Masterclass for MetLife Employees and Executives
A career at MetLife is both challenging and rewarding. Without a doubt, the commitment and effort you put into your role are substantial.. MetLife is also very generous when it comes to its benefits and compensation package, especially if you understand how to maximize all that is offered to you.
The financial advisors at Strata Capital have been working with MetLife professionals for over a decade. In fact, we started our careers at MetLife before it became the MetLife Premier Client Group and we deeply understand and respect the effort you invest in juggling your work and personal lives.
This is why we have devoted extensive time and resources to better understanding the benefits and opportunities that MetLife offers you, ensuring you receive a thorough and insightful planning experience.
- How well can you answer these questions?
- What am I saving and investing for?
- What does retirement look like for me and when will it happen?
- How do I recreate my paycheck when I retire?
- When should I start taking Social Security?
- How can I best maximize everything that is offered to me through MetLife?
- Which pension option should I choose for my traditional formula pension when I retire?
- For my personal retirement account (PRA), what are my options when I leave MetLife?
- How should I invest my 401(k)? And how does it fit in with my overall investment strategy and retirement plan?
- How much of my investments should be in MetLife stock?
- When should I execute on my stock options?
- What is my auxiliary retirement plan and how do I use it?
- What happens to my group life insurance and disability insurance when I leave the company?
- How does my deferred compensation work and how much should I be deferring?
- How are my investments allocated and what type of risk am I taking? When/if should I change this?
- How does health insurance work if I retire before Medicare age?
Call us crazy, but we believe everyone, regardless of their employer, should know how to optimize the benefits available to them. MetLife offers a full range of benefits that are well worth understanding to their fullest to ensure you’re maximizing what’s available to you.
You are likely most acquainted with the 401(k) plan, and it could very well be one of your most substantial assets by the time you retire. The MetLife 401(k) plan allows you to contribute a portion of your income to your retirement plan through payroll deductions, with the IRS dictating the varying contribution limits annually. MetLife offers three different contribution options.
Pre-tax Contributions. The most common type is pre-tax, or before-tax, contributions. When you make a pre-tax contribution, you are reducing your taxable income by that amount. While the money is invested in the plan, it continues to grow tax-deferred. This means that you do not pay taxes on any of the growth as the account grows. When you withdraw money from the plan, you will owe ordinary income tax on your distributions.
Roth 401(k) Contributions. MetLife offers a Roth 401(k) option. When you make a Roth contribution, the money you contribute is made with after-tax income, meaning your income is taxed and THEN it goes into the 401(k) plan. The money grows tax-deferred while it is invested. Distributions from the Roth 401(k) come out tax-free.
After-tax Contributions. Usually, these contributions are made after you’ve contributed the maximum allowable amount to the traditional or Roth accounts for the year. Contributions are made after you pay taxes, and the money grows tax-deferred while invested. When taking money out of the plan, the total amount of after-tax contributions you made will come out tax-free, however, any investment gains will be taxed as ordinary income, like pre-tax contributions. You may want to consider utilizing a backdoor Roth IRA strategy. More info on how that works here. Though this is an attractive strategy and seems simple, it is important to speak with a financial advisor or accountant before you attempt such a strategy. If done improperly, you could end up having some unintended tax consequences.
Understanding your entire financial situation and the tax impact each type of contribution has on your plan is the best way to determine which contribution or combination is right for you.
The best part of the 401(k) plan is that MetLife will match your contributions up to 4% of your eligible compensation. All you must do is contribute at least 5% of your income and they will automatically deposit funds each pay period.
The 401(k) plan offers many different investment options. For those of you who like to create your own portfolios, you can use different asset class funds to create your asset allocation. For those who do not want to do investment research, MetLife also offers target date funds. If you don’t have a lot of experience building your own portfolios, this could be a safe option for achieving a well-diversified portfolio.
401(k) Auxiliary Match Plan
You might notice this on your benefits statement and wonder, “Why there is another match plan?” MetLife created the auxiliary match plan so that it can equally match all employees. The IRS imposes a limit on the amount of compensation a company can “match” when contributing to a retirement plan on behalf of an employee. For those of you making over the IRS income limit ($330,000 for 2023), you will see that the company matches 4% on compensation over the limit go into this plan. This allows for the employee receiving the match to get a true 4% compensation match. Remember, you cannot contribute to this portion of your retirement plan. This is simply a match account for those making over $333,000 annually. Investment options for this plan are the same as the 401(k) plan.
The PRA is a cash balance pension plan. You might have been accumulating benefits in this account for a while, or you might have been recently enrolled, especially if you were accruing benefits through the traditional formula pension, which is now frozen.
