As a 3M employee, you’ve worked hard in your career to reach your current position. But for many, with career success comes little time to focus on financial planning. You’re not alone if you haven’t dedicated the time to getting your finances in order and having a roadmap you can follow to pursue your short and long-term goals.
At Point Wealth Management Group, we have worked with hundreds of 3M employees, helping them make the most of the company’s retirement plan and other benefits and integrating them with their financial planning strategies. Over the course of our years working with so many 3M employees, we’ve discovered that, while all have unique concerns and needs, many face the same five financial planning challenges.
As an employee of 3M, you know that the company appreciates its employees. The 3M retirement plan is truly one of the top plans available. However, are you taking advantage of all that it offers?
Not many realize that the 3M 401(k) plan that is offered through Hewitt is a powerful tax-advantaged savings and investment tool. From a financial planning standpoint, the program is outstanding, especially for new employees just getting started with their retirement savings. Due to its benefits, you may want to contribute more than the automatic 7%.
Additionally, the Roth 401(k) option is perhaps one of the most underutilized portions of the 3M’s retirement plan for pre-retirees. While the Roth was long thought to be a benefit for younger people and not for someone who was in their prime earning years, that opinion has transformed over the years because many expect taxes to increase in the future. By putting money into the 3M Roth 401(k) plan and paying taxes now, you can look forward to tax-free distributions on the principle and growth you have earned once you’re 59 ½.
These are just a few elements of the 3M benefits package that many employees may not realize can significantly help them work toward their ideal retirement.
At a prestigious company like 3M, it’s no surprise that their employee benefits package offers a variety of valuable healthcare and insurance benefits, including an HSA. Health Savings Accounts, or HSAs, are more financially powerful than you may realize. One important benefit of an HSA is that the dollars contributed to this account are never taxed when used for qualified expenses. This offers participants significant savings on healthcare expenses when paid with funds from their HSA.
The HSA is one of 3M’s most valuable financial tools, but employees tend not to max out their accounts because they don’t realize they can save money for the future. For the 2018 tax year, $6,900 is the maximum contribution per family, with those over 55 permitted an additional $1,000 as a catch-up contribution. 3M automatically puts in $1,200 annually on your behalf.
From a financial planning perspective, the plan should be maxed out every year, as medical expenses will occur eventually, even if not in the current calendar year. While your HSA should not be your only retirement savings, since funds are only tax-free for qualified medical expenses. when used in conjunction with IRAs and 401(k)s to pay for non-medical expenses, they can be a very powerful way to build your nest egg. After all, an HSA receives better tax treatment than any IRA or 401(k), whether traditional or Roth.
As you accumulate wealth and build your retirement savings, there is always a risk that your career could end prematurely due to poor health, disability, job loss, or the responsibility of caring for a family member. To protect yourself from this risk, you need to plan for the unexpected.
First, ensure you have adequate disability insurance to protect your income in the event of an illness or disability, especially if you’re a high earner. The 3M benefits package offers both short-term and long-term disability, which is beneficial to take advantage of.
Just like the other facets of 3M’s plan, the life insurance offered goes above and beyond an average company benefit. The company provides annual earnings as a death benefit, whereas most companies only give their employees the minimum amounts required by law.
In addition to the base coverage, there are additional options for additional coverage for an additional premium at a deeply discounted rate, which you may want to discuss with an advisor to see if it makes sense for you. Group life insurance is the least expensive insurance available, and even healthy employees shopping for individual carriers can’t get rates at this level. Family members can also be added to the group plan, and, for basic coverage, there is no proof of insurability required.
And in terms of health insurance, the 3M health plan is considered a very high-quality health plan. 3M fully supports preventative medical visits and promotes healthy lifestyles. However, make sure you’re getting your regular checkups. If you don’t, you will be penalized and pay a higher premium than those who take tangible health precautions. It’s one of the easier ways to maintain a lower premium. Plus, a quick trip to the doctor is wise preventative care as you get older.
With so many risk management options, it’s important to understand what you’re receiving through your 3M benefits package, what you have yet to take advantage of, and what type of coverage you may need to supplement based on your needs and concerns.
As people continue to live longer than ever before, most financial professionals recommend that people plan to enjoy a 30+ year retirement. The longer the retirement, the more you’ll need to save and, for some people, it may mean working longer than they intended. A big concern with retiring early is determining how to cover healthcare costs.
Many 3M employees want to retire early, prior to 65, when Medicare eligibility begins. If you purchase Cobra, you can get coverage under your existing plan for 18 months. But to keep the identical coverage as your group plan through 3M, you need to work until 63 ½. This stipulation used to be crucial, especially for those with preexisting health conditions.
Since Obamacare has been enacted, there are several ways to avoid paying an elevated amount for health care premiums. A significant perk of Obamacare is the removal of rules surrounding pre-existing conditions, and coverage can now be obtained for those with ongoing health issues. Obamacare premiums are based on income levels, so the lower the income, the lower the premium. With proper planning, one can enter retirement with very little income on their tax return, pay minimal health care costs, and still have the income that is needed to keep an excellent standard of living.
However, with a new administration, we don’t know the future of Obamacare, so it’s important to keep a close eye on changing rules and regulations.
Beyond healthcare, 3M employees will need to evaluate their retirement plan, investments, and savings, including how much they’re putting away and how much they’ll need to maintain their desired lifestyle in retirement.
Contributing to a 401(k), especially since 3M matches, is an indispensable piece of your retirement planning. But too often people assume that their plan will fund a majority of their retirement. One report from the Economic Policy Institute estimates that only the wealthiest workers benefit from 401(k)s because they contribute enough to make their plans work.
A 401(k) can serve as an important piece of your overall retirement plan if you coordinate it with your other investments and plans. For most people, your retirement income will come from a combination of sources, including Social Security, investments, savings, and other retirement accounts. Rather than view your 401(k) as the star, consider it an important piece of your overall retirement plan.
To make the most of your 401(k), be strategic in its management and rebalance annually. Furthermore, look into opening a Roth IRA or other investment opportunities that may offer a higher rate of return without extending beyond your risk tolerance.
We believe 3M pre-retirees and retirees often choose to work with us because we are a high-touch and proactive firm. We aim to be someone they can trust to guide them toward their ideal retirement.
Helping so many people in our community drives us every day in our careers. We enjoy meeting with individuals, couples, and families approaching or living in retirement to learn about their goals and see if we may be able to help. To schedule a complimentary financial consultation, or to get a second opinion on your current retirement strategies, contact our office today by calling 715-870-2450.