The Abbott Laboratories/AbbVie 401(k)
By Mike Gibbons, RICP®
The Abbott Laboratories/AbbVie 401(k) plan can make up a large portion of your eventual wealth, especially if you have worked at the company for several years. But what is the best way to manage your 401(k)? And how do you make sure your investments are diversified and appropriate for your situation? We’re specialists in the Abbott Laboratories/AbbVie 401(k) investment options and we help employees like you make the most of their plans.
The Stock Retirement Plan (SRP)
The SRP allows Abbott Laboratories and AbbVie employees to save for retirement, offering standard 401(k) features and a generous company matching benefit of 5% for those who contribute 2% of their gross pay or more. You can join the SRP immediately after your date of hire, and company contributions vest after two years of service. (1) Like any 401(k), you will have to choose the specific plan funds where your money will be invested. Part of our role is helping our clients understand the impact of different risk levels and which funds are appropriate given your goals, financial situation, and time horizon for retirement.
Traditional vs. Roth Contributions
The SRP offers both traditional and Roth options. Traditional contributions are tax-deferred, meaning tax is due on the full amount when you retire. Roth contributions, on the other hand, are taken from your after-tax pay, but they grow tax-free, meaning that no taxes will be due upon withdrawal. In order to receive tax-free growth on your Roth contributions, you must have made the first Roth contribution at least five years before you begin taking withdrawals. (2)
Both traditional and Roth contributions are subject to a 10% penalty for early withdrawal. For Roth contributions, only the earnings on your investments are subject to the 10% penalty (not the original amount you contributed). For traditional contributions, an early withdrawal in any amount will incur the 10% penalty. You can withdraw from your SRP penalty-free after you reach age 59½. If you retire during or after the year when you turn 55, you can make penalty-free withdrawals as early as age 55. (3)
Distribution Options When You Retire
Retirement plan participants typically have four options upon separation from an employer: leave the money in the employer’s plan (if permitted), roll over the assets to a new employer’s plan, if one is available and rollovers are permitted, roll the assets over to an IRA, or cash out the account value.
As an Abbott Laboratories or AbbVie employee, should you choose to cash out your SRP account, you elect a lump-sum distribution or fixed installment payments (on a monthly or annual schedule). When you receive each payment, taxes will come due on pre-tax contributions and company matching amounts. If you combined Roth and traditional contributions, and/or if you made any after-tax contributions to your SRP, you may be able to choose which balance you withdraw from (your pre-tax balance, your Roth balance, or your after-tax balance) when you take each distribution.
Taking a 401(k) Loan Against Your SRP
Like most 401(k) plans, the SRP allows you to take a loan against your balance should you need access to your money. The IRS allows you to take out a maximum of 50% of a 401(k) balance or $50,000, whichever is less. (4) You will be required to repay the loan with interest within five years (although the “interest” is money you pay back to yourself). Loans can be repaid through payroll deduction. Should you separate from service with a balance outstanding, any amount that you cannot repay when you separate may be treated as a distribution and could incur the 10% penalty for early withdrawal.
We’re Here to Help
Abbott Laboratories and AbbVie generally offer excellent benefits, and the SRP is a robust 401(k) plan with a lot of options. 401(k) plans are straightforward and simple, but planning for your retirement and financial future can be complex. If you are an Abbott Laboratories or AbbVie employee and would like to better understand how the SRP fits into the big picture of your long-term goals, call 224-419-5550 or email me at Mike@gibbonsfinancialgroup.com to schedule a complimentary consultation. Also be sure to join our free webinar, Retiring Early From Pharma.
About Mike
Michael J. Gibbons is founder and president of Gibbons Financial Group, an independent advisory firm providing custom-tailored financial planning and investment management services to pharmaceutical and healthcare professionals and their families. Mike has over 25 years of experience and spends a significant portion of his day working with pre-retirees and retirees, focusing on asset management, Social Security and pension planning, as well as retirement income preparation.
Mike has degrees in both business and psychology from Lake Forest College and currently holds his Retirement Income Certified Professional (RICP®) designation from the American College. Mike was named a Five Star Wealth Manager for 2016 and 2018* Mike is heavily involved in his community, having served on the Village of Gurnee Police Pension Board as a Community Volunteer and the St. Patrick’s Parish Financial Board. When he’s not working or volunteering, Mike loves playing golf and spending his time with his wife and children. To learn more about Mike and how he can help you, connect with him on LinkedIn, visit his website, and register for his free webinar, Retiring Early From Pharma, created specifically for professionals retiring from the pharmaceutical, biotechnology, and healthcare industries.
*Award based on 10 objective criteria associated with providing quality services to clients such as credentials, experience, and assets under management among other factors. Wealth managers do not pay a fee to be considered or placed on the final list of 2016/2018 Five Star Wealth Managers.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.
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(1) https://www.abbott.com/careers/benefits.html
(2) https://www.irs.gov/retirement-plans/roth-acct-in-your-retirement-plan
(4) https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-loans