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Do Real Estate Agents Get Benefits?
Real estate agents who work with a brokerage may receive benefits as a part of their agreement, but they usually do not. In many ways, agents function as self-employed contractors who partner with the brokerage but are expected to share a portion of their commissions or pay fees to the brokerage. Some brokerages are starting to offer group health insurance or retirement plans to gain interest among new agents. As a general rule, agents can expect that they will need to explore options on their own.
How Real Estate Agents Get Benefits
Real estate agents can get benefits through a variety of possible paths, including:
- Purchasing individual coverage for agents and their families
- Getting coverage through a spouse or family member
- Signing up through the REALTORS® Insurance Place, for members of the National Association of REALTORS®
- Paying premiums into a group plan through a brokerage
- Getting a second job that offers benefits
The best route to take depends on the agent and their needs. The largest plurality of agents gets their health insurance by paying for their own plans. A smaller percentage of agents get benefits directly through their brokerage or through a spouse or family member who is eligible for family coverage through their place of employment.
For retirement planning, the breakdown of agents' options is fairly similar. Most agents either don't have a retirement savings plan or open their own with a bank or credit union. Others have the option to open a plan at their brokerage, or they might rely on the savings plan offered to a spouse. Agents who aren't sure which one they should choose may want to consult their banking institution for options.
Investment Accounts for Real Estate Benefits
Real estate agents often don't get a retirement plan through their brokerages for the same reason they often don't get health insurance that way. They are allowed to set many of their own terms of employment, and the unpredictability or instability of income may make scheduled contributions to a retirement plan more difficult. However, agents still have a variety of options they can consider. Each one has benefits and drawbacks, so it's important to evaluate them before making a choice. Agents may also choose more than one as a way to provide a diversity of retirement income sources.
Roth IRA
A Roth IRA is a type of IRA that is ideal for agents at the beginning of their careers and those who don't have a high income. This independent retirement account relies on after-tax earnings, so agents who contribute aren't eligible for a tax deduction on those deposits. Agents can only deposit up to $6,000 per year, or $7,000 once they reach age 50, although this option phases out for single filers with an annual income above $125,000. The benefit of a Roth IRA is that once they reach retirement age, they can withdraw their earnings tax-free.
Traditional IRA
A traditional IRA makes more sense for people who have a higher income and those looking for reasonable tax deductions. A traditional IRA has the same contribution limits as a Roth IRA, although that limit applies to the total contributions across all IRA accounts. Traditional IRA contributions may be eligible for a tax deduction in the year they're made, although there are a few exceptions. In some cases, agents can withdraw a portion of their IRA contributions to pay for a home purchase. At retirement, the earnings from this IRA will be taxed at that year's rate.
Solo 401(k)
A solo 401(k) may be a good option for self-employed agents who do not have any employees. Contributions to these plans are generally pre-tax, which means they lower an agent's adjusted gross income on their taxes. Agents can contribute about $20,000 each year, or $26,000 if they are over age 50. With a solo 401(k), agents may also be able to make additional contributions based on their earnings minus half of their self-employment tax. These plans can help agents build retirement savings more quickly, which is ideal for those who reach middle age without a lot of savings.
SEP IRA
A simplified employee pension (SEP) IRA is similar to other types of IRAs, with a few key differences. It's more like a pension that an employer contributes to, instead of a savings account that an employee can choose to use or not. Whatever the employer contributes is the percentage that applies to each employee. Agents can contribute up to 25% of their compensation or $58,000, whichever is less. It's ideal for businesses with either no or just a few employees, which means it's a reasonable choice for agents. SEP IRAs may make it easier to save faster than other types of IRAs.
Getting Insurance from REALTORS® Insurance Place
Agents who are also REALTORS® may want to consider REALTORS® Insurance Place as they pursue options for insurance coverage. Since most agents do not have the ability to get coverage on a group health plan through an employer, the REALTORS® Insurance Plan offers assistance and possible discounts on individual insurance plans. This option is only available to agents who are also members of the National Association of REALTORS®. Current membership is required to sign up or remain in the program.
