changing in your life.

If you’re starting a second job—especially a freelance one where taxes aren’t withheld by your employer—you may want to increase withholding at your first job to cover the taxes you’ll pay on this new income stream. Or if your marital status changes—say, if you get married and move and take a higher-paying job—you’ll want to update your W-4. But if you’re just making more at the same job, the amount of money you’re having withheld will increase proportionally to your new salary, so you don’t need to adjust anything.

A potentially larger problem looms if you leave your job for any reason during the term of the loan. You’ll probably have to repay the full amount within 30 to 90 days of your departure. If you don’t, you’re in default and the remaining loan balance is considered a withdrawal, subject to income taxes and early withdrawal penalty.