IBM® 401(k) Plus Plan: 2021 Update

A Review of Investing for Your Financial Future Prepared by Vanguard for IBM

January 2021 | Print or download the 2021 Update      Feedback

Be prepared for 2021—and beyond



The coronavirus pandemic has affected us in many ways over the past year. While it’s essential you continue to focus on your physical and mental health, your financial health is important too. A lack of time, experience, or information can contribute to stress around finances. Connecting with an IBM MoneySmart coach can save you time and gives you access to a team of professionals who can help you make informed decisions before you take actions that could have a lasting impact on your wealth accumulation plans. Use this time for a checkup on your financial situation, and know your IBM 401(k) Plus Plan has the tools to help you.

Whether you’re committed to staying the course or worried about market volatility and your investments, keep reading for tips and strategies to help you assess your financial picture and get individualized help from financial professionals.

Review your investments

Do you know how your money in the plan is invested among stocks and bonds? This is a key part to understanding risk. Stocks have a higher potential for growth over the long haul. They also carry more risk that prices will fluctuate from year to year. Bonds generally have less risk, but also less potential for gains. The mix of stocks and bonds is the biggest factor that has accounted for long-term investment results.

You want to sleep at night. So keep that in mind as you find the right mix based on your goals and timeline to retirement. Once you have a plan, stick to it. Reassess periodically to see if your strategy still fits. To review your investment mix, log on to your account at netbenefits.com/ibm.

Consider an All-in-One investment

You may want a sophisticated approach to investing that’s simpler for you to manage. If so, consider a single All-in-One Life Cycle Fund. You’ll get a professionally managed and diversified mix of investments that automatically rebalances.

Learn more

Consider advice

You’re bound to have questions about your money and planning for retirement. The IBM 401(k) Plus Plan gives you access to advice options and one-on-one support.

Anyone can benefit. Whether you stayed the course in 2020 or made heat-of-the-moment decisions, advice can keep you on course—or help you get back on track.

See how advice can help

Consider IBM MoneySmart

See how an IBM MoneySmart Coach can help

Set a savings goal

Contributing to your IBM 401(k) Plus Plan is one of the best—and easiest—ways to save for retirement. Set a goal: How much of your salary should you save? Many experts recommend 12% to 15%, which includes company contributions.

It’s OK if you can’t do that now. Save what you can, but try to save enough to maximize your match. And whenever your pay increases, increase your contribution rate too. Or increase your savings rate a bit each year. Or let the plan do it for you automatically. Log on to your account at netbenefits.com/ibm and sign up for the Annual Increase Program under the Contributions tab. You choose how much to increase your savings and which month you want it to occur.

Did you consider taking (or have you taken) money from your plan?

We understand that you may have had immediate financial needs in 2020 that caused you to look to your 401(k) plan for support. If you took a loan, one step you can take to help you get back on track for retirement is to increase your savings rate, if you can.

The good news is that once you’re back on sound financial footing, Vanguard research shows that increasing your savings rate by one percentage point could cover a potential retirement shortfall.* If you have taken a larger withdrawal or are closer to retirement, you may need to make a larger increase. IBM MoneySmart coaches can help you figure out a plan to rebuild your wealth. Schedule an individual session with a financial coach via w3.

But if you make an increase to your current rate, you can help your account balance recover over time.
Just log on to your account at netbenefits.com/ibm.

If you’re considering a loan, did you know the IBM MoneySmart coaches can be a resource for you? If you’re feeling unsure about your next steps, a coach can help you review your personal situation and provide guidance. Call 877-543-7678 Monday through Friday from 9 a.m. to 8 p.m. Eastern time or schedule an appointment via w3.

Through IBM MoneySmart, you have access to Ayco’s financial coaches and digital platform to guide you in core financial areas—helping you to plan for life events and reach your goals.

Get to know Ayco by watching this short video:



*Assuming a real rate of return of 4%. Source: Vanguard’s How America Saves 2020: The CARES Act.

