Matt Nelson  0:00  
Do you know if you're getting all of the contributions available to you in your Medtronic, 401 k plan in this video, I'm going to break down how the 401 k plan contributions work, and two settings that every employee should be checking whether you're new or veteran to make sure you're making your largest retirement asset work better for you.

Hey, welcome back, everybody. We work with a lot of med tech professionals, and of course, a lot from Medtronic. And I've been getting questions about how to optimize their 401 k plan. And wanted to give you an advisor take on how the plan works, what to make sure that you're checking on. So let's get right into it. We're going to cover how to make sure you're getting the full amount for Medtronic and then we're going to cover two settings you should look at on your plan in the fidelity portal to make sure your plan is working the best for you. All right, so if you're not contributing at least 6% of your compensation to the Medtronic plan, you're not getting the full contribution that Medtronic has available to you. So let's break down the Medtronic contributions. They come in three buckets. There's the core contribution, the base match and the discretionary match. And when you're getting the full amount, you should be getting somewhere between seven and a half percent and nine and a half percent of your compensation added to the plan. Let's go over each of these contribution types. So the core contribution is something made to everybody, regardless of whether you're putting in your own money or not. If you're hired before 2016 the contribution is 5% for most people hired after 2016 the contribution is 3% now it's a generous contribution, but don't confuse that with the company match. The company match, I'll refer to as the base match, is a portion of what you put in on your own the way the formula works is it's 50% up to 6% of your pay. That means, if you put in 6% of your compensation, Medtronic is going to put in 3% of your compensation. If you only put in 3% of your compensation, Medtronic is only going to put in one and a half percent. And if you put in 10, they're still going to cap out at the 3% level. And finally, there's the discretionary match. This portion is based on the company's performance, but it's historically been about one and a half percent of compensation. To get the full amount, you do have to put in all 6% of your compensation, and it's proportional. So if you put in less than 6% let's just say 3% you're only going to get half of the discretionary match. So let's just review to get the full amount contribute 6% of your pay. If you do and you're hired after 2016 Medtronic should be putting in about seven and a half percent of your compensation, assuming the discretionary match comes in at the historical number. If you're hired before 2016 that level is going to be up to nine and a half percent of your pay. So what's this worth to you? I figured I would break this down with some simple round numbers and show you a graph to see what this would amount to. So let's illustrate what this would be worth to you. Let's assume someone earning $100,000 and they're hired after 2016 so they're getting about seven and a half percent contribution from Medtronic, six plus seven and a half, 13 and a half percent. That would be about 13,500 going into their plan. And let's assume that that goes out for 20 years. Let's also just assume a basic 7% rate of return after all the expenses, that would grow the plan balance to about $550,000 again, just for illustration purposes. Now, obviously that's a tidy sum, but we see a lot of Medtronic employees having planned balances well over $2 million and really, it just depends on how much you're contributing yourself and how you're invested. Okay, so the good news is that all new employees are actually enrolled in the plan with some default settings. So unless you've opted out when you first were employed, your plan should have been set up with a 6% contribution level and an auto escalation feature that moves your contribution amount up a little bit every year. Unfortunately, what we see is sometimes plans get set up employees don't give them a second thought. So what I want to point out here are a couple of settings that you should take a look at on your fidelity.com portal to check that your 41k is optimized for your situation. All right, first, just verify that your contribution level is actually at 6% or more. Now, as obvious or basic as this might sound, there's actually been a lot of surveys done where form 1k plan participants thought they were contributing and they really weren't, or it was working a different way than they. Bought. In fact, in 2024 Principal Financial Group did a survey that showed that six out of 10 people thought they were contributing to their plan and they weren't. So again, as simple as it sounds, log on to fidelity.com where your 401, k should be set up the portal check that you're actually getting your contributions in sometimes people mix up their contributions with the core match, because it's going in every year, so they just figure something's being done all right. While you're in the plan portal and taking a look at your account, why not just evaluate if 6% is the right number? If you're not contributing more than 6% look at your financial situation. It's always better to save more than less. If you're coming over as a new employee to Medtronic, maybe just bump up your 401 K contributions from what you were doing before based on the raise you got. The other piece to consider is the auto escalation feature, so the default setting moves your contribution up by 1% every year, up to 10% and then it stops. You don't have to leave it there, though. You You could always just set it at two or 3% so you're you're increasing what you're contributing even faster. And 10% certainly isn't the cap. In fact, if you want to max out your 401, K, which is a great idea. Let's go over what those plan caps are for 2025, they're a little extra confusing. So on the screen, I'll display how those plan maximums work. For those under age 50, you can contribute up to 23,500, now, once you get between age 50 and 59 you get to do a catch up contribution of $7,500 and that brings the maximum you can contribute up to 31,000 when you hit age 60 to 63 there's a new special catch up amount that's 11,002 50, which means you can get up to 34,007 50 for the year. And then, oddly, at age 64 plus, that catch up drops back down to just the the level between 50 and 59 so if once you hit 64 plus, you actually go back down to a $7,500 catch up level. Strange that they did it that way for this year. But take advantage of it. You've got those extra, you know, few years where you can put a little bit extra into the account, all right. So to recap, to make sure you're getting the full contribution from Medtronic, 6% of your own pay has to be going in. Second thing is, make sure you're actually contributing. And the third is try to hit those plan maximums if you can. If you want to get our full report on how to maximize your Medtronic 401, K plan, check out the comments for the link to our report. Or if you'd like a second opinion, check out our website for more information about our group, perspective six group.com, and until next time, remember financial freedom takes more than money, so find your purpose and make a plan to live your life well. Take care of each other out there you.

Transcribed by https://otter.ai