Should You Roll Over Your Lockheed Martin 401(k) When You Retire?

Retiring from Lockheed Martin often means making decisions about several benefits at roughly the same time.

Your pension. Social Security. Healthcare. Taxes. Investments. And, for many longtime employees, a 401(k) that has become one of the largest assets they've accumulated.

One of the questions I hear frequently is:

“Should I roll my Lockheed Martin 401(k) into an IRA when I retire?”

In many of the situations we work with, we ultimately do recommend rolling the 401(k) into an IRA.

But I don't believe the paperwork should come first.

Before you roll over anything, you need to understand exactly what you own, what tax opportunities may exist, and what job that money needs to perform during retirement.

There are situations where moving too quickly could eliminate planning opportunities you won't be able to get back.

Here's how I think about the decision.

Why We Often Roll a Lockheed Martin 401(k) Into an IRA

The biggest reason I generally prefer an IRA after retirement is control.

While you're working, the Lockheed Martin 401(k) can be an excellent accumulation vehicle. You're contributing through payroll, receiving employer benefits, and building retirement assets within the plan.

Once you retire, the purpose of the money changes.

You are no longer simply accumulating it.

You need to turn it into a portfolio capable of supporting your retirement.

An IRA generally gives us access to a much broader investment universe than an employer retirement plan. That allows us to construct the investment strategy around the retiree rather than around the investment menu selected for thousands of employees.

That doesn't inherently mean an IRA will outperform the 401(k).

What it can provide is greater flexibility to customize the portfolio around:

• Retirement income needs
• Investment risk
• Tax strategy
• Cash needs
• Fixed-income positioning
• Withdrawal planning
• Estate and beneficiary considerations

Those things become increasingly important once the portfolio is helping replace a paycheck.

We discuss the transition from accumulation to retirement in more detail in Lockheed Martin 401(k): What to Consider Before and After Retirement.

The Rollover Isn't the First Decision

When a Lockheed employee tells me they're retiring, I don't want the first question to be:

“Where should we move the 401(k)?”

I want to understand the retirement plan first.

How much will you spend?

What will your pension provide?

When will you claim Social Security?

What does your spouse have?

How much cash and taxable investment money exists outside the 401(k)?

What does your tax return look like once your salary disappears?

And importantly:

What exactly is inside the Lockheed 401(k)?

Only then should we determine what gets rolled over and when.

That's particularly important for employees who own Lockheed Martin stock.

Before You Roll Over, Look for Lockheed Martin Stock

This is probably the biggest reason I would not automatically roll an entire Lockheed Martin 401(k) into an IRA.

If you have appreciated Lockheed Martin stock inside the plan, you may need to evaluate Net Unrealized Appreciation, commonly called NUA, before initiating the rollover.

NUA can potentially provide different tax treatment for qualifying employer stock distributed from a retirement plan.

The details matter considerably, and NUA isn't automatically the right choice.

But the important point for a retiring Lockheed employee is simpler:

Don't roll appreciated company stock into an IRA until you've evaluated whether NUA applies and whether using it makes sense.

Once the stock is rolled into an IRA, that potential planning opportunity can be lost.

For someone who spent decades at Lockheed and accumulated a meaningful company-stock position, this can be a significant part of the rollover analysis.

What About the Rest of the 401(k)?

Once we've addressed any special assets such as company stock, we can evaluate the remainder of the account.

For many retirees, this is where an IRA becomes attractive.

The broader investment universe gives us more ability to design different portions of the portfolio for different jobs.

For example, someone retiring at 63 may need money from their portfolio immediately.

Other dollars may not be needed for 10, 20 or even 30 years.

Those dollars shouldn't necessarily be invested identically.

We can think about the portfolio in layers:

Near-term retirement spending

Money that may need to support distributions relatively soon should generally be positioned differently from long-term growth assets.

Intermediate retirement needs

These assets can potentially accept more fluctuation because they aren't funding next year's expenses.

Long-term growth

Someone retiring in their early 60s could still have a 30-year retirement ahead. Part of the portfolio still needs to support long-term growth and purchasing power.

An IRA can give us greater flexibility to build around those different objectives.

Your Pension Changes the Rollover Conversation

This is where Lockheed retirement planning becomes particularly interesting.

Many longtime employees aren't retiring with only a 401(k).

They may also have a pension.

That guaranteed income can materially change how much pressure is placed on the investment portfolio.

For example, consider two retirees who each spend $120,000 annually.

One receives $70,000 from pension and Social Security income.

The other receives $30,000.

Those two portfolios have very different jobs.

That's why I don't think the Lockheed pension and 401(k) should be evaluated separately.

We've covered the pension decision more deeply in Lockheed Martin Pension: What Employees Should Know Before Retirement.

The goal is to determine how much of your lifestyle can eventually be supported by predictable income and how much needs to come from investments.

That informs how we invest the rollover IRA.

Money Outside Your 401(k) Matters, Too

One pattern we see with successful longtime employees is that they can accumulate substantial retirement assets while having comparatively little invested outside their retirement plans.

Someone might retire with:

• $1.8 million in a 401(k)
• A valuable pension
• A paid-off or nearly paid-off home
• $75,000 in cash
• Very little in taxable investments

Their balance sheet looks excellent.

But from a retirement-income and tax-planning perspective, there isn't much flexibility.

Most of their available investment assets are pre-tax.

If they need an additional $100,000 for a vehicle, home renovation, large trip, or other expense, generating that money from an IRA could also mean generating significant taxable income.

That's why, in the years before retirement, we often want employees building assets outside the 401(k), too.

We explain that strategy more deeply in Why High Earners Need Brokerage Accounts Beyond Their 401(k).