Before investing in any investment options of the IBM 401(k) Plus Plan, please carefully consider its investment objectives, risks, and fees and read the applicable fund flyer/prospectus available on netbenefits.com/ibm or by calling the IBM Benefits Center — Provided by Fidelity at 866-937-0720 (TTY 711). Representatives are available Monday through Friday (excluding New York Stock Exchange holidays except Good Friday) from 8:30 a.m. to 8:30 p.m. Eastern time. Read all documents carefully before you invest.

Whenever you invest, there’s a chance you could lose the money. Target Retirement Funds are subject to the risks of their underlying funds. The year in the fund name refers to the approximate year (the target date) when an investor would retire and leave the workforce. The fund will gradually shift its emphasis from more aggressive investments to more conservative ones based on its target date. A Target Retirement Fund is not guaranteed at any time, including on or after the target date. Diversification does not ensure a profit or protect against a loss. Even though Target Retirement Funds simplify the investment process, they still require some monitoring to ensure that the portfolio is in line with your current situation.

IBM® 401(k) Plus Plan: 2021 Update

A Review of Investing for Your Financial Future Prepared by Vanguard for IBM

January 2021 | Print or download the 2021 Update      Feedback

To Roth or not to Roth. That is the question



Roth 401(k) can be a powerful tool as you save for retirement. That’s because Roth money—plus any earnings—can be withdrawn tax-free if you meet a few conditions. And having tax-free money in retirement could be a big benefit, particularly if you expect your tax rate to be higher in retirement. Here’s a quick guide to understanding Roth. You can then decide if Roth, or a Roth in-plan conversion, might be right for you.*

Two conditions for tax-free Roth withdrawals:

• You’re at least age 59½.

• You made the contribution (or in-plan conversion) at least five years before the withdrawal.

What is Roth?

The Roth 401(k) option is one of three ways to save in your plan, along with Before-Tax and After-Tax contributions. These determine whether you pay taxes now or in the future. With the Roth option, you’ll pay taxes now. With the Before-Tax option, you’ll pay taxes later.

Contribution types

Contributions Withdrawals Eligible for company match
Before-Tax Not taxed Taxable Yes
Roth Taxable Not taxed Yes
After-Tax Taxable Taxable* No**

*Although withdrawals of After-Tax contributions are not taxed, earnings on these contributions are taxable at withdrawal.

Are you a good fit for Roth?

You might benefit by making Roth contributions if:

  • You're at the start of your career and you expect your income to rise substantially over the years.
  • Your income is too high to allow you to contribute to a Roth IRA.
  • You're in a low tax bracket today.

You don’t have to pick just one

You don’t have to make just Before-Tax or just Roth contributions—you can do both. You can get some of the tax benefits now and some later. You can also save on an After-Tax basis, which allows you to save more. (If you make After-Tax contributions, you’ll want to make sure you reach the IRS limits for Before-Tax and Roth contributions.)

Want to save all that you can?

In 2021, you can save up to $19,500 ($26,000 if you will be age 50 or older anytime during the year). You can use the Deferral Maximizer at netbenefits.com/ibm to automatically save the maximum amount you are eligible for. If you will be age 50 or older in 2021, make sure to change your deferral option to Deferral Maximizer Plus Catch-Up.

Is a Roth in-plan conversion right for you?

There’s another aspect to Roth. Any Before-Tax or After-Tax money in your account can be converted to Roth money. This may be an option to consider if you want tax-free money in retirement.

Any potential future tax benefit must be weighed against the cost of conversion today. When you convert Before-Tax money to Roth, you’ll have to pay income tax on the whole amount you convert in the tax year of the conversion. However, if you convert After-Tax money to Roth, you would owe taxes only on earnings, as taxes have already been paid on contributions.

The decision to convert to Roth depends greatly on your circumstances, including your current and estimated future tax rates. You also need to pay for those taxes with money outside of the plan. Talk with an IBM MoneySmart Coach or consult a tax advisor before taking any action.

