Money Matters

Raytheon Technologies 401(K): 3 Scenarios Employees Should Consider

Comprehensive retirement planning involves managing factors such as market fluctuations, inflation, or an unexpected income change in your family. These situations may feel concerning, especially for your long-term savings and financial future. So it’s natural to think you should proactively do something to mitigate the risk. However, it’s imperative to avoid hasty or reactive decisions that may affect your retirement plan or overall financial picture. For example, specific issues can impact important goals, such as your target retirement date, but can generally be avoided with a disciplined approach and financial plan in place. Still, you may wonder if your situation warrants action.

Should I Make Changes to My Raytheon Technologies 401(k)?

When change arises, clients often wonder what they can do to reduce their risk or optimize their strategies, such as adjusting their financial or retirement plans during high inflation. The answer is unique to everyone and depends on your individual financial situation, risk level, and goals. As a general guideline, you should first review your circumstances and concerns with a financial advisor who can help you explore other retirement planning scenarios and offer suggestions, such as making shifts or staying the course. Another essential component is to partner with a professional who understands the features and mechanics of your particular employer-sponsored retirement plan, which may present additional factors to consider.

For example, as financial advisors in San Diego, we often consult with Collins Aerospace  employees, the division of Raytheon Technologies located here and we are familiar with the Raytheon Technologies (RTX) 401(k) plan. We’ll discuss three typical scenarios and the related actions you should consider if you’re evaluating your Raytheon retirement plan.  Additionally, there have been some key changes to the plan that went into effect recently.

Raytheon Technologies 401(k) Situation #1

Employee Financial Situation and Characteristics:

  • You still have some working years ahead of you.
  • You have fully funded your emergency savings.
  • You have a financial plan and cash set aside for any upcoming large expenses.
  • You find yourself with more than enough cash.

Retirement Plan Action to Consider: Maximize Your Raytheon Retirement Plan

If you are not currently maximizing 401(k) contributions, consider increasing to a point that does not strain your cash flow. 

  • Buy more stocks: Consider buying more stocks when prices go down as a normal part of the market cycle, which better positions you for the eventual recovery. There are additional considerations and common mistakes to be aware and avoid if you hold company stock
  • Maximize 401(k) contributions: Maximize 401(k) contributions by contributing up to $22,500 if you are under age 50 or up to $30,000 if you are 50 or older (2023 limits).
  • Leverage the Raytheon 401(k) match: Currently, RTX matches up to 4% of your salary for up to 6% of your pay period contributions as shown below:

Additionally, they offer company retirement contributions, if you are not actively accruing a pension benefit, which are based on your age as of December 31st of each calendar year.  This can be up to an additional 7% per pay period or more in some cases.  You receive these additional contributions whether or not you contribute to the Savings Plan.

Consider excess 401(k) contributions and Roth conversions on eligible balances:
            The Raytheon Technologies 401(k) allows after-tax contributions beyond the above limits.

      • This option allows you to contribute a total of $66,000 in 2023 by aggregating the employee contribution, employer match, and excess contributions.  Reach out to CCMI if you would like a review of your paystub to determine the amount of the excess contribution based on your specific situation.
    • RTX Savings Plan participants may convert some or all of their eligible balances to a Roth account. Roth account withdrawals are tax-free and there are no required minimum distributions (RMDs) at age 73 such as those on pre-tax 401(k) contributions, which are fully taxable.
    • Please note legislation may alter this option in the future.
    • You want to be mindful of not exceeding total allowable contributions and determine if the benefits team will automatically stop contributions once you’ve reached the limit.
  • Review your RTX investment allocation: Ensure your mix is diversified and aligned with your long-term goals. Additionally, you can take advantage of net unrealized appreciation (NUA), a tax savings strategy if you have RTX stock in your Raytheon 401(k). Consider how much company stock you have, as you want to limit your exposure to any one company, especially the one where you are employed.

Raytheon Technologies 401(k) Situation #2

Employee Financial Situation and Characteristics:

  • You feel the impact of factors such as higher inflation on your bottom line. 
  • You have a funded emergency savings but you may not have any surplus cash. 
  • You may have put a hold on any large upcoming expenses. 
  • The current market and economic conditions have been weighing on you.

