New Jersey is home to some of America’s greatest pharmaceutical companies, namely Johnson & Johnson which has its headquarters in New Brunswick. In this blog we’ll talk about the Johnson & Johnson 401(k) plan, providing you with valuable information about the Johnson & Johnson retirement benefits such as the savings plan and 401(k) match.
Hello Gardenstaters! Before we get started, you may want to check out other New Jersey finance blogs we’ve written:
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Johnson & Johnson retirement benefits
Let’s start with the basics. What are the fundamental aspects of your Johnson & Johnson retirement benefits?
There are a few major ones:
- A 401(k) plan, which provides the opportunity for matching
- A non-contributory pension plan
- Company stock options
We are financial advisors based in Morristown, NJ, serving clients in New Jersey and across the country. Just to be clear, we’re not affiliated with Johnson & Johnson in any way, and what we discuss is based upon what we have learned from our clients and other sources, and all of this is subject to change. All of this is a long way of saying that you should conduct your own research in order to make an informed decision, and none of what we discuss in this article may be interpreted as financial advice specific to any one individual.
Having said that, let’s drill down into what each of these options are.
What is the Johnson & Johnson 401(k) plan?
Let’s talk about the Johnson & Johnson 401(k) plan whose official name is the Johnson & Johnson Savings Plan.
But first – some basics.
A 401(k) plan is a profit-sharing plan offered by an employer, where employees contribute to individual accounts on a pre-tax basis. These contributions are usually made on a periodic basis as a percentage of your salary. Once the funds are contributed to your account, you (the employee) can pick from a lineup of funds and invest the money.
The point of a 401k plan is to encourage saving for employees, which provides greater financial stability and may enrich your life!
For details about the Johnson & Johnson 401k plan, please refer to the Summary Plan Document. It has a variety of investment options to pick from, some small and some higher cost, as well as a participant website where you can track your investments and receive statements.
The employee benefits website is SUPER hard to find.
Click this link.
Then scroll to the left and click the picture above the words “Retiree Connection”. Please note, you have to click on the picture; the words are not clickable.
Once you click, you can navigate to the login for your employee benefits.
So that was simple, right?
There is also a Roth 401(k) option in which your contributions are made after-tax. They grow tax free and then are not taxed upon distribution. Another feature we love is the fact that the plan has 401(k) matching. It’s a great financial benefit for J&J employees!
Let’s talk about it…
What is the Johnson & Johnson 401(k) match?
Now, about the Johnson & Johnson 401(k) match…
The company itself can also contribute to your account – this is called “matching” – which is a huge perk. Your 401(k) contributions are matched at 75 cents to the dollar, for up to 6% of your salary. After three years, these are vested, meaning that you could take the entire amount of matched contributions with you if you were to leave your job at J&J.
The limit for 401(k) contributions in 2022 is $20,500 which applies to all deferrals and matching contributions. All matching contributions (coming from the employer) are made on a pre-tax basis, even if the employee is contributing only to the Roth 401(k). An employee can usually track this by logging in to the 401k recordkeeper’s website.
Before we go any further, we’ve got a quick question for you.
Is this J&J retirement stuff driving you nuts yet?
If so, come and talk to us. We’re familiar with the terrain and can help shed some light on whatever questions you may have.
Johnson & Johnson pension plan
The Johnson & Johnson pension plan is officially called the Johnson & Johnson Savings Plan Trust. It is a corporate defined benefit plan.
We’ll jump into it soon, but what is a pension plan, first?
A pension plan is a retirement plan that takes contributions, invests them, and then pays you out a set amount at a particular time.
- The employer is required to contribution to the pension on your behalf
- The employee is not required to contribute to the pension, but has the option to do so
- The employer assumes all risk for meeting the pension obligation; the employee is not actively involved in picking the investments in a pension plan.
Just as with the Johnson & Johnson 401k, your contributions must vest in accordance with the schedule in order for you to take them. The benefit of a pension plan is that you’ll receive a regular payment once the pension becomes annuitized during your retirement. Much like you would as with Social Security, you are producing an income stream to replace the income you aren’t making from work during your retirement.
Johnson & Johnson stock options
Some employees are eligible for Johnson & Johnson stock options. Many clients of ours have received them as part of their total Johnson & Johnson compensation package, but they may also be distributed “on hire” or as a merit-based award.
It’s important to:
- Know the vesting schedule.
- Understand the tax implications of selling vested stock
- Be aware of the concentration risk that holding company stock can bring
What is vesting?
Vesting is the process through which the company stock options awarded to you become officially yours, after a certain period of time has passed. Different types of stock options (on hire, merit-based, etc.) may vest at different times – in other words, their vesting schedules vary.
Why does vesting matter?
It’s important to manage the tax impact of any stock options you decide to sell. Don’t overlook this! Work with your financial advisor, CPA, or tax advisor if you require assistance handling a potential tax liability.
If you hold shares of Johnson & Johnson stock once the stock options vest, you are potentially subject to holding a concentrated position. This may increase the volatility of your portfolio because you are vulnerable to whatever happens to that one particular company. Diversifying your holdings may help to decrease the overall volatility of your portfolio, and is an important consideration if a large amount of your J&J stock options vest.
Work with a financial advisor to achieve an efficient and optimal portfolio that is diversified and appropriate for your risk tolerance.
How to incorporate this into your financial plan
The Johnson & Johnson retirement benefits are tools in your overall financial strategy, but they cannot replace the plan itself. Especially for J&J employees looking to retire in New Jersey or New York, where the cost of living is high, it’s important to put together a financial plan that maps out a course for important elements such as taxes, estate, retirement, and cash flow.
Even if you are years away from retiring from Johnson & Johnson, it’s important to have an overall roadmap for the inflection points that your life will take.
We hope you’ve enjoyed our blog on what you need to know about the Johnson & Johnson 401(k) plan and retirement benefits in 2022.
We are financial advisors in Morristown, NJ serving the local community and beyond. If you have questions about retiring in New Jersey, moving there, affording to live there, or (like us) are just plain old Bruce Springsteen fans, reach out and send us a message.
Johnson & Johnson. Careers. Healthiest Finances. https://www.careers.jnj.com/employee-benefits/financial-benefits
Johnson & Johnson Retirement Savings Plan. Form 11-k. https://johnsonandjohnson.gcs-web.com/static-files/faf26264-b110-48a8-af01-4328045bbe9d
Johnson & Johnson Savings Plan. Plan Details. Summary Plan Description and Prospectus. January 2019. https://cache.hacontent.com/ybr/R515/00695_ybr_ybrfndt/downloads/SavingsPlanSPD.pdf
SWFI. Johnson & Johnson Savings Plan Trust. https://www.swfinstitute.org/profile/598cdaa50124e9fd2d05b51e
Glassner Carlton Financial has no affiliation with Johnson & Johnson. Glassner Carlton communicates with its clients and the public in writing and verbally about Johnson & Johnson employee benefits, but there is no guarantee that the information presented on this website and its associated links is accurate. The information presented herein is subject to change at any time, and Glassner Carlton is under no obligation to update it. For questions regarding your Johnson & Johnson retirement or employee benefits, please contact your employer.