An option to consider: Automatic Roth in-plan conversions

The IRS allows you to contribute After-Tax money beyond the limits for Before-Tax and Roth contributions. If you’re a supersaver who makes the maximum contributions each year, you may fall into this category.

The automatic Roth conversion feature allows you to convert After-Tax contributions to Roth on the same day you make the contributions. Even better, any earnings on the converted money will start growing tax-free immediately. This approach can allow you to save more Roth money in a year than by just making Roth contributions directly.

You can make After-Tax contributions up to 10% of your eligible pay. Please note that if your After-Tax contribution rate is too high, you may miss out on IBM contributions because once you reach the IRS limit on total contributions, all contributions to your 401(k) plan account will stop.

 

Want to take action?

To make Roth contributions or initiate a Roth in-plan conversion, log on to your account at netbenefits.com/ibm.

*Tax implications: You will be responsible for paying any federal, state, local, or foreign taxes on a distribution or withdrawal from pre-tax accounts. A distribution or withdrawal of Roth 401(k) earnings is usually also taxable unless the initial Roth contribution was made more than five years ago and you are at least age 59½. Early withdrawals may be subject to a 10% federal penalty tax. To the extent required by law, Fidelity will make the appropriate withholding for tax purposes. In most cases, converting to a Roth account is a taxable event. If you convert, you may be subject to federal, state, and local taxes on all or part of the converted amount. Consult an attorney, tax professional, or other advisor regarding your specific legal or tax situation.

IBM® 401(k) Plus Plan: 2021 Update

A Review of Investing for Your Financial Future Prepared by Vanguard for IBM

January 2021 | Print or download the 2021 Update      Feedback

All-in-One may be all you need



If you invest in an All-in-One Life Cycle Fund, you’re in good company: About 42% of IBMers invest in one.

It’s easy to understand why these funds are so popular. They offer a simple, one-stop approach to retirement investing. They also:

  • Make it easier for you to diversify your holdings.
  • Automatically rebalance periodically.
  • Are designed to be the only fund you need.

So what are these funds and how do they work?

All-in-One Life Cycle Funds is the umbrella name given to 14 specific funds in your plan: ten Target Retirement Funds and four Target Risk Funds.

Both groups are professionally managed portfolios of low-cost, balanced funds. These funds invest in your Plan’s Core Building Block Funds and the Balanced Exposure Fund—but in different proportions.

See them side by side

Target Retirement Funds Target Risk Funds
Number of funds Ten
(2020, 2025, 2030, 2035, 2040, 2045, 2050, 2055, 2060, and 2065)
Four
(Income Plus, Conservative, Moderate, and Aggressive)
Asset mix and risk level automatically change over time Yes No
Professionally managed Yes Yes
Based on a projected retirement year Yes No
Based on a risk level you choose No Yes

Target Retirement Funds aim to keep striking the right balance between the risk necessary to build wealth and the safety needed to protect a growing (or ready-to-hatch) nest egg. As you age, they automatically rebalance your portfolio with an age-appropriate mix of stocks and bonds. For this reason, an investor could hold a single Target Retirement Fund for life.



Target Risk Funds, on the other hand, will always be as conservative, moderate, or aggressive as their names suggest. The mix of investments they hold and their risk objectives are not expected to change materially over time. That means the investor has to physically change funds on their own when they want to change the risk level of their investments.

Why invest in All-in-One funds?

They’re simple yet diversified. And they can help you stay disciplined during market swings.

Also, they generally invest in the broadest index funds, which gives you access to thousands of U.S. and international stocks and bonds, as well as broad exposure to the world’s major market sectors and segments.

And importantly, they provide automatic rebalancing. This keeps your portfolio from becoming more risky or more conservative than you intended because of shifts in the markets.

Just don’t forget about them

As with any investment portfolio, check your mix regularly. Does it still match your goals? Are you saving enough to retire? If your goals change, see if your investments should too.

Talk with an IBM MoneySmart Coach.

