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How to Navigate RTX (Raytheon) Stock for Retirement Planning

A comprehensive retirement plan has become a critical component of financial well-being. Many Americans now rely on 401(k) plans as their primary retirement savings vehicle. Retirement 401(k) plans, such as those offered by RTX (Raytheon Technologies and its predecessor company United Technologies (UTC, previously Goodrich), can be structured in various ways, offering multiple benefits such as company stock options, which require a deeper understanding to maximize their benefits. While the RTX (Raytheon) 401(k) plan gives employees a tax-advantaged way to save for retirement, it may also present challenges related to concentration risk and diversification. 

As a former employee of RTX (Raytheon), CCMI principal and owner Kim Benson, CFP®, CPA, CeFT®, invested in the options available in the company’s 401(k). She regularly shares her professional and personal experience with the plan and its options. Since leaving the company in 2015 to become a CERTIFIED FINANCIAL PLANNER™, she continues to work with several former colleagues and executives, primarily at the Collins Aerospace division, and remains thoroughly familiar with the features of the RTX Savings Plan. We’ll discuss some of the essential retirement planning strategies you may consider as a current or past RTX (Raytheon) employee, with a focus on optimizing 401(k) investments, making informed decisions for a secure future, and the costly mistakes to avoid if you have company stock

Strategic 401(k) Plan Management 

Pensions are employer-based retirement savings accounts in which the employer contributes to a fund on behalf of an employee for future payments. Unlike traditional pension plans, 401(k)s place responsibility on employees rather than employers to manage their investments effectively and ensure they’re setting themselves up successfully for retirement. In standard plans, employees contribute to the 401(k) plan, their employers match a portion of the contribution, and the accounts continue to grow until employees are no longer working.

The Raytheon 401(k) Difference

Some plans, however, offer additional benefits as part of compensation, which may extend beyond an employee’s employment. For example, RTX (Raytheon) offers other features in their 401(k) plan, including matching funds with company stock through the Employee Stock Ownership Plan (ESOP). 

The Benefits of an Employee Stock Ownership Plan

While most 401(k) plans offer a range of investment options, including company stock through the ESOP creates a unique dynamic. Employees are empowered and encouraged to participate in their retirement readiness, having the flexibility to invest in the menu of options the company provides, which can include company stock such as RTX (Raytheon) stock.

An ESOP is an effective way to give employees ownership in a company, incentivize performance, and align employee and employer interests because employees have a financial stake. Companies also typically use company stock as benefits to attract and retain top talent and allow employees to accumulate wealth beyond their salaries.

An Added Level of Complexity

In addition to the 401(k) plan, some employees have other types of stock compensation including Restricted Share Units (RSUs), Stock Appreciation Rights (SARs), and Performance Share Units (PSUs).  As a 401(k) plan gets more complex, comprising incentives to allow for even more ownership in company stock, professionals face additional challenges they must address, including:

  • How to avoid concentration risk
  • Understanding vesting schedules and rules
  • How to time stock option exercises and sales
  • Understanding the details of equity-based awards and their tax implications
  • Developing a cohesive retirement plan that integrates various benefits, tax treatments, and withdrawal strategies

By carefully considering the available options, employees can tailor their portfolios to align with their risk tolerance, retirement timeline, and long-term financial goals. If you have the stocks we mentioned above or other stocks in your 401(k), it’s essential to know strategic retirement planning techniques you can consider to maximize your benefits and retirement income. We’ll discuss those strategies next.

Retirement Strategies If You’re a Current RTX Employee

The following strategies may benefit you if you’re still employed with RTX (Raytheon) and have company stock in your 401(k) as well as additional company stock outside of your 401(k). 

Diversify to Reduce Risk and Maximize Returns

The Raytheon savings and benefits plan provides a diverse array of investment options, ranging from traditional assets like stocks and bonds to the unique feature of company stock through the ESOP. This flexibility allows employees to customize their investment portfolio based on their individual financial goals and preferences. 

The Benefits of Diversification in Investments

When managing your investments, diversification that aligns with your risk tolerance and retirement timeline is a fundamental component of comprehensive retirement planning and long-term financial security. Diversification involves spreading your investments across different asset classes to reduce the impact of a single investment’s poor performance on your overall portfolio. Particularly as you near retirement, you’ll want to find ways to gradually reduce risk and provide a cushion of protection against market fluctuations and other factors that may affect your retirement savings. Reviewing and adjusting your investment portfolio periodically and ensuring you have a good investment mix of stock and bonds is crucial to maintaining a well-rounded, adaptable portfolio. 

