Wealth Management For Current And Former Moog Employees

If you are a Moog employee, past or present, and are currently thinking about retirement, we have a plan for you.

Ogorek Wealth Management (based in Buffalo, NY) specializes in managing wealth and building retirement plans for Moog employees.

We are experts in your benefits plans and will work to give you a seamless transition into retirement.

Moog Retirement Insights

Take Advantage Of This Little Known Tax Strategy For Employee Stock

As a Moog employee, you likely own Moog stock in your 401(k) plan. Many publicly traded companies offer company stock as a way to promote an "ownership mentality" by making employees shareholders of the company. As we all know, your 401(k) dollars will eventually be taxed as ordinary income when withdrawn from your account. However, this may not be the case with employee stock. The Internal Revenue Code offers a favorable tax treatment for employee stock --- called Net Unrealized Appreciation (NUA) --- which could save you a significant amount in taxes, if you use it correctly. 

What is NUA?

 Net Unrealized Appreciation (NUA) allows employees to transfer company stock from a retirement account to a brokerage account. While the cost basis is taxed as ordinary income, the unrealized gain in the shares is taxed at preferential long-term capital gains rates. For instance, let’s say you have $100,000 in Moog stock sitting in your 401(k), with a cost basis (what you paid for the shares) of $40,000. If left in your 401(k), the entire $100,000 would be taxed as ordinary income when the funds are ultimately withdrawn from the account. Using the NUA strategy, however, would mean that only your original $40,000 would be taxed as ordinary income. Your gain ($60,000) would then be taxed at preferential capital gains rates. Most retirees will pay a capital gains rate of 15% (though some may qualify to pay nothing). This can be considerably lower than your ordinary income rates. 

Are there any requirements to make the NUA election?

 
    • The transfer needs to be made in-kind. Selling the shares, transferring cash, then repurchasing shares in a brokerage account does not qualify. Shares need to be transferred directly to a brokerage account.
    • The 401(k) plan must take a lump sum distribution. In this circumstance, it means all the money needs to be distributed from the plan in one year. No partial rollovers are allowed.
    • The distribution must occur after a triggering event:
      • Death
      • Disability
      • Separation from service
      • Reaching age 59.5
 At first glance, making an NUA election sounds like an obvious choice, but it really depends on personal circumstances. Here are some factors to consider to determine if making an NUA election is right for you: 

Cost Basis

If you have a very low cost basis, the NUA election becomes more attractive. Ordinary income taxes are immediately due on the cost basis of the stock. So the lower the basis, the less tax you will have to pay up front. 

Holding Period

The NUA strategy makes the most sense if you were planning to sell the shares soon anyways. 

Future Tax Rates

If you expect tax rates to be lower in retirement, NUA is less intriguing. This is because the spread between ordinary income rates and capital gains rates narrows. 

If you are an employee who owns Moog stock and are currently thinking about retirement, we have a plan for you. Ogorek Wealth Management (based in Buffalo, NY) specializes in managing wealth and building retirement plans for Moog employees. We are experts in your benefits plans and will work to ensure you are making the correct NUA decision based on your individual circumstances.

 

Learn more about Ogorek Wealth Management and our unique approach by scheduling a time to meet.

 

Gain comfort in one of the most important decisions in your life.

Considering Rolling Over Your Moog 401(k)? Read This First

If you are a Moog employee and are currently thinking about retirement, you will need to decide whether to leave your 401(k) in Moog's RSP+ account, or roll it over to an IRA. Additionally, Moog's retirement plan allows for partial rollovers upon reaching age 59.5, so even if you are still employed, it may make sense to roll funds into an IRA. Here are the pros and cons of a 401(k) rollover:

Pros:

  • Account Consolidation
Moving one or more retirement accounts into an IRA reduces the probability of losing track of your investments. Neglecting accounts can result in a mishmash of investments, including redundant positions or asset allocations out of line with your overall risk tolerance and financial planning goals. By consolidating accounts, it is easier to manage investments and track account performance.
  • Investment Selection
Most employer retirement plans offer a limited selection of investment options, specifically with bond and alternative investment funds. While Moog has a solid lineup of stock funds, they only offer two bond funds. As you approach retirement, you will want to shift towards a more conservative investment allocation that may require a broader menu of bond or alternative investment options.Even though Moog offers a generous array of stock funds, individual stocks cannot be purchased in RSP+ accounts. In today's low rate environment; we use individual stocks as an alternative to bonds to generate income. You can read more about our approach here.

