Pfizer is headquartered in Manhattan, New York, but it is home to many tri-state area employees. For these folks we’ve written a blog to decipher the ins and outs of the Pfizer 401k plan. You’ll learn what the major benefits are, how to get started, invest, and much more.
We are financial advisors in Morristown, NJ, providing financial advice for New Jersey residents as well as folks across the country. Before we get started, you may want to check out these New Jersey finance blogs we’ve written, if they apply to you:
A checklist for moving to Morristown, NJ from NYC
What is the average income in New Jersey?
What is the New Jersey 529 Plan and should I use it to send my kids to college?
Should you buy a New Jersey vacation home?
40 questions to ask a financial advisor in New Jersey
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Pfizer retirement benefits
Pfizer employees may potentially receive a multitude of benefits from the company. In addition to your health benefits, here are the major Pfizer retirement benefits that the company might offer to help certain employees save up for the future.
- The Pfizer Savings Plan
- The Pfizer Supplemental Savings Plan
- Pfizer stock options, RSUs, etc.
We’re about to get into it…but first, a few words about 401ks in general.
What is a 401(k) plan?
First let’s talk about what a 401k plan is. Here it is in a nutshell.
A 401k plan is a retirement vehicle that your employer offers. In some states, such as New Jersey, it is mandatory for a company to offer a 401k plan to its employees.
Basically, every pay period you direct a portion of your salary into the plan, up to $22,500 total in 2023. Often your employer will match your contribution up to a certain percentage. The money you put into the plan is invested in accordance with whatever fund options you select. Your employer will present you with a menu of funds – usually mutual funds of ETFs – to pick from. The funds accumulate and grow over time until you either leave the company and roll over your 401k to a new qualified account, or take distributions from them at age 59½.
It’s important to note that in a 401(k) plan, the participant bears the risk. The company is under no obligation, nor are they able, to cause the funds to grow by any certain amount. The investing decisions are all made by the participant, who is responsible for the outcome.
The Pfizer 401(k) plan
The Pfizer 401(k) plan is called the Pfizer Savings Plan (or “PSP”). You can put up to 30% of your earnings into it in any given year on a before, after, or Roth basis.
Whoa, whoa there were some technical terms there.
“Earnings” means your salary and bonus.
“Before-tax” means tax is deferred until the money is withdrawn which must occur at the latest at age 72.
“Roth” means your contribution is made with post-tax money, but once you go to withdraw it, you can do so in a tax-free fashion.
“After-tax” means you will declare the contribution and pay tax on the contribution amount for the calendar year in which the contribution was made.
Wait a second, aren’t “Roth” and “after-tax” the same thing, you ask?
Not exactly. There is a strategy called the Mega Backdoor Roth IRA. It goes like this.
- You max out your pre-tax 401(k) contribution by funding your 401(k) with $22,500
- You contribute a certain amount, up to $43,500, into your 401(k) on a post-tax basis
- You immediately convert that to a Roth IRA, or you can leave it in your plan as a Roth 401(k) contribution
This is a bit complicated from a tax perspective, so you may want to consult with your CPA or a financial advisor before making any moves.
But wait – it gets even better!
A word about the Pfizer 401(k) match
According to Pfizer, the company will match dollar for dollar for the first 3% of your earnings. After that, Pfizer will match 50% for the next 3% of your earnings.
These matched contribution amounts immediately vest, meaning that if you were to leave the company you would have a right to this money.
That’s fabulous!
Pfizer Supplemental Savings Plan (PSSP)
This non-qualified plan allows certain employees to contribute, before-tax, up to 30% of their wages. The company also matches on contributions into the PSSP in the same way as the 401(k) – 100% on first 3% of earnings, 50% on the next 3%.
Pfizer pension plan
Pfizer offers a defined benefit plan. It is called the Pfizer Consolidated Pension Plan.
What’s that?
First let’s go over what a defined benefit plan is.
In such a scenario, a certain portion of the employee’s salary is deducted pre-tax from his or her paycheck and placed into a trust invested by the company, or by a representative appointed to do so. In the case of the Pfizer defined benefit plan, this is the highest five-calendar years of salary and bonus. The proceeds grow over time, and when you retire the plan delivers your benefits back to you in the form of an annuitized payment stream or a lump sum. In other words, you get a check every month, or all at once, from the Pfizer pension plan with your payout.
The advantage here is that you are not taking any of the investment risk. The responsibility to generate an actuarially-determined payout is on the company, not you.
Pfizer stock options
Pfizer offers share-based compensation to its employees in the form of:
- Pfizer RSU’s – Restricted stock units. These are units of the company’s stock. They vest at certain times without you having to pull the trigger and buy them.
- Pfizer TSRU’s – Total shareholder return units. These are awarded to management and key personnel. The value you receive is the difference between the settlement and grant price, plus dividends.
- Pfizer Stock Options – you receive the option but not the obligation to purchase shares of Pfizer stock at a certain price, and it is your choice as to if, how and when you exercise these options, within certain limits.
- Pfizer Performance Shares – these are stock grants given to certain employees. The amount you are granted is determined by the achievement of certain performance goals for the company.
How to make it all work with your financial plan
There are a variety of ways to fund your retirement. Social Security, the savings you accrue in your personal brokerage accounts, cash value life insurance, and distributions from employer sponsored retirement plans such as the Pfizer 401k are all viable options.
However, each of these elements can’t be considered on its own. You need a plan that makes it all jive together. Such a plan would plot the course for the final years of your life, and include your major life goals, challenges, personal preferences, and other considerations such as estate, tax, and legacy.
We hope you’ve enjoyed our blog on what you need to know about the Pfizer 401k, the Pfizer defined benefit plan, and Pfizer Restricted Stock Units.
We are financial advisors in Morristown, NJ serving the local community and beyond. If you have questions about your Pfizer retirement benefits, 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.
Sources
Executive Compensation. Compensation Tables. Pfizer savings plans. https://www.pfizer.com/sites/default/files/investors/proxy/2017/PDF/pfizer-proxy2017_0102.pdf
Executive Compensation. Compensation Tables. Pfizer savings plans. https://s28.q4cdn.com/781576035/files/doc_financials/interactive_proxy/2022/PDF/pfizer-proxy2022_0079.pdf
Executive Compensation. Compensation Tables. The Pension Plan and Supplemental Pension Plan Summary. https://www.pfizer.com/sites/default/files/investors/proxy/2017/PDF/pfizer-proxy2017_0099.pdf
Share-based payments. 12 month ended December 31, 2016. https://www.sec.gov/Archives/edgar/data/78003/000007800317000014/R22.htm
Disclosures
Glassner Carlton Financial has no affiliation with Pfizer. Glassner Carlton communicates with its clients and the public in writing and verbally about Pfizer 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 Pfizer retirement or employee benefits, please contact your employer.