Investment Allocation Considerations

To facilitate this, Raytheon Technologies’ 401(k) offers low-cost, diversified options to help you strike an appropriate balance and choose the right mix. Still, you should ensure you’re not positioning too much of your allocation or relying solely on company stock for your retirement. Overconcentration in any single asset exposes you to unnecessary risk. When most of your wealth and earnings are tied to the company, other financial areas could be severely impacted if something unfavorable happens and affects its stock value. Regularly monitor your 401(k) investment strategy to ensure it remains aligned with your retirement objectives. If the company’s stock performance or your financial circumstances change, you may consider adjusting your allocation.

Manage Concentration Risk

How much company stock is too much? Concentration risk occurs when you own too much of one company’s stock, which can quickly overtake a larger-than-desired portion of your retirement assets. In this case, an unexpected company downturn and decline in stock value can significantly affect an investor’s retirement savings. The risk of concentration is a particular consideration in the RTX (Raytheon) 401(k), which gives employees an option to invest in company stock through its ESOP. To mitigate this risk, think about the following:

  • Determine the optimal percentage of your 401(k) to allocate to company stock, for example 15 or 20 percent, and periodically adjust your allocation if you exceed it. 
  • Consider your risk tolerance when deciding how much company stock to hold. 
  • Assess how comfortable you are with potential fluctuations in the stock’s value and adjust your allocation accordingly.
  • Be sure to include additional stock exposure outside of your 401(k) and develop a selling strategy well before retirement to ensure a smooth transition.

Keep Up with Company Performance

To help you further make informed decisions about your stock, you should stay aware of the company’s financial health, performance, and significant developments during and after your employment. A strategic approach can help you capitalize on your employer’s current and future success while safeguarding your retirement savings.

When to Make Changes to Your RTX (Raytheon) 401(k)

Whether due to income changes, inflation, or market volatility, RTX (Raytheon) employees often ask us if or when they should adjust their RTX Savings Plan. The answer is unique to everyone and depends on the individual’s financial situation, risk level, and goals. If you find yourself uneasy about your future financial security and savings, it’s a common reaction to want to take immediate action to reduce potential risks. Yet, it’s crucial to avoid making rushed or impulsive choices that could impact your retirement strategy or broader financial picture.

Retirement and Investment Factors to Evaluate

Since everyone’s situation is different, it’s always helpful to consult with a financial advisor who can first review your circumstances and concerns and offer insights into whether you should make adjustments or stay the course. An advisor will help you assess the following factors and how they may affect your decisions:

  • How far away you are from retirement
  • If you have an emergency fund or other savings for unanticipated expenses
  • Your risk tolerance and overall sentiment toward external factors, such as market conditions

There are additional actions and strategies to keep in mind as you transition into retirement, such as whether you’ll continue to hold company stock, gradually sell it, or explore net unrealized appreciation (NUA). Your decision should align with your retirement income needs and tax considerations.

As change occurs, it once again highlights the importance of partnering with a professional who understands the features and mechanics of your particular employer-sponsored retirement plan, such as the RTX Savings Plan. Read our blog where we discuss three scenarios you may be encountering as a Raytheon Technologies 401(k) participant and the different strategies you may consider. 

If You’re a Former RTX (Raytheon) Employee

The following strategies may be considered by anyone who is no longer employed by Raytheon or has taken a Voluntary Separation Package (VSP). You may also review this checklist of actions to take to manage your stock options when you leave Raytheon or another company that offers company stock. 

Consider Net Unrealized Appreciation (NUA)

For RTX (Raytheon) employees who have recently left the company or are no longer employed, NUA presents a unique opportunity. If you’ve yet to roll over your 401(k) into an IRA, have low-cost basis stock in your plan, or have met another qualifying event, you should consider this strategy. 

What is NUA?

NUA transfers company stock “in-kind” to a non-retirement brokerage account in the same year you roll your 401(k) to an IRA account, unlocking potential tax benefits and flexibility. Several factors will help you determine whether it’s right for you and if it fits into your overall financial picture. 

