By Jonathan Harner, CFP®
You are sitting in one of those meetings where someone is talking about employee benefits. They are reading from the slides, and by the end you are thoroughly confused. So, what options do you pick? Chances are you pick the same options as the one guy who read every line of every document. You figure, he knows what he’s talking about, so if it is good enough for him, it is good enough for you. The only problem is his situation is different from yours; so what’s good for him may not be good for you.
The good news is that as a Textron employee, you have access to a fantastic set of employee benefits. Since it’s likely that up to 30% of total compensation comes from your benefits, it is important to really understand your options and what is best for you. Put another way, if you got a 30% bonus, would you just spend it however one of your co-workers spent theirs?
I’d like to highlight four key benefits that stand out in Textron’s comprehensive package, delving into their unique features and illustrating how they can be optimized for your financial situation.
Your Pension Decisions
While the pension is closed to new employees, this remains one of the best benefits for long-time employees. Your decision on when and how to take it is one of the biggest single financial decisions you will likely make during your lifetime. Like any big decision, there is a lot to consider.
First, should you take a one-time lump sum or should you opt for a steady income stream that lasts the rest of your life? While the allure of a significant lump sum is undeniable, especially when considering potential reinvestment opportunities or immediate satisfaction of spending it early in retirement, it’s essential to weigh this against the consistent, guaranteed income an annuity offers.
On that note: 34% of plan participants who took a lump sum from their pension depleted it within 5 years. Is that the best financial choice? Most likely not. And if you’re worried that you might spend it too quickly and you want to extend the length of your pension benefits, it’s highly worth considering the annuity options over the lump-sum option.
If you do decide to choose the annuity option, you’ll be faced with a number of related questions. Will you want to take the pension over the course of your own life, or the life of yourself and your spouse? If you choose the latter option, it decreases your benefit amount but ensures your spouse receives the payments if you pass away before they do.
Or do you want to receive the pension for a certain period of time (like 10 or 15 years)? That will also change your pension amount, and give you confidence that your early years of retirement will be funded up to whatever amount you receive.
There are a number of other factors to consider, and the right strategy depends on your personal financial circumstances and retirement goals. To navigate these types of decisions, I’d recommend working with an experienced financial planner who can help you make the decision best suited to you.
Health Insurance and Health Savings Accounts (HSA)
Health savings accounts (HSAs) serve as an integral part of many benefits packages, but their full potential often goes unrecognized. In Textron’s case, their contribution to this account makes it an even better benefit. For example, if Textron offers an HSA contribution of $2,000, an employee who is enrolled in a family medical plan has the option to contribute an additional $5,750—or $6,750 for those over age 55. Over a span of 10 years, an individual in the 22% federal tax bracket can accrue tax savings exceeding $10,000 by maximizing this benefit.
There are also some common misconceptions that deter many from utilizing these accounts. Some fear unused funds might be forfeited annually, as they confuse HSAs with FSAs (flex savings accounts). But HSAs allow you to accrue money year over year, and actually let you invest that money so it can grow tax-deferred (as well as be distributed tax-free for a qualified medical expense).
Whether it’s for immediate medical expenses or future medical expenses in retirement, HSAs can be a versatile and vital financial tool.
Maximizing Your 401(k) Contributions
Another common misconception among employees is a belief that merely matching their company’s 401(k) contributions means they are maximizing their retirement savings. While taking advantage of company matches is crucial, it’s just the tip of the iceberg. In 2023, for instance, the contribution limit is $22,500, or $30,000 for those aged over 50. These numbers often exceed what most employees contribute, even when they believe they’re maximizing their contribution. By maximizing these contribution limits, in conjunction with understanding when you want to retire and how much income you want, you can get a clearer picture of how much you need to contribute to move closer to your future goals.
Another overlooked benefit is the Roth 401(k) option, which allows you to make contributions into the tax-free bucket instead of the traditional/tax-deferred route. Unfortunately, some people make the Roth decision based on generalized online advice or casual recommendations, but that isn’t always the most optimal tax planning. The most effective strategy to make the traditional vs. Roth decision involves detailed tax projections on a year-by-year basis that help you understand your future tax liabilities in either scenario. If you haven’t done that, put those projections together (or hire someone to do it for you) so you can make the most informed choice.
Other Miscellaneous Benefits at Textron
Pensions and 401(k) contributions get the most attention, but you should also be aware of Textron’s other miscellaneous benefits. Are you currently maximizing the life insurance coverage available to you? Are you signed up for long-term disability? I often see people neglecting one or both benefits, yet they are so important to your family if something terrible were to happen to you.
Additional benefits include matching gifts to qualifying non-profits and educational assistance programs. Set aside the time to comprehensively review and optimize these benefits.
Unlock the Full Potential of Your Textron Benefits
Your benefits package at Textron is more than just a reward for your hard work—it’s a cornerstone for your financial stability and future. While this guide provides insights into some key Textron benefits, it’s crucial to remember that everyone’s financial decisions are unique. What best serves one person might differ for another.
Before making these pivotal decisions, consider partnering with a financial professional who can tailor advice to your unique situation. If you’re feeling uncertain or just want to feel confident you’re maximizing every opportunity, I’m here to assist. To begin this journey, feel free to reach out for an initial 15-minute consultation. Connect with me at 316-722-1010 or email me at jonathan@wichitawealth.com.
About Jonathan
Jonathan Harner is a CERTIFIED FINANCIAL PLANNER™ practitioner at Wichita Wealth Management, a fee-only, fiduciary financial advisory firm dedicated to helping their clients thoroughly prepare for retirement. Jonathan’s goal is to simplify the complex so his clients can experience confidence and peace of mind as they work toward and live out their retirement dreams. He specializes in developing and implementing tax strategies that maximize his clients’ money and builds a tax-efficient withdrawal plan for retirement. Jonathan loves finding opportunities for his clients to save money and is dedicated to continual learning and growing in his profession so he can provide solutions for his clients’ financial needs. When he’s not working, you can find Jonathan spending time with his wife, Annie, and their daughter, staying active in his church community, and participating in his two favorite (but vastly different) hobbies: CrossFit and Dungeons & Dragons. To learn more about Jonathan and how he can help you, connect with him on LinkedIn.