Cons:

  • You Want to Retire Early
If you plan to retire early, it may be a good idea to keep your 401(k) if you need to access the money. Upon separation of service, you can access the funds penalty free at age 55. However, distributions from an IRA are subject to a 10% penalty until age 59.5.
  • You Want to Retire Late
Upon reaching age 72, you are subject to Required Minimum Distributions (RMDs) from your IRA or 401(k), which are subject to income taxes. However, if you are still employed (and less than a 5% owner of the company) your 401(k) is not subject to the RMD rules. This means that you can continue to defer taxes until you retire.
  • Loss of Creditor Protection
Assets in 401(k) and other qualified retirement plans are protected from creditors. If someone wins a judgment against you in a personal injury lawsuit, your retirement account is exempt from the lawsuit. In some states, this is a moot point. For example, New York extends creditor protections to IRAs. However, if you are planning to move to a different state, you will need to check the protection that your state covers. Some states offer no protection or only exempt an amount necessary to support you in retirement. Proper insurance planning can mitigate the risks of judgment. Our team can analyze your current insurance coverage to ensure your assets are protected in a lawsuit.

A rollover decision is a complex and dependent with your individual situation. Fortunately, we can help make a decision that fits your needs. Ogorek Wealth Management (based in Buffalo, NY) specializes in managing wealth and building retirement plans for Moog employees. We are experts in your benefits plans and will work to give you a seamless transition into retirement.

 

Learn more about Ogorek Wealth Management and our unique approach by scheduling a time to meet.

 

Gain comfort in one of the most important decisions in your life.

Pre-tax Or Roth 401(k) Contributions? What All Moog Employees Should Know

Pre-tax contributions to a 401(k) offer an upfront tax advantage – you receive a tax deduction on contributions, and investment earnings compound tax-free. Taxes are deferred until withdrawals are made. Moog's retirement plan also offers Roth contributions, which are the opposite – taxes are paid on contributions, but investment earnings and withdrawals are tax-free. Here are some factors to consider before selecting pre-tax or Roth contributions: 

Tax Rates

 If you expect your tax rate to be lower in retirement, choose pre-tax to take advantage of the current income tax deduction. If you are in a high tax bracket, you may not have the same level of income in retirement. In this case, you may be better off receiving a current tax benefit. If you expect taxes to be higher in the future, choose a Roth IRA to receive future tax-free distributions. The 2017 Tax Cuts and Jobs Act temporarily lowered tax rates. Assuming rates increase in the future, tax-free Roth distributions would be even more valuable than they are today. Another consideration is if you plan to move to a new state in retirement. Depending on that state's income tax rates, your projected retirement tax rate may be higher or lower that if you stayed in New York. 

Hedge Your Bets

 If there is no clear favorite based on tax-rates, you can hedge your bets by contributing both pre-tax and Roth dollars to your plan. There is a lot of uncertainty on where future tax rates will ultimately land and it is not easy to project retirement income, especially when your future taxable income relies heavily on the allocation between pre-tax and Roth accounts in the first place. In light of this, tax diversification is always a sound strategy. Having a mix of pre-tax, Roth and taxable (brokerage) assets provides you with the ability to manufacture your own tax rate, as you can choose where you want your income to come from. It allows you to take advantage of tax planning strategies such as Roth conversions, early IRA distributions to reduce future RMDs, or generating capital gains on highly appreciated securities without paying any taxes. 

