By: AnnaMarie Mock, CFP®
Pharmaceutical Company Benefit Packages
Pharmaceutical companies can have robust benefits packages encompassing cash compensation, equity compensation, and non-monetary benefits. It's essential to understand the type, timing, and amount of each to have a clear picture of your finances, as this provides the capital to grow wealth.
Regardless of your industry, a 401(k) can be a powerful retirement tool that bolsters long-term savings specifically for retirement. Based on the 2022 401(k) Participant Study conducted by Charles Schwab, 43% of participants would like specific advice on investing their 401(k) accounts and determining how much is needed for retirement.
Merck & Co is one of the leading pharmaceutical companies worldwide and one of the best pharmaceutical companies to work for based on the company's culture, benefits, and work environment, according to Grand View Research.
The Merck US Savings Plan
The Merck US Savings Plan offers savings on a before-tax basis (traditional 401(k)) or after-tax basis (Roth 401(k)); the account type is entirely dependent on your personal needs and taxes. The IRS sets annual limits on the maximum amount employees can save (defer) into a 401(k) plan and is regularly adjusted for inflation.
Maximum Deferrals for 2023
In 2023, the maximum amount of deferrals is $22,500 plus an additional $7,500 for individuals above 50. As legislation changes and social events shape the future, retirement savings plans have added features to make saving more conducive for employees. Not every 401(k) plan is created the same from one to another or even within the same company itself.
Advantages of the Merck 401(k)
The Merck 401(k) plan has many advantageous features that are not always readily available in other plans. Some of the critical characteristics of the plan are:
There is no waiting period to enter the plan meaning you can begin contributing on your hire date.
All employee and employer contributions are immediately vested. Based on a study by Vanguard, "How America Saves," only 40% of all retirement plans offered immediate vesting for employer-provided contributions.
This benefit is amplified by employer matching or profit sharing, essentially 'free money.' Merck will match 75% up to 6% of the employee contributions. In other words, they will match $0.75 for each dollar contributed until it reaches 6% of your pay, making this an effective rate of 4.5%. The caveat is the employee needs to contribute 6% themselves. About 50% of plans in the “How America Saves” study offers a matching rate greater than 4%, with the bulk in the 3% range.
There are three options to invest the 401(k) assets through Fidelity Net Benefits. Fidelity is one of the largest financial asset managers for 401(k) plans.
What to do with this information? As a successful pharmaceutical employee, you want your financial success to match your professional success. You need to capitalize on your compensation and benefits so you don't leave anything on the table.
Get the Most Out of Your Merck Compensation and Benefits
Some steps can be taken to increase your odds of personal and professional success. It is vital to take a strategic approach to regularly review your benefits and incorporate them into a financial plan to make the most out of them, even if it is easier not to act. Financial planning is as unique as you are, so a solution for one person may not be appropriate for your situation. Getting started:
Start by understanding your compensation and benefits
Define your short-term and long-term goals
Create a financial and investment plan to achieve your goals by incorporating your benefits
Monitor and stick to the plan
Monitoring is one of the most critical steps. Financial planning is not a set-it-and-forget-it process; it is very dynamic. A financial plan does not need to be complicated and should provide a starting point for measuring your long-term success. Planning allows us to be proactive in shaping our lives because we have more control over the outcomes than just being reactive.
Making decisions about your compensation & benefits package may seem complicated. Still, your benefits should be a benefit, not a burden. I suggest partnering with a knowledgeable financial advisor as a sounding board and a resource with the primary goal of simplifying your financial life.
AnnaMarie Mock is a CERTIFIED FINANCIAL PLANNER™ and Partner at HIGHLAND Financial Advisors, LLC, a Fee-Only financial planning firm that offers comprehensive financial planning, retirement planning, employer retirement planning, and investment management. AnnaMarie graduated from Montclair State University with a degree in finance and management and successfully passed the CFP® national exam in 2016. She has been working at Highland Financial Advisors since 2013 as a fee-only, fiduciary Wealth Advisor and is a member of NAPFA.