Find Financial Advisors for Mayo Clinic Employees: Q&A Insights from the Experts

The Mayo Clinic Pension Payout Choice Is One of Your Biggest Retirement Decisions

Many employees default to the monthly pension, but the advisors below find that a lump sum paired with Roth conversions can sometimes reduce lifetime taxes, while a joint lifetime payout may be the better way to protect a spouse. Model both the income and the tax impact of each option before you elect.

Mayo Clinic Physicians Can Double Up on Pre-Tax Savings with a 403(b) and 457(b)

Eligible physicians and highly compensated employees can contribute to both plans, and Mayo Clinic can make matching contributions into a Roth 403(b). Because many employees retire heavily weighted in pre-tax dollars, planning distributions, Roth conversions, and charitable strategies early can lower the lifetime tax bill.

Pre-Medicare Retiree Medical Coverage Is an Underused Mayo Clinic Benefit

Retirees who qualify can obtain health insurance before Medicare begins, and some may be eligible for subsidized premiums. Factoring this benefit into your retirement date can make an earlier retirement more affordable.

I help Mayo Clinic staff review their employee benefits, maximize 403b/457b benefits, and determine the best options for them.

How long have you been working at Mayo Clinic? What does your income look like when you retire? Will someone depend on your pension benefits? How are you reducing your income from a tax standpoint?

The pension plan versus the lump sum option. Employees default to the pension payout, but often times, I find it’s better for an employee to do a lump sum from a tax and investment standpoint.

They are offered a pension, and the physicians are offered both a 401k/403b and a 457b, which allows them to double up on pretax retirement savings. They are also offered a Health Savings Account (HSA) and disability insurance.

Understanding what your pension plan options are. Know how to access other retirement plans as well.

Mayo Clinic employees should understand the implications of each pension payout not only from an income perspective but also from a tax perspective. Many of them will be heavily weighted in pretax dollars, so taking a pension may hurt them from a total income perspective than taking the lump sum and dragging those distributions out longer or doing Roth conversions.

Do they understand the impact of taxes and longevity risk in each pension plan option? Do they know how to reduce Required Minimum Distributions (RMDs)? If they aren’t sure how much they should take out of their investments each year or unsure of how to effectively pass down money to their kids and avoid estate taxes.

Being heavily weighted in pretax dollars since they were avoiding taxes in high-income earning years. Using Roth conversion strategies, donor-advised funds, and Qualified Charitable Distributions (QCDs) are some ways that we can help reduce their lifetime tax bill when taking distributions from those accounts.

Run Mayo Clinic Pension analysis. Do you understand deferred compensation plans? Are you well-versed in Roth conversion strategies?

Many Mayo Clinic employees do not understand their pension options.

The ability for the employees to contribute to both the 457b and 401k, which, as of 2024, can give them $46,000 (or more if over 50) in income deductions.

Mayo Clinic offers excellent benefits. When I work with employees, I help them understand and utilize the appropriate benefits given their unique financial situation. It could be a mid-career physician optimizing his 403(b) tax allocation or a pre-retiree utilizing the Mayo retiree medical premiums benefit.

The initial conversation I have with employees is called a Discovery Conversation. The first question I ask during this conversation is, “What was money like growing up?” Often, our relationship with money can be traced back to our childhood. Understanding that gives me a better idea of the “why” behind their financial motivations.

One of Mayo Clinic employees’ best opportunities is using the pre-Medicare retiree medical health insurance premium offering. If retired employees qualify, they can obtain high-quality health insurance before Medicare starts. In some cases, they could even become eligible for subsidized premiums.

I’ve had the privilege of helping employees prepare for retirement across a spectrum of different employers. The Mayo Clinic 403(b) investment options are some of the best. It allows their employees at any life stage to allocate their retirement nest egg properly.

In preparing for retirement, I always recommend three specific planning tasks to complete before retirement. First, a Benchmark Retirement Plan needs to be completed. This plan outlines the future desired income, expenses, and asset accumulation or decumulation projections. Next, a short and long-term tax strategy must be applied to that Benchmark Retirement Plan. In many cases, tax planning can provide 6 to 7 figures in tax savings and net legacy generation. Finally, the investment portfolio can be optimized based on that benchmark retirement plan and tax strategy. Retirement becomes stress-free when those three aspects are in place and working in alignment.

Does a financial advisor bring enough value to their financial life to make hiring and paying one worth it? No two financial advisors are the same. Hiring one should be seen as an investment where you should expect a return (quantitatively or qualitatively) on that decision. Often, proactive retirement planning, investment management, tax planning, and estate management can be areas of a pre-retirees life where significant value can be derived by hiring a financial professional.

Recently, the question of whether advancements in technology (ex: AI) will be a good or bad thing for their position in the long run.

Tax planning is always a big concern and an area these types of employees are interested in optimizing. As of this writing, Mayo Clinic employees cannot utilize the Mega Backdoor Roth strategy. So, finding other tax-smart retirement savings resources becomes a significant priority.

The first thought that comes to mind is seeing a Mayo Clinic employee receiving a matching 403(b) contribution into their Roth 403(b). With the passing of the SECURE Act 2.0 in December 2022, employers can now make their matching retirement account contributions into Roth accounts. However, many employers still choose not to. It was great to see that the Mayo Clinic does. It provides another unique tool in the tax planning process.