Early Withdrawal Concerns

 401(k) plans are be retirement savings vehicles. By design, it is hard to get money out of these plans prior to retirement. You can borrow from your plan by taking a loan from your account, which has to be paid back with interest (which may cause cash flow issues). If you take early withdrawals, you will be subject to a 10% penalty plus applicable taxes, unless you meet one of the qualifying exceptions. To mitigate the risk of an early withdrawal, you may want to contribute to a Roth IRA. Contributions can always be distributed tax-free, assuming that you've had the account for five years. If your income exceeds the Roth income limits, you can utilize the "Backdoor Roth IRA" strategy, where you contribute to a Traditional IRA, then convert the funds to a Roth IRA in the same year. Our team can help employ this strategy to avoid paying additional taxes on the conversion. 

If you are a Moog employee and are currently thinking about retirement, we have a plan for you. Ogorek Wealth Management (based in Buffalo, NY) specializes in managing wealth and building retirement plans for Moog employees. We are experts in your benefits plans and will work to give you a seamless transition into retirement.

Learn more about Ogorek Wealth Management by scheduling a time to talk.

 

Gain comfort in one of the most important decisions in your life.

The Pros And Cons Of Moog’s Employee Stock Purchase Plan

In 2017, Moog created an Employee Stock Purchase Plan (ESPP) that allows employees to purchase shares at a 15% discount. The purchases can be made automatically through payroll deductions (similar to 401(k) contributions). Importantly, however, ESPP contributions are made with after-tax dollars. With such a large discount, many Moog employees are likely taking advantage of the program to save for larger expenses down the road, possibly their child’s education. But does that make sense given other options? 

Is Moog’s ESPP a good deal?

 If you are looking to build an ownership stake in the company, Moog’s ESPP is a better route than simply buying the shares in a brokerage account. The 15% discount allows you to earn an instant return of 17.6%. Why 17.6%? Moog currently trades for $78.00 per share, which means employees can purchase shares for just $66.30 ($78.00 x .85) apiece. The difference of $11.70 per share would result in a gain of 17.6% ($11.70/$66.30) on your original investment. 

What’s the catch?

  1. Moog shares have to be held for at least 1 year before selling. In other words, Moog employees cannot immediately sell the share for risk-free gain.
  2. Even with the discount, Moog shares might not outperform the overall stock market. For instance, over the last 10 years, Moog stock returned just 114%, versus 350% for the S&P 500. Discount or no discount, you would have been better off investing elsewhere. Click here for our blog titled Should Moog Employees Sell their Shares?
 

Is Moog’s ESPP a good way to save for college?

 The answer all comes down to taxes. While the discount is tempting, remember that when your shares are eventually sold, you will owe taxes on both the initial discount (taxed as ordinary income) and your capital gain, should Moog stock appreciate further. This is significant disadvantage versus the traditional route for saving for college: the 529 plan. NY State’s 529 plan offers a triple-tax savings:
  1. Contributions to the plan are tax-deductible in NY State
  2. Investments grow tax-free, with no capital gains taxes
  3. Withdrawals are tax-free as long as they are for qualified education expenses
 Ultimately, the right decision for you will depend on many factors, including your marginal tax rate, the age of your children, and how long you plan to stay at Moog.  

If you are a Moog employee, let us help you with these tough financial decisions. Ogorek Wealth Management (based in Buffalo, NY) specializes in managing wealth and building retirement plans for Moog employees. We are experts in your benefits plans and will work to give you a seamless transition into retirement.

 

Learn more about Ogorek Wealth Management and our unique approach by scheduling a time to meet.

 

Gain comfort in one of the most important decisions in your life.

Should Moog Employees Sell Their Shares?

If you are a Moog employee, you know the company changed its retirement plan at the start of 2020. The change was not unexpected: like many in the industry, Moog shifted from a traditional pension system (with payments guaranteed), to a now more common defined contribution plan (where the payments are not guaranteed and market risk is assumed by employees). As part of that new plan, Moog created the RSP+ account. 

What is the RSP+ Account?