And remember:

  • Target Retirement Funds are designed for a particular retirement year, not a particular person. They don’t take into account your finances and tolerance for risk. If you aren’t comfortable with the mix, consider a different one, even if it doesn’t match your retirement year.
  • For Target Risk Funds, you’ll need to be a bit more hands-on because you have to take action to choose a more aggressive or conservative fund.
  • The 401(k) Plus Plan administrators continually check in on the funds, too. The funds have new target asset allocations effective December 31, 2020. Key changes for the Target Retirement Funds’ glide path and asset allocations include extending the end of the glide path out to age 72 from age 70 and removing their allocation to the Commodities Fund. Key changes for the Target Risk Funds’ allocations include removing the allocation to the Commodities Fund and reducing the Conservative Fund’s allocation to equities.

Learn more about Target Retirement Funds

See the Fund Flyers for information on each fund, including the objectives, investment mix, risks, and expense ratios.

Before investing in any investment options of the IBM 401(k) Plus Plan, please carefully consider its investment objectives, risks, and fees and read the applicable fund flyer/prospectus. This and other information is available on netbenefits.com/ibm or by calling the IBM Benefits Center — Provided by Fidelity at 866-937-0720 (TTY 711). Representatives are available Monday through Friday (excluding New York Stock Exchange holidays except Good Friday) from 8:30 a.m. to 8:30 p.m. Eastern time. Read all documents carefully before you invest.

Target Retirement Funds are subject to the risks of their underlying funds. The year in the fund name refers to the approximate year (the target date) when an investor would retire and leave the workforce. The fund will gradually shift its emphasis from more aggressive investments to more conservative ones based on its target date. A Target Retirement Fund is not guaranteed at any time, including on or after the target date. Diversification does not ensure a profit or protect against a loss. Even though Target Retirement Funds simplify the investment process, they still require some monitoring to ensure that the portfolio is in line with your current situation.

IBM® 401(k) Plus Plan: 2021 Update

A Review of Investing for Your Financial Future Prepared by Vanguard for IBM

January 2021 | Print or download the 2021 Update      Feedback

IBMers’ top questions of 2020



Each year, IBMers reach out to Ayco MoneySmart Coaches, Edelman Financial Engines, and our call centers with questions about the 401(k) Plus Plan. Here are some of your top questions and their answers.

10 Benefits Tips to Kick Off the New Year

Your Benefits Team is sharing 10 benefits tips to help U.S. IBMers stay current on the latest information and updates related to their 2021 benefits, including the extension of COVID-19-related benefits and leaves, important pharmacy reminders and more.

#usbenefits Slack Channel: Join this channel to get answers to benefit plan questions.

Question 1: I’m new to the 401(k). Where should I start?

Answer: Welcome to IBM! Start with the Alex 401(k) Engager, an interactive experience to help optimize your 401(k) Plus Plan and direct you to available resources. Log on to netbenefits.com/ibm.

If you prefer to get personalized help from a financial coach, take advantage of your IBM MoneySmart program and schedule a call with your Ayco financial coach.

Question 2: When should I update my beneficiary information, and how can I do it?

Answer: You should check your beneficiary information annually to make sure all the information is correct and updated.

Here’s why beneficiary designations are so important:

  • They supersede your will. Federal law requires that employers distribute the savings in 401(k) plans to the beneficiary named in the plan, even if it doesn’t match your will.
  • They are critical for same-sex couples in civil unions or other types of domestic partnerships. Recognition (or prioritization) of these unions varies by region, and designating a beneficiary ensures assets are distributed according to your wishes.
  • Naming a beneficiary (or making sure the person named is the person who want to inherit your money) is a small step you can take now that can save your loved ones heartache down the road.

For more info: Log on to netbenefits.com/ibm. Choose Profile (located at the top right of the screen), select Beneficiaries in the About You section, and follow the instructions.

Question 3: What’s the most conservative fund in the 401(k) that is closely correlated to cash or money market funds?