Having cash, taxable investments, Roth assets, and pre-tax retirement assets gives us more levers to pull once retirement begins.

A Rollover Can Become Part of Your Tax Strategy

One of the most valuable periods in retirement can occur immediately after someone leaves Lockheed.

Their salary stops.

Perhaps their spouse is still working.

They may receive a pension but delay Social Security.

Required Minimum Distributions haven't started.

That can create a period where taxable income is substantially lower than it was during the final working years.

We often evaluate whether those years create opportunities for Roth conversions.

For example, imagine someone retires after years of earning $200,000+ and now has $1.7 million of pre-tax retirement assets.

Rather than simply waiting for future Required Minimum Distributions, there may be years where deliberately converting some of those assets to Roth makes sense.

That doesn't mean automatically converting as much as possible.

We have to consider:

• Current marginal tax rates
• Future expected tax rates
• Social Security
• Pension income
• Medicare IRMAA
• RMDs
• Spousal income
• Other investment income

The objective is not simply minimizing taxes this year.

It's controlling taxes across retirement.

An IRA can make that planning and implementation easier to coordinate.

When I Wouldn't Immediately Roll Over the 401(k)

Despite generally favoring an IRA after retirement, there are situations where I wouldn't rush.

You Need to Evaluate NUA

If appreciated Lockheed Martin stock exists in the plan, I want that analyzed before completing the rollover.

You're Still Working

If you're still employed, there may be reasons to leave assets inside the employer plan.

One important consideration for some older employees is Required Minimum Distributions. Depending on the applicable rules and individual circumstances, an employer plan associated with a current employer can receive different RMD treatment than an IRA.

That can make maintaining assets in the plan valuable for someone continuing to work later in life.

The Employer Plan Has a Feature You Want to Preserve

There can be differences between an employer-sponsored plan and an IRA involving investment costs, creditor protections, withdrawal rules, and other plan-specific features.

Those should be understood before moving the money.

The point isn't that IRAs are universally superior.

It's that the rollover should solve a planning problem rather than simply happen because you retired.

What I Would Evaluate for a Typical Lockheed Retiree

Consider someone retiring from Lockheed at 62 with:

• $1.5 million in the 401(k)
• $150,000 of Lockheed Martin stock within the plan
• A Lockheed pension
• $200,000 between cash and a taxable brokerage account
• A spouse who plans to work another three years
• No immediate need to claim Social Security

I wouldn't begin by submitting rollover paperwork.

First, I'd map out the household's income for the next several years.

What does spending look like?

How much does the spouse earn?

Which pension election provides appropriate survivor protection?

When should Social Security begin?

How much taxable income will the household have after both salaries disappear?

Then I'd look inside the 401(k).

We'd identify the cost basis and appreciation in the Lockheed stock and determine whether NUA deserves further consideration.

Then we'd determine what assets should remain where and whether the remainder of the account should be rolled into an IRA.

Finally, we'd build a multi-year withdrawal and tax strategy.

Maybe taxable investments help fund the early years.

Maybe Roth conversions make sense after the spouse retires.

Maybe Social Security is delayed.

Maybe the pension provides enough baseline income that the investment portfolio can remain more growth-oriented.

The rollover is one transaction inside that plan. It isn't the plan itself.

Don't Forget About Beneficiaries

Retirement is also a good time to revisit beneficiary designations.

Your 401(k), IRA, Roth IRA, life insurance, and other accounts can transfer according to beneficiary designations rather than instructions contained elsewhere in your estate plan.

After decades at the same employer, it's easy for designations made years ago to remain untouched.

Marriage, divorce, deaths, births, grandchildren, and changing estate-planning objectives can all create reasons to review them.

A rollover creates a natural opportunity to make sure those designations still reflect your wishes.

Should You Roll Over Your Lockheed Martin 401(k)?

For many of the retiring Lockheed employees I work with, the answer ultimately is yes.

An IRA can provide greater investment flexibility and allow us to coordinate the portfolio more closely with retirement income and tax planning.

But I wouldn't make that decision automatically.

Before rolling over the account, I would want to understand:

1. What's actually inside your Lockheed 401(k)?
2. Do you own appreciated Lockheed Martin stock?
3. What will your pension provide?
4. How much money do you have outside retirement accounts?
5. When will you claim Social Security?
6. What will your taxable income look like after retirement?
7. What investment strategy does the money need to support?
8. Are there reasons to preserve any features of the employer plan?

Answer those questions first.

Then make the rollover decision.

The Bigger Lockheed Martin Retirement Picture

The 401(k) rollover is only one part of retiring from Lockheed Martin.

Your pension, Social Security, taxes, healthcare, investments, company stock, cash reserves, and estate plan all need to work together.

If you're beginning that process, I'd start with our guide to Lockheed Martin Retirement Planning: 7 Decisions to Make Before You Retire.

You can also read our broader guide to Financial Planning for Lockheed Martin Employees in Dallas-Fort Worth.

At Apeiron Planning Partners, we work with aerospace and defense professionals throughout Dallas-Fort Worth to help coordinate these decisions before and throughout retirement.

If you're approaching retirement from Lockheed Martin and want help determining what to do with your 401(k), schedule a conversation with our team.

Related Resources

• Lockheed Martin 401(k): What to Consider Before and After Retirement
• Lockheed Martin Pension: What Employees Should Know Before Retirement
• Lockheed Martin Retirement Planning: 7 Decisions to Make Before You Retire
• Financial Planning for Lockheed Martin Employees in Dallas-Fort Worth
• Why High Earners Need Brokerage Accounts Beyond Their 401(k)
• Roth Conversions: Why Retirees Talk About Them So Much
• How We Evaluate Pension Decisions