  Moog’s new retirement plan includes both a company match on employee 401(k) contributions as well as a direct retirement contribution. The direct retirement contributions are not a match (employees don’t have to contribute to receive the payments) and take into account both an employee’s age and salary: those ages 39 or younger receive 3% of compensation, ages 40-49 and ages 50+, receive 4% and 5%, respectively. For example, a 52-year old Moog employee making $100,000 per year, receives an annual direct RSP+ contribution of $5,000. 

How are RSP+ accounts invested?

  While the default option for Moog employee 401(k) accounts (including the company match) is the Blackrock LifePath funds (you can read our review of the LifePath funds here: “Moog Employees: Are you Making the Most of your 401(k) Account?”), the default option for the direct retirement contributions is 100% in Moog stock. As a Moog employee, you have the option to change how your RSP+ account is invested at any time (including the direct retirement contribution). The RSP+ plan offers a wide range of diversified index funds (such as those tracking the S&P 500) to choose from instead. However, as of September 2020, Moog employees still own $98 million in company stock. 

I haven’t changed my investment election and am still receiving Moog stock. What should I do?

  The chart below shows the performance of Moog Stock (green) versus the S&P 500 (blue) over the last ten years. Moog has significantly underperformed the S&P 500, returning 114% versus the S&P’s 350%. Put another way, $10,000 invested in Moog stock ten years ago would be worth $21,400 today. That same $10,000 invested in the S&P 500 would be worth $45,000 today. In other words, investing in Moog would have cost you nearly $23,600. Now imagine you are investing $10,000 per year in Moog. If you are a high earner at Moog, that may be exactly what’s happening.  It’s not just about returns, too. It’s also about risk. Moog stock has been significantly more volatile than the S&P 500 over the last ten years, including drops of 50% in 2016, and nearly 70% in 2020. In fact, over the last ten years, Moog has capture just 91% of the market’s upside, but 178% of the downside.  

That’s a losing proposition for Moog investors.

  We believe an index fund tracking the S&P 500 would be a much wiser investment for Moog employees. 

How can we help?

If you are a Moog employee and are currently thinking about retirement, we have a plan for you. Ogorek Wealth Management (based in Buffalo, NY) specializes in managing wealth and building retirement plans for Moog employees. We are experts in your benefits plans and will work to give you a seamless transition into retirement.

 

Learn more about Ogorek Wealth Management and our unique approach by scheduling a time to meet.

 

Gain comfort in one of the most important decisions in your life.

Moog Employees: Are You Making The Most Of Your 401(k)?

In 2020, Moog created a new retirement plan called the RSP+ account. The plan consists of a company match on employee 401(k) contributions, and an additional annual direct contribution by Moog. Importantly, Moog’s retirement plan no longer has a pension option. This means all the market risk is borne by the employees, which makes it vital that retirement dollars are invested wisely. 

How does the Moog 401(k) match work?

 Starting October 1, 2021, Moog will match 50% of the first 10% of eligible pay that employees contribute to their 401(k) account. In other words, employees contributing 10% or more of their salary will receive the full 5% match.The below table shows the matching amounts received for a Moog employee making $100,000 per year:

How is my 401(k) invested?

 The default option for Moog 401(k) accounts (including the company match) is the Blackrock Life Path funds. These funds are similar to other target-date retirement funds, and hold both stocks and bonds.Your default Blackrock Life Path fund depends on your age. For instance, a 30 year-old Moog employee will likely be assigned the 2055 fund (the closest year to which the employee turns 65). A 55 year-old Moog employee, on the other hand, will likely be assigned the 2030 fund.The funds differ in their risk exposure, with the funds designed for younger employees (with target retirement dates further out into the future) with more exposure to stocks (and less to bonds). Conversely, funds designed for older employees have greater exposure to bonds (and less to stocks). 

Are the Blackrock Funds good investments? Do I have other options?

 While you do have many other options (including several Vanguard funds) we think the Blackrock funds are perfectly suitable while you are still working. It’s worth noting that roughly half of all 401(k) dollars at Moog are invested in the Blackrock Life Path funds. 