Answer: The Interest Income Fund. This fund seeks to preserve your principal by investing in stable value insurance contracts to provide income similar to an intermediate-term bond fund. This means:

  • It may be appropriate for those looking to balance out their portfolio with cash or bonds.
  • Like a money market fund, there is little risk that you could lose your original investment.

Additionally, the expected return of the Interest Income Fund is higher than that of a money market fund.
For more info: See the Fund Flyer.

Question 4: How many times can I trade in my 401(k)?

Answer: Participants may trade daily, provided they remain in compliance with the Excessive Trading Policy. Participants are limited to one roundtrip transaction per fund within any rolling 90-day period and an overall limit of four roundtrip transactions across all funds over a rolling 12-month period.
For more info: See the Excessive Trading Policy.

Question 5: How do I move out of current investments and into new funds?

Answer: You can do this either online or by calling the IBM Benefits Center — Provided by Fidelity at 866-937-0720 (TTY 711).

Question 6: Is there a default investment election? If so, what is it?

Answer: Yes, the default investment election is the Target Retirement Fund with the date closest to the year you’ll turn 65. If you do not complete enrollment in the 401(k) Plan or indicate that you do not want to participate in the 401(k) Plan before the automatic enrollment date, you will be automatically enrolled and contributions will be deducted from each paycheck.
For more info: See the Automatic Enrollment and Default Investment Notice.

Question 7: How often should I rebalance my 401(k)?

Answer: A good rule of thumb is at least once a year, or when your mix is off by at least 5 percentage points.

You do this to make sure your portfolio stays in line with the target allocation you chose from the get-go. Once you choose your target allocation, you can sign up to be alerted if your allocation slips from that target (this is called Rebalance Notification). Fidelity will send you an email alert with a link to NetBenefits to update your allocation.

Alternately, you can choose to have your account automatically reset to your desired allocation (this is called Automatic Rebalance) on a regular basis—quarterly, semiannually, or annually.

For more info: Log on to netbenefits.com/ibm to sign up for either of these services.

Question 8: Can I roll over money into my 401(k)?

Answer: Yes, you can roll over money from another retirement plan or an IRA into your IBM plan account. Here are some things to consider:

  • Costs: Look at the investment costs and any fees you're paying in your former employer's plan or an IRA. Compare them with costs and fees in the IBM 401(k) Plus Plan, which IBM sends you each year.
  • Investment options: The IBM 401(k) Plus Plan offers an array of investment options. You can compare them with the investments offered in a former employer's plan. IRAs generally offer more investment options than retirement plans. But because of the size of the IBM 401 (k) Plus Plan, you may find that the IBM 401 (k) Plus Plan may offer lower-cost investments than what is offered in your former employer's plan.

There are Important factors to consider when rolling over assets to an IRA or employer-sponsored plan, or leaving assets in an employer retirement plan account. These factors include, but are not limited to, investment options in each type of account, fees and expenses, available services, potential withdrawal penalties, protection from creditors and legal judgments, required minimum distributions, and tax consequences of rolling over employer stock to an IRA.

You can begin the process of moving money from your previous employer's plan to the IBM 401 (k) Plan at netbenefits.com/ibm.

IBM® 401(k) Plus Plan: 2021 Update

A Review of Investing for Your Financial Future Prepared by Vanguard for IBM

January 2021 | Print or download the 2021 Update      Feedback

Reminder: Changes to RMDs



The government sets the age when you must begin taking money from your retirement plan account. These are called required minimum distributions (RMDs). An important change took place in December 2019—the SECURE Act pushed back the age when you must begin taking these.

The age when you must begin taking RMDs is now 72 rather than 70½. This change means you’re allowed to keep your money in the plan longer, giving it more time to grow without drawing down your assets as early.

If you reached age 70½ in 2019 or earlier, you are unaffected by this change.

Note: In March 2020, the government also passed the CARES Act, which waived RMDs from most retirement plans in 2020, regardless of age. You may have still received a distribution from your retirement plan if you requested one or if you had automatic distributions set up and did not stop them.