There are two main components to the PRA: benefits credits and interest credits. The benefit credit, which is based on your eligible income, is the amount that MetLife is going to contribute to this account on your behalf. MetLife will credit your account:
- 5% of compensation up to the Social Security Wage Base
- 10% of compensation above the wage base but below the IRS income limit
The interest credit is how the benefit grows while money is in the plan. Unlike the 401(k), you don’t select investments in this plan. Instead, your account is credited with interest which is calculated based on the 30-year U.S. Treasury Securities rate published by the IRS monthly. This rate is subject to annual adjustments.
The most significant decision you'll face regarding the PRA is determining what to do with it when you leave MetLife. You have four options:
- Lump-sum cash payment
- Rollover your PRA balance into an IRA or other retirement plan
- Convert your PRA balance into a monthly annuity payout
- Leave your balance in the PRA to accrue interest credits. You can do this until age 65, at that point you will have to choose option 1, 2, or 3.
Selecting the most suitable option depends on your individual circumstances and preferences. Factors to consider are:
- Your age and health at retirement
- Marital status at retirement
- Sources of guaranteed income in retirement (pensions, SSI, etc.)
- Alternative investment options, if considering an IRA rollover
- The need for additional guaranteed income
- If departing MetLife before retirement, the better choice between maintaining balance in PRA or investing elsewhere
We consider all variables of your financial life when helping you make this decision. For example, the rollover option might be suitable for someone who has other assets, stock options to vest or exercise, receives another pension, or plans to continue working. They may not necessarily need the income right away and choosing to roll over the balance to an IRA can allow for further deferral of taxes and align the account with the rest of their financial plan. On the other hand, someone may elect an annuity option if they do not have other pension-like retirement sources in retirement. The assurance of a guaranteed monthly check can provide confidence in retirement.
Remember, decisions like this should never be done in a vacuum. It is important to align your PRA with your other investments to effectively maximize its value.
Auxiliary Retirement Plan (Aux Plan)
Participation in the aux plan comes into play only when your eligible compensation is above the IRS income limit ($330,000 for 2023). There are two different formulas for how your benefit accrues and distributes: the traditional pension formula and the PRA formula. Since accruals on the traditional pension formula have ceased, everyone’s benefit will now accrue under the PRA formula.
Here’s how it works: Essentially, MetLife will credit 10% of your eligible income ABOVE the IRS income limit to your Auxiliary Retirement Plan. Interest credits work the same as the PRA.
Like your other benefits, understanding how the aux plan works when you leave MetLife is crucial. Distribution methods depend on how your benefit was accrued, be it the traditional pension formula or the PRA formula. Keep in mind, it is possible for your aux plan balance to have been accrued under both formulas.
Under the traditional pension formula you will receive your benefit as a monthly annuity payment. There are several payout options, similar to the traditional pension.
Under the PRA formula you will receive your payment as a lump sum and it will occur at your separation from MetLife.
Remember, both distribution methods are taxable as ordinary income. It is important to understand how you will be receiving your benefit and to properly account for each payment when going through your retirement income planning.
For those that are eligible, MetLife offers a deferred compensation plan. The plan permits you to defer a percentage of your income today to be paid out in the future. You have the option to choose how you receive this payment – lump sum, 5-year installments, etc. This can be a powerful tool to save for financial goals, such as college funds, or to reduce current income in the year you defer. It can also cause headaches if not executed properly. The most common error we see when it comes to deferred comp is employees choosing to defer income without a solid cash flow plan in place. This can cause scattered payouts and elections – some are lump sum, some are over a 5-year period, some may occur while you are still working, or the income may not even be necessary!
Developing a cash flow strategy is key to taking full advantage of your deferred compensation. For example, you may want to retire early at 60 before your pension kicks in at 65. It could make sense to defer compensation to create income to bridge the gap between 60 and 65. Or you may want to use your benefit to for a financial goal, such as paying for college. Electing a lump sum in the same year you need to begin paying for a child’s college tuition would make a lot of sense.
An often overlooked component of the deferred comp is the immediate income reduction in the deferral year A common strategy we use aligns deferrals with the vesting of stock options or RSUs. For example, if you anticipate $100,000 of RSUs vesting this year, it might be prudent to defer an equivalent amount of income to offset the additional income from the RSU vesting.
MetLife offers many different investment options within the deferred comp plan and it is advisable to align the investment allocation with your overall investment plan.
Stock and Equity Compensation
MetLife offers different types of stock compensation such as restricted stock units (RSUs), stock options, and performance shares. Using the stock that you receive to pay down debt, pay for children’s college or to save for retirement is very common and can be a good choice.