Pros:

  1. Simplicity – While you can replicate 90% of the investment strategy using various Vanguard funds in your 401(k), the Blackrock funds offer the simplicity of a single investment choice. In addition, the funds automatically reduce your exposure to the stock market as you get closer to retirement.
  2. Relatively Low Fees – Blackrock Life Path charges 0.09% per year, or $9 per $10,000 invested. While Vanguard funds are slightly cheaper (as low as 0.03%), you would have to invest in several to replicate the all-in-one stock/bond mix offered by Blackrock.
  3. Only option for exposure to REITs, TIPS – Moog’s 401(k) lineup in bonds/alternative investments is very weak. For instance, you have only two bond funds to choose from (versus 11 stock funds). As a result, the Blackrock Life Path fund do offer some exposure you can’t get elsewhere, including to Real Estate Investment Trusts (REITs) and Treasury Inflation-Protected Securities (TIPS).
 While Blackrock Life Path funds are a perfectly suitable choice within the confines of Moog’s 401(k) plan, we think better options may exist outside Moog’s plan

Cons:

  1. Not Actively Managed – Blackrock Life Path is made up of index funds designed to track the overall market. In other words, Blackrock does not buy individual bonds or stocks in an attempt to gain an advantage.
  2. Not Built for Today’s Low Rate Environment – Blackrock Life Path leans heavily on a bond-index that pays just 1.25% per year (this funds is more than 50% of the Blackrock Life Path Retirement Fund), below the inflation rate.
  3. Benchmark Performance – Blackrock Life Path generates market performance (i.e. the stock market falls 20%, your stocks fall 20%). There is no opportunity to decrease risk as conditions warrant.
 

If you are a Moog employee and are currently thinking about retirement, we have a plan for you. Ogorek Wealth Management (based in Buffalo, NY) specializes in managing wealth and building retirement plans for Moog employees. We are experts in your benefits plans and will work to give you a seamless transition into retirement.

 

Learn more about Ogorek Wealth Management and our unique approach by scheduling a time to meet.

 

Gain comfort in one of the most important decisions in your life.

 

What Makes Ogorek Different?

1. We Don’t Sell Anything

As Registered Investment Advisors, we serve as fiduciaries and are required to act in your best interest at all times. That means we don’t sell you products (insurance, annuities, or mutual funds), we don’t earn commissions, and all investment decisions are based entirely on merit.

2. Low Expenses

When all investment decisions are based on merit, it’s no surprise that our portfolios benefit from very low expenses. Mutual Funds and Exchange Traded Funds with high expense ratios need not apply.

3. Charles Schwab

We have a more than 35 year relationship with Charles Schwab as our recommended Independent 3rd Party custodian. With Charles Schwab as custodian, your assets are kept safe, and no money is moved in/out of the accounts without your approval.

Our Team Is Your Team

Fostering a culture of trust, as an independent fee-only advisor, we’ve aligned our interests with yours. As your fiduciary, we’ve pledged to act in your best interests – at all times.

More About Us

Find Out How We Can Help You!

Learn more about Ogorek Wealth Management and our unique approach for Moog employees, past and present, by scheduling a 15-minute introductory meeting with our team.

 

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Disclaimer:

This website is for informational purposes only and does not constitute a complete description of our investment services or performance. Information throughout this site, whether charts, articles, or any other statement or statements regarding market or other financial information, is obtained from sources which we, and our suppliers believe reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. Nothing on this website should be interpreted to state or imply that past results are an indication of future performance. Neither we or our information providers shall be liable for any errors or inaccuracies, regardless of cause, or the lack of timeliness of, or for any delay or interruption in the transmission thereof to the user. Ogorek does not have a formal/informal relationship with Moog, and nothing on this site should be construed as implying such a relationship exists. All Moog related material has been derived from public sources, including the Moog website, and SEC filings.

Ogorek Wealth Management, LLC

Ogorek Wealth Management, LLC