IBM® 401(k) Plus Plan: 2021 Update

A Review of Investing for Your Financial Future Prepared by Vanguard for IBM

January 2021 | Print or download the 2021 Update      Feedback

More on …



IBM MoneySmart

IBM MoneySmart provides IBMers access to MoneySmart Coaches who are available for confidential, one-on-one financial planning sessions. MoneySmart is offered at no cost to active IBMers in the U.S. and is available for 120 days from your last day of active employment at IBM.

Coaches are available to discuss topics such as investment planning, saving for retirement, IBM benefit plans, plus generalized financial planning and wellness. Your session can be brief or result in several follow-up sessions at your request.

You have two options:

1. Call Ayco at 877-543-7678 to discuss your top-of-mind financial questions (Monday through Friday, 9 a.m. to 8 p.m., Eastern time), or schedule your session online for individual financial counseling, including retirement planning and guidance on your investments.

Coaches can help you:

  • Figure out your 401(k) plan options, including contributions and investments.
  • Review opportunities for Roth in-plan conversions.
  • Optimize your company match.
  • Develop a personalized plan to achieve your retirement goals.

2. Call Fidelity at 800-976-1054 for support in making retirement plan changes - Monday through Friday, 8 a.m. to 8 p.m., Eastern time.

Edelman Financial Engines

Online Advice and Managed Accounts from Edelman Financial Engines enables you to complete a personalized assessment to help you evaluate whether your IBM 401(k) Plus Plan investments are aligned with your age, personal goals, and other financial assets.

With Online Advice, you can get:

  • Independent advice at no additional cost, including a recommended asset allocation for the investments in your IBM 401(k) Plus Plan account based on your personal risk profile.
  • Powerful online tools to build an investment portfolio, project retirement income, and explore ways to improve your retirement outlook.
  • Personalized investment recommendations for your IBM 401(k) Plus Plan account. Online Advice can also help you evaluate changes before you make them.

With Managed Accounts, you can get:

  • A team of experts that, for a fee, develops a personalized retirement plan and makes the investment changes for you.
  • Routine monitoring and management of your account to help keep you on track, including rebalancing as needed.
  • Advisor support. Know that you are partnering with a fiduciary, which has a legal obligation to put your interests first.

For more information about Online Advice and Managed Accounts or to get started, log on to EdelmanFinancialEngines.com/foribm or call 877-401-5762 and ask to be connected to an Edelman Financial Engines advisor.

Log in anytime to see if you’re on track. Keep in mind that when using Online Advice, you’re responsible for requesting transactions for your account, including rebalancing.

Hueler Income Solutions

Learn more about income annuities and use the Hueler Income Solutions® tool to shop for income annuities outside of the 401(k) Plan at institutional prices. This often leads to higher income payouts than retail income annuities.

More about Hueler Income Solutions

You can evaluate immediate income and deferred income annuities with the Hueler Income Solutions tool. In just minutes, you’ll receive quotes from multiple annuity providers so you can compare payments, features, and fees.

To get started, go to incomesolutions.com or call a Hueler lifetime-income specialist at 866-297-9835.

Edelman Financial Engines® is a registered trademark of Edelman Financial Engines, LLC. All advisory services provided by Financial Engines Advisors L.L.C., a federally registered investment advisor. Results are not guaranteed.

Income Solutions® is a registered trademark of Hueler Investment Services, Inc. U.S. Patent 7,653,560

How can we help?

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IBM MoneySmart

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© 2021 International Business Machines Corporation.

Whenever you invest, there’s a chance you could lose the money. Bond funds are made up of IOUs, primarily from companies or governments. These funds risk losing value if the debt isn’t repaid on time. Also, bond prices can drop when interest rates rise or the issuer’s reputation suffers. The performance of a company stock fund depends on the price of a single stock, which can move up or down dramatically. So, this type of fund can be riskier than a stock mutual fund, which may own hundreds or thousands of stocks. Diversification does not ensure a profit or protect against a loss.

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