Because of this, we’ve developed an in-depth understanding of WE Energies as a company — and the considerations employees need to take into account when preparing for their retirement.
Today, we’ve compiled all the great insight we’ve learned to share our top retirement strategies for WE Energies employees.
And if you’re not a WE Energies employee, don’t worry! Many of these strategies also apply to those who work at publicly-traded companies and have company stocks and/or a pension.
Look Into the Value of Your Pension
Believe it or not, but your pension isn’t as simple as the number on your retirement statement. While that number might tell you the lump sum value of your pension, the reality is that lately taking the lump sum tends to be one of the lowest value ways to take out your pension.
Your pension could be calculated and paid out in a number of different ways. That’s why you have to do even more digging to find out how your pension can change based on different factors. Plus, doing a bit of digging will also help you figure out which option will help you maximize what you get.
To do this, we believe in doing the research and running different scenarios based on your retirement date and age to find the best option for you.
Sign-Up for Your Pension
Another important thing to remember when it comes to your pension is to actually complete your pension start form.
Some people think that all you have to do is talk to HR and tell them that you’re good to go with your retirement and pension — but you don’t automatically start receiving your pension when you file for retirement.
At WE Energies, HR doesn’t start your pension for you. Instead, you have to go through a place called Fidelity NetBenefits.
So when you fill out your forms to retire, remember, it does not start your pension. Make sure you start your pension when you want to. If not, you might miss out on some income when you expect your pension to start at a specific time but end up having to wait longer because you forgot to fill out that form.
Look Into Your Sick Leave and Vacation Benefits
When it comes to your sick leave and vacation benefits, there could be some benefits that you could take advantage of — especially if you’re part of a local union.
While some people lose their sick leave and vacation benefits once they retire, some companies give their employees the opportunity to have their sick leave and vacation benefits moved over to something called a premium medical account. At WE Energies, this benefit looks to be one that was negotiated into the retirement packages by the local unions.
With this account, you can take your benefits and move it tax-free into the account to use later on to pay your medical premiums — plus, when you reimburse yourself for your insurance premiums, it’s also tax-free.
This is something that is worth finding out ahead of time if you can do. There are some rules and cutoffs around these accounts, for example, if you don’t have enough sick leave and vacation used up, you can’t do them. By finding out ahead of time, you can do some planning and perhaps save up your sick leave and vacation so that you get this benefit instead of losing out!
Sign Up For Health Insurance
Just like with pensions, many people believe that health insurance costs will automatically come out of their pension — especially since health insurance costs usually come out of your paycheck during your working years.
While a lot of pensions actually do work like this, WE Energies’ doesn’t.
Instead, WE Energies will send you a form that tells you how to pay for your insurance and you can then go online and sign yourself up. It’s not an automatic thing. You have to sign up for it and pay for your health insurance benefits yourself.
So, be sure you don’t forget and you have the coverage you need, because if you don’t pay for your health insurance you eventually won’t have health insurance!
Take Advantage of Your Employer Stocks
If you work at WE Energies or a publicly-traded company you likely have company stock as an option inside your 401(k) - sometimes the company even does their employer match in their own company stock!
If you have these stocks in your 401(k), there’s a little known tax rule that could be a huge tax benefit to you, called net unrealized appreciation.
This rule is a way to take stocks outside of your 401(k) and have part (or all) of it switched over to long-term capital gains rates. With this, you can switch the taxes on these stocks from one area called income taxes (which are higher), to another area called capital gains (which are lower).
We’ve found that those who take advantage of net unrealized appreciation typically find more success with their retirement plan. Why? Because net unrealized appreciation is such a huge benefit. To be able to take money that will have income tax rates of 10% to 37% and switch it down to capital gains rates, which could be 0% to 20%, is huge.
In addition, if you’re somebody who has enough money to leave some behind for your kids or grandkids, everything in your traditional 401(k) or traditional IRA will be entirely income taxable to those who receive it.