REALTORS® Insurance Place provides information, including price quotes and coverage details, for various types of insurance:
- Health insurance
- Medicare supplement
- Supplemental insurance
- Dental
- Vision
- Prescription discount cards
All plans meet standards set by the Affordable Care Act for minimum coverage requirements. The chief aims of the program are to identify plans that are popular for NAR members, help members determine their coverage needs and sort through their plan options, and sign up for coverage within the right enrollment periods. Since these are individual plans, coverage options and costs are highly dependent on the agent and whether or not they need family coverage. Qualified agents may want to compare these prices with other research before they make a decision.
Other Insurance Providers
There are a variety of possible providers that real estate agents can use to get insurance. They may choose to look on the exchanges to buy individual insurance plans, and some might qualify for subsidies based on income. Group health plans, when available, can offer better coverage at a lower price.
HealthCare.gov
Using HealthCare.gov to get health insurance is most commonly referred to as "the health insurance exchange." Within this environment, agents have the ability to:
- Browse a variety of plans available in their state
- Compare premiums across plans
- Evaluate coverage options and service areas
- Sign up for coverage
Options with higher coverage usually cost more. Low-cost options may have high deductibles and out-of-pocket maximums. Plans for health, vision, dental, and disability usually involve separate coverage, so agents will need to pursue them individually. Agents can sign up during an annual enrollment period or whenever they lose access to their current insurance.
Premium Tax Credit Health Insurance Subsidy
Agents may be able to lower their premiums for insurance plans purchased on the exchanges through the premium tax credit health insurance subsidy. This subsidy presumes that people with low or modest incomes may still need to get health insurance through the health insurance marketplace. As a general rule, the subsidy applies to agents with a taxable income at 100% to 400% of the federal poverty level. It comes as a discount on monthly premiums. People who qualify for a larger credit may be able to claim the excess on their taxes.
Group Health Plans
Group health plans spread out the risk of high health care claims, which often lowers the cost. In most cases, people get access to a group health plan through their employer. Brokerages may also choose to offer a group health plan as a way to entice new agents to sign up or current agents to stay. The plan owner selects the coverage for the group, and the insurance company sets annual premiums. Employers can also choose to pay a portion of the premiums or pass along all costs to members of the group.
Types of Insurance Agents May Want
Although most people think of health insurance first for coverage, there are several different types of insurance. Each one has its own coverage and premiums. By comparing options, agents can make choices that will work best for them.
Health Insurance
The average health insurance plan for an adult costs about $500 per month. Premiums vary widely depending on the level of coverage and location, with high cost-of-living states usually charging more. This insurance provides coverage for preventive check-ups, emergency or urgent care, and prescriptions.
Dental Care
Dental insurance costs about $15 to $50 per person per month and covers at least a portion of dental care. Regular exams and basic fillings are usually covered, as are occasional x-rays or other imaging. Crowns, root canals, implants, and other major dental procedures may have higher copays or coverage limits.
Vision Care
Vision care costs $5 to $15 per month for most people. Vision insurance may be more important for people with vision concerns. Some health insurance plans cover annual eye exams. Vision care often includes an allowance for glasses and discounts on expensive vision correction procedures like LASIK.
Disability Insurance
Disability insurance usually costs 1% to 3% of a person's income as an annual premium. Disability insurance supplements a portion of a person's current income as a way to help them pay bills during a short-term or long-term period of disability. Coverage depends on a person's age and income.
Being a real estate agent offers a lot of freedom, which can feel a little daunting when it comes to finding benefits. Most agents aren't offered health insurance or retirement savings through a brokerage, so they must look for other methods to access those benefits. Options depend heavily on the location and the type of coverage agents expect, so they may need to sort through a lot of plans before they find the right one. Making this investment can make it easier to get health care and prepare for eventual retirement.