When it comes to vesting or exercising on your equity compensation, it is almost always advisable to do some tax planning. For example, stock is automatically sold to cover a portion of taxes but depending on your tax bracket, it may not be enough to cover the entire tax liability. Given that you can anticipate an estimated dollar amount from RSUs vesting during the year, you have the capability to assess its impact on your tax situation and potentially implement strategies to reduce the impact. This also applies when choosing to exercise any stock options; it’s important to know the tax impact prior to executing.
Conducting cash flow planning before exercising or vesting is key to maximizing this benefit. Avoid succumbing to the “groupthink” that may arise when others in the office are exercising their stock options. For instance, if you know you need MET stock to hit $50 for early retirement, let that be your trigger to exercise, not because Jim from group benefit sales told you to do so. Understanding your vesting schedule for RSUs is important, especially after you separate from MetLife. You may have 3 years of vesting RSUs after you retire. This stock could be used to supplement your retirement income and should be coordinated with your retirement income plan.
Another common question we get from employees is, “How much of my net worth should be in MET stock?” There is nothing wrong with holding MetLife stock; however, there are risks. You already rely on the company for many parts of your life such as income, health insurance, and various other benefits. Owning a sizeable amount of the company stock as well puts a lot of your eggs in one basket.
Diversifying can be easy when there are no substantial gains in the stock. But what about situations where significant gains are involved? If your MET stock has large unrealized capital gains, this can make the situation difficult to unwind because now you will lose money to taxes if you were to diversify in a lump sum. The best strategy usually is to diversify over time and tax-loss harvest where possible to unwind the position. This becomes more important as you approach retirement or any other goal you would use the MET stock to fund.
The age at which you choose to retire may present you with various healthcare options to consider, especially if you are retiring “early” and have a spouse or children who still depend on you for health insurance coverage.
Retiring before age 65
If you choose to retire before 65, you'll need to find healthcare coverage to bridge you to 65 when Medicare eligibility begins.
These are the options:
- You can utilize the MetLife post-employment benefits if you qualify (MLC)
- Remember to ask Benefits about whether you’ve accrued any credits
- You can continue your coverage for up to 18 months through COBRA (MLO)
- You can purchase private health insurance coverage on your own through the marketplace
- You can utilize a spouse’s plan if they are still working.
The best option for you depends on your personal circumstances. Considerations should include your established budget for your healthcare as well as your health status.
For more detailed information and explanations, please watch the healthcare section of our masterclass.
Retirement at 65 or later
For those who are retiring at 65 or older, you can enroll in Medicare, but you’ll still need to make some choices about your supplement and what level of coverage you would feel comfortable with.
- You can utilize MetLife MLC option for Medicare
- You can search for your own Medicare Supplement
Remember, when it comes to Medicare supplements you can go Rolls Royce or Honda Civic. It all depends on your health status, your budget, and what you are comfortable with.
MetLife offers a slew of other benefits such as group life insurance, disability insurance, long-term care, legal plans, and much more. Each benefit should be evaluated through the context of your plan to truly maximize your benefits. For example, you may need to continue life insurance coverage in retirement but feel like it may be expensive to purchase at this age. The group coverage through MetLife can be converted to an individual policy and may be more cost-effective than purchasing a new policy. It is important to look at each benefit offered to you and determine if you can retain the benefit after retirement, or if it even makes sense to do so.
A valuable tip we often share with individuals enrolled in the legal plan before they retire is to make sure they use the plan to consult with an attorney for their will, durable power of attorney, and healthcare proxy. Many of our clients will wrap up their legal work through the plan prior to leaving the company. This yeilds them a significant cost savings. Might as well use the benefit if you’ve been paying for it!
Your compensation at MetLife goes far beyond what gets deposited into your checking account. Knowing how to maximize your benefits and how they each fit in with the rest of your circumstances is key to getting the most out of what the company offers. It’s important to understand that all aspects of your financial life are interconnected, and a decision made in one area, seemingly unrelated to another, may have unintended consequences. That’s why it is important to seek the advice of a financial planning firm that has experience with your company benefits. Not every financial planning firm has proficiency in catering to the needs of corporate professionals.
The founders of Strata Capital specialize in serving corporate professionals and have assisted MetLife employees for over a decade. Click below to book a meeting and let us show you how to maximize your benefits and your financial plans.
Strata Capital is a wealth management firm serving corporate executives, professionals, and entrepreneurs in the New York Tri-State Area, focusing on corporate benefits and executive compensation. Co-founded by David D’Albero and Carmine Coppola, the firm specializes in making the complex simple to ensure clients feel confident in their financial decisions. They can be reached by phone at (212) 367-2855, via email at email@example.com, or by visiting their website at stratacapital.co.
The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor.
This represents the views and opinions of Strata Capital and has not been reviewed or endorsed by MetLife or any of its employees.