The Benefits of NUA

  • Tax Savings and Flexibility—When you eventually sell company stock within your 401(k), you may be subject to capital gains taxes. The tax rate depends on how long you’ve held the stock. Once NUA is completed, your company stock can continue to grow at more favorable long-term capital gain tax rates within a non-retirement brokerage account, which could result in substantial tax savings. If you instead rolled the stock to an IRA, it would be taxed at higher ordinary income rates when you begin withdrawing from your IRA. You also have more control over accessing your assets in the non-retirement account. CCMI can prepare a comparison by reviewing a current 401(k) statement.
  • Lower Future Required Minimum Distributions (RMDs)—Since the portion of company stock is no longer in the 401(k)/IRA, it is excluded from the account value that is used to calculate RMDs or the amount you’re required to withdraw from your accounts once you reach age 73 or older depending on your birthday (based on current tax rules and the SECURE Act 2.0). A lower RMD may also prevent you from being in a higher tax bracket with a bigger tax liability in the future.
  • Tax-Advantaged Charitable Opportunities—Charitable giving using stocks can provide tax benefits while supporting causes you care about. If the stock value rises and you’re inclined to give to charity, you can donate shares. Many 501(c)(3) charitable organizations and churches accept company stock as donations. This is a win-win strategy in which a charity receives a tax-free contribution and you eliminate the taxable gain from selling the stock instead. Keep in mind there are also ways to contribute stock to charity with your IRA through a qualified charitable distribution (QCD).

Professional NUA Guidance

There are strict rules on executing NUA correctly. We recommend consulting with a professional to assess whether you qualify and if the tax benefits of NUA outweigh the benefits of rolling your company stock into an IRA. A retirement planning professional or financial advisor can help evaluate your specific situation, taking into account factors such as your age, retirement timeline, and tax bracket.

CCMI Understands the RTX (Raytheon) Retirement and Benefits Plan

Navigating retirement planning and investment management requires a comprehensive understanding of your plan’s specific rules and regulations. Seeking guidance from a CERTIFIED FINANCIAL PLANNER TM can prove invaluable in making well-informed decisions.

Whether you’re a young professional or close to retirement, Raytheon Technologies employees have a unique array of options at their fingertips. The diverse, intricate nature of plans like the Raytheon Technologies 401(k) underscore the importance of individualized strategies, from diversification and concentration risk management to leveraging solutions like NUA. A disciplined investment approach and proactive monitoring will continue to help you identify opportunities as your income and benefits change throughout your career. Here’s how CCMI can help:

  • As a financial planning firm in San Diego, we’re thoroughly familiar with the various biotech, start-ups, and other companies that offer stock options within their compensation and retirement packages. Additionally, with past employment experience and continued work helping RTX (Raytheon) employees plan for retirement, our firm provides specialized expertise and personalized guidance to help employees assess their individual circumstances and specific plan benefits.
  • We have a deep understanding of the details and rules of the RTX (Raytheon) 401(k) plan and can provide tailored analyses that estimate potential tax savings and offer strategic insights.
  • We can help you implement tax-efficient strategies that integrate your stock benefits into your overall financial plan. Whether you are leveling up in your career or transitioning to retirement, we can guide you through the sale of concentrated company stock and other strategies to help maximize what you keep and minimize your tax liability.

Make the Most of Your RTX (Raytheon) 401(k) Retirement Plan

Retirement planning within the context of an RTX (Raytheon) 401(k) plan requires a customized and strategic approach to help employees proactively build a successful investment portfolio and retirement savings. 

If you find you have a concentration of RTX or any other stock in your 401(k) or wish to explore advanced retirement planning strategies, CCMI is here to help. Give us a call to learn more about the tools and resources employees of RTX (Raytheon) and other companies have available to manage their plans with confidence and achieve financial security over the long run.

Editor’s Note: This article was originally published October 1, 2020. It has been updated to reflect information from this year. 




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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With a strong technical background in corporate financial planning and analysis, a CPA and CERTIFIED FINANCIAL PLANNER™ professional, Kim also specializes in the personal side of financial planning as a Certified Financial Transitionist®. As principal and owner, Kim’s unique skill set helps her relate to clients’ evolving needs and provide clarity around significant life decisions. Kim also specializes in working with current, former and retired employees of Raytheon Technologies (RTX).

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