However, if you did an analysis and found out that taking some of that money outside of your 401(k) or traditional IRA to grow is the best way to go, then when you pass it onto the kids, that money that grew outside of those accounts will be passed on tax-free. This is something called a step-up in cost basis.
Exercise Your Stock Options
In addition to company stock, many people who are in middle-upper management also have stock options.
When you have a stock option, you don’t actually own the stock. Instead, you have the right to buy or sell a stock at a certain price and date.
Plus, if you have stock options for a company like WE Energies, whose stocks pay dividends, while you have the option, you don’t own the stock — and that means you don’t get the dividend.
That’s why we believe that a good thing to do is to look into when you can actually exercise these options to make sure you’re not missing out on dividends.
Run Your Retirement Scenarios
Before you retire, we recommend that you run different scenarios to maximize each element of your retirement. For example, with your pension, run various scenarios and get an estimate of the ways your lump sum and your monthly pension will change depending on the age that you take it.
By doing this, you can find different times to max everything out in a way that is right for you and your circumstances. And remember, the way you can max your pension or 401(k) out might be completely different than how your co-worker who retired from WE Energies before you did. Why? Because the rules can change, or they may have been hired in a different year with different rules, or oftentimes corporate employees have different rules than unionized employees have.
Even if you weren’t charitably inclined before retiring, or were just a little bit charitable, if you’re a WE Energies employee, you might want to consider being the most charitable you’ve ever been in the first 12 months after you retire.
Why? Because some big companies like WE Energies have an employer matching gifts program. With these programs, if you give money to a nonprofit, the company or their foundation (which for WE Energies is the WE Energies Foundation), will match that contribution. They’ll even do this when you retire, but only for the first 12 months.
At WE Energies, the maximum amount for giving in 2020 is $20,000. So if you’re someone that’s looking to get charitable, you can do it in the first 12 months and get your money doubled.
Look into the Stable Value fund of your 401(k)
Many companies have an option in their 401(k) that pays you a set interest rate. This option is only allowed inside of 401(k) plans and is called a stable value fund. At WE Energies they have named their stable value fund the blended-rate income fund (BRIF). While the name is somewhat unique to WE Energies, it’s really a stable value fund and you may want to look into it as you approach retirement.
This is a type of investment available in 401(k) plans that are designed to be a stable investment by paying out interest payments regardless of the economy.
When you hit retirement, you might need some short-term or interest-rate-type money. And a lot of the time, stable value funds actually pay a higher interest rate than what you could find at the bank. So when you’re trying to figure out what’s inside your 401(k), it can be worthwhile to take a look at the WE Energies blended rate income fund (BRIF).
If you’re outside of WE Energies, we also recommend that you find out what the stable value fund is and whether you can get a better interest rate inside of your 401(k) than you could anywhere else.
Now, a quick word of caution - make sure you are aware of your 401(k) plan’s ‘distribution options.’ At WE Energies you are only allowed to take money out once every 90 days. We’ve seen some plans that only allow you to take money out once per year, or even once in your lifetime!
Assess Your Executive Compensation
Many WE Energies executives are able to delay taxes on their income through deferred compensation. This is where you earn your income now, but you defer receiving it until later on. It’s similar to a 401(k), but you don’t pay taxes on it today — you pay it later.
Inside of the WE Energies deferred compensation plan is something called the prime rate fund. This is something you might’ve heard about with your home equity lines of credit or car loans. With this, you can receive a prime interest rate, which might be 3% or 4%. This could be a good option to look into if you’re somebody who wants short-term money before and into retire with good interest rates.
So, as you’re getting ready for retirement, whether you’re with WE Energies or another company, we believe you should be digging into your 401(k), your pension, your benefits, and sick leave, and your deferred compensation or stock options.
There could be some amazing value and benefits sitting right there with what you already have, and we don’t want you to miss out on it — instead, we want you to maximize it for your ideal retirement.
If you’d like to learn more about our planning considerations for WE Energies employees, be sure to check out our retirement checklist at WEEnergiesRetirement.com.
You can also reach out to us today on our contact us page to speak to us about how we can help you!
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