Retirement Plan Action to Consider: Stay the Course

  • Continue leveraging the Raytheon 401(k) match: Consider continuing to contribute to your 401(k) of at least up to 6% of your salary so the free money from Raytheon’s match is not left on the table. 
  • Maintain your allocations: If you already have a balanced allocation that is aligned with your long-term goals, continue to target this allocation. If not, consider reaching out and CCMI can assist with finding the right balance using the funds available in your RTX plan.

Raytheon Technologies 401(k) Situation #3

Employee Financial Situation and Characteristics:

  • You feel very stressed and may be losing sleep over current market and economic conditions.
  • You do not have emergency savings, or it is running low. 
  • Other unanticipated expenses have come up, and you require more cash.

Retirement Plan Action to Consider: Temporarily Change

  • Reduce your RTX 401(k) contributions: If you have been contributing to your 401(k), you may need to reduce your contributions temporarily to help see you through this period.
  • Avoid early 401(k) withdrawals or “going to cash.” Stocks do not fall to the ground nor do they grow to the sky. Change is a normal part of the market cycle, and it’s normal to feel uneasy. Now is the time to stay put unless you have a unique situation that requires a change to your allocation.
  • Reassess periodically. If you are unable to stay the course and end up making changes to either your contribution or allocation, schedule reminders to reassess your situation. Market turnarounds happen quickly, and it would be unfortunate to miss out on any growth for too long. Think about the Global Financial Crisis of 2008,; in hindsight, it would have been a good decision to stay invested as you would have missed out on the market appreciation since then had you “gone to cash.”

Other Retirement Planning Challenges

Your 401(k) is a significant piece of your comprehensive financial plan, and decisions around it should not be taken lightly. Other retirement planning challenges we typically see include:

  • Underfunding or overfunding
  • Misalignment of the allocation with goals
  • Improper levels of risk in both directions
  • Overconcentration of company stock

We Understand the Raytheon Technologies Retirement and Benefits Plan

We’re uniquely positioned to help Raytheon Technologies employees, which includes Collins Aerospace employees, navigate their RTX  retirement and benefits. CCMI principal and owner Kim Benson, CFP®, CPA, CeFT® is a previous employee, familiar with the RTX 401(k) plan. She often advises prior colleagues regarding the program and shares her insights into common 401(k) situations Raytheon Technologies employees may face. Our team can help you with the following:

  • Invest your excess cash flow with purpose during your peak professional years.
  • Prioritize your assets to buy your first home, invest for the future, save for children’s education, or navigate an emergency.
  • Manage your stock options and other corporate benefits as your income grows.
  • Explore tax-efficient strategies and tactics to increase and optimize your retirement savings.

The Emotional Side of Financial Decision-Making

When unplanned or outside factors affect our money or financial security, managing emotional decision-making is critical. When you can avoid making snap decisions or drastic changes, you can more clearly monitor your situation and take balanced next steps. Sometimes patience is the best option. As a Certified Financial Transitionist®, Kim also possesses the skills that help her relate to clients’ changing needs and provide a sense of calm around major decisions during stressful or uncertain times. 

There will always be changes, market fluctuations, and unexpected life events that may affect your income needs or the future of your retirement nest egg. It is why it’s crucial, as ever, to have a solid foundation in place so you can find a clear path forward and walk ahead confidently. We encourage you to stay informed, take necessary action, and discuss your concerns with your financial advisors to help you gain more peace of mind. 

Remember, everyone’s situation is different, and you should review your time horizon, cash flow needs, and other factors with your financial advisor and/or CPA. Our team of financial planning professionals is happy to have a complimentary conversation to discuss your 401(k) options from Raytheon or another employer. Contact us anytime. 

PLEASE SEE IMPORTANT DISCLOSURE INFORMATION at https://myccmi.com/important-disclosures/

CCMI provides personalized fee-only financial planning and investment management services to business owners, professionals, individuals and families in San Diego and throughout the country. CCMI has a team of CERTIFIED FINANCIAL PLANNERTM professionals who act as fiduciaries, which means our clients’ interests always come first.
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