Planning for retirement is a priority for Eli Lilly employees, and the company’s 401(k) plan offers flexible options to help you build your savings. With features like pre-tax and Roth contributions, employer matching, and a range of investment choices, the Eli Lilly 401(k) plan provides tools to support your retirement goals. However, it’s important to regularly review and adjust your strategy to make the most of the plan’s offerings.
In this article, we’ll break down the key elements of the Lilly 401(k) plan and offer tips on how you can approach structuring your contributions.
Options and Benefits of the Eli Lilly 401(k) Plan
The Lilly 401(k) plan provides flexibility, allowing employees to choose between pre-tax or Roth 401(k) contributions. This gives employees greater control over tax management, and the employer match on contributions can help accelerate retirement savings.
If no action is taken within 60 days of your start date at Lilly, you’ll be automatically enrolled in a 401(k) savings account with a 6% contribution rate, which will increase by 1% annually until it reaches 15%. Your savings will be invested in the Target Date Portfolio that corresponds with the year you turn 60. You can adjust your contribution rate and investment selections at any time.
Lilly employees also have the option to tailor their investment strategies. With a range of choices, including target-date funds, mutual funds, and self-directed brokerage accounts, employees can align their portfolios with their risk tolerance and financial goals.
While multiple investment structures are available, Lilly encourages employees to consider the Roth 401(k) option, which was introduced in 2012, for potential tax benefits during retirement.
Contributions to the Eli Lilly 401(k) Plan
With the suggested Roth 401(k) plan, employee contributions are made after taxes. Retirement withdrawals from Roth plans, however, are tax-free as long as certain conditions are met. If employees can afford pre-retirement taxes on contributions, they can take distributions in retirement without worrying about taxation. Growth in a Roth plan is tax-deferred.
Employees opting for other after-tax contribution plans also enjoy tax-deferred growth but are subject to taxes in distributions. Pre-tax contributions are made before taxes are deducted, limiting an employee’s taxable income. In retirement, withdrawals are considered ordinary income and are therefore taxed.
Until fairly recently, Eli Lilly matched employee contributions by issuing stock shares. Now, however, the company sends matching funds straight to the 401(k) plan using the employee’s preferred allocation.
The IRS imposes annual limits on employee contributions to a 401(k) plan. In 2024, this limit is $23,000. Catch-up contributions by employees 50 years or older are capped at $30,500.
Leveraging Net Unrealized Appreciation (NUA) on Lilly Stock
For Eli Lilly employees with significant company stock in their 401(k) plans, the Net Unrealized Appreciation (NUA) rule can be a valuable tax-saving strategy. If you hold a large portion of Lilly stock within your 401(k) and are considering a rollover, the NUA provision allows you to roll out the stock and pay capital gains tax on the appreciation rather than ordinary income tax. This can make a significant difference if you’re in a higher tax bracket, potentially saving you 12-15% in taxes compared to traditional 401(k) withdrawals, which are taxed as ordinary income.
In a recent case with a client, we rolled over a portion of their 401(k) into an IRA, utilizing the NUA provision to help reduce their tax burden. With Lilly stock prices rising, this strategy may be worth considering for those holding large positions in the company’s stock.
Our Deerfield team can assist in evaluating whether the NUA rule fits into your overall financial plan, helping you explore the most tax-efficient options for managing your company stock.
Guidance on the Eli Lilly 401(k) Plan
Employees need to allocate their funds according to their abilities to tolerate risk. Often, the investments with the biggest potential for growth come with higher levels of risk. A financial advisor can help determine what your risk profile should be according to your goals.
It’s also a good idea to reassess your financial goals as you approach retirement. Take your age, income, and desired lifestyle into consideration when setting your milestones.
The Lilly 401(k) provides a Self-Directed Brokerage Account (SDBA) option for accounts valued at $10,000 or more. With an SDBA, you gain the flexibility to invest in a range of assets including stocks, bonds, mutual funds, trusts, and options, offering greater potential for higher returns. However, this option also carries increased risk, making it best suited for experienced investors. Our Deerfield team is here to assist you in selecting and periodically reviewing your SDBA investments to help you stay aligned with your financial goals.
You can also take out other investments to bolster your Lilly 401(k) account, such as other IRAs, health savings accounts (HSAs), and other instruments.
Get Help With Your Eli Lilly 401(k) Plan
Deerfield Financial Advisors helps Lilly employees understand their investment options and can guide you to one that best suits your profile. To learn more, contact us online, call us at (317) 469-2455, or email mroop@deerfieldfa.com.
About Matt
Matt Roop is Wealth Manager and Shareholder at Deerfield Financial Advisors, a fee-only financial advisory and wealth management firm with offices in Indianapolis and Chicago. In his role, Matt acts as a personal “chief financial officer” for his clients, overseeing every facet of their financial landscapes, orchestrating strategies to grow their wealth, and enhancing their financial clarity. Catering to the distinct needs of lawyers, engineers, and business owners, he empowers them to embrace their passions and lead their optimal lives. Matt conveys a depth of experience and a calm demeanor that clients find reassuring and soothing, and he loves providing peace and confidence around their financial future.
Matt received a Bachelor of Science from Indiana University and a Master of Business Administration (MBA) from George Washington University. He is a NAPFA Registered Financial Advisor and holds the CERTIFIED FINANCIAL PLANNER® and Certified Exit Planning Advisor (CEPA) designations. Committed to staying at the forefront of his field, he is actively involved with the Exit Planning Institute, National Association of Personal Financial Advisors, and the Estate Planning Council of Indianapolis. Since 1997, Matt has been involved in the investment and wealth management realm, with experience at Charles Schwab & Co., Inc., as well as a boutique Indianapolis-based independent advisory firm and a brief stint at his family’s closely held business.
Outside the professional realm, Matt serves his Indianapolis community by volunteering for Meals on Wheels of Hamilton County and is on the Executive Leadership Team for the Indiana Alzheimer’s Association’s Walk to End Alzheimer’s. He is dedicated to financial stewardship and continuous growth, with an unyielding commitment to enhancing the lives of both his clients and his community. Matt and his wife, Kimberly, reside in Carmel, IN, with their four children, who are all pursuing their college dreams. When he’s not working, he enjoys traveling, reading, and spending time at his lake house in southern Indiana with his family. To learn more about Matt, connect with him on LinkedIn.
