Congratulations on your acceptance to Lilly’s Voluntary Early Retirement Program (VERP). To ensure a smooth transition for your retirement we have listed a few things you will want to consider before and after separation from Lilly. Please keep in mind some of these items may not be applicable to everyone’s situation.
BEFORE DECEMBER 8TH (If you are retiring December 31st)
Go to the Lilly benefits site at: resources.hewitt.com/lilly and make the following elections before December 8th:
Federal and State tax withholding elections. Set-up direct deposit to your bank for your Pension payments. If you are married, you will need to make a survivorship election. (Single individuals will skip this step.)
Health Insurance Elections
Consider the HSA. There are multiple tax benefits. Call us to discuss details.
Get your e-mail and other contact information updated:
Do you use your work e-mail for any personal communication? Make sure to change them to a personal e-mail before separation so you don’t miss any important e-mails. Make sure you have a personal e-mail, personal cell phone, and home phone (if applicable) setup on the Lilly Benefits site as these things are used to verify your identity for some requests and to reset a password if necessary.
Please confirm with Oaktree what e-mail you would like us to use going forward for you. Investor 360 – if you currently hold Commonwealth accounts with Oaktree Financial Advisors, you will want to confirm that your Investor360° account has your personal e-mail address and not your Lilly e-mail attached to it. You will also want to check if your paperless settings need to be updated to a personal e-mail. Discuss with your advisor whether any automatic deposits to IRAs, Roth IRAs and non-retirement accounts need to be stopped.
IF YOU HAVE A 2018 SEPARATION DATE
Consider increasing your 401(k) contribution to get in the maximum for 2018. For those under age 50 this is $18,500. For those who will be 50 or older in 2018 this is $24,500. You are allowed to contribute up to 50% of your base salary to the 401(k).
Discuss the rollover of your 401(k) to your IRA with your advisor. If you do not already have an IRA we will establish one. If you were 55 in the year of separation but not yet 59.5 we will discuss whether a full or partial rollover is best as the 401(k) allows access without the 10% early withdrawal penalty. If a partial rollover makes sense we will do a final rollover of any remaining balance once you turn 59.5. You also may need to establish a Roth IRA if you are participating in the Roth 401(k).
Life insurance – if you will continue to have a need for life insurance that was covered by your company provided or supplemental group coverage look into purchasing an individual policy – your Oaktree advisor can help you with this if necessary. If you are not able to qualify for an individual policy, you have the following options within 31 days after retirement The 2x company provided coverage will terminate and be replaced by a $5,000 company provided death benefit and you can also convert up to $50,000 to an individual whole life policy without evidence of insurability. The supplemental term can be converted to a group term to age 70 in $5,000 increments up to 1x your base salary or it can be converted to an individual whole life policy up to the amount of coverage at termination without evidence of insurability.
Bonus – will you invest it or use it for short term cash flow needs?
Severance – will you invest it or use if for short term cash flow needs?
Equity Awards – you will continue to receive awards for up to three years after retirement and the shares will be deposited into a Merrill Lynch account just as they were while working. Each year you can decide if will you keep in Lilly stock or sell? If you want to hold the shares we recommend moving them to either a joint account or an individual transfer on death account depending on your situation.
Traditional or Roth IRA contribution eligibility – Even if you retire December 31st, you may be able to make a 2018 contribution because you will have earned income from your VERP lump sum payment, your bonus, and equity awards. The rules for eligibility are complex and can depend on your income and whether you or your spouse are active participants in a qualified plan. We recommend you discuss your specific situation with your advisor and/or tax professional.
Retirement income plan – Do you know where your retirement income will come from? Of course, part of it will come from your Lilly pension. For some, the pension may be enough to live comfortably in the short term. But there is no cost of living adjustment in the pension. That means that your pension will not increase even though your expenses will. Many others will need to have to make withdrawals from investments from the beginning of retirement to supplement their pension income.
You will need to have a plan to provide for increased living expenses over your lifetime and the lifetime of your spouse if you are married.
What is the best way to withdraw from your investments that you’ve worked so hard to accumulate for so long?
How do you plan withdrawals in the most tax-efficient way?
How will you deal with Required Minimum Distributions?
How do you plan so that you do not outlive your investments?
You need a plan to help you live your lifestyle comfortably without a significant risk of running out of money. We can help you create such a plan. Oaktree has advised thousands of Lilly workers on retirement savings, planning and investing. We can provide a comprehensive Independent Professional Retirement Overview (IPRO) and help you evaluate different “what-if” scenarios to help you make well-informed decisions regarding your retirement planning.
Call Oaktree Financial Advisors toll-free at 1-877-901-1631 or email us at firstname.lastname@example.org. We are ready to help.