Retirement: The Empower Follow-up
I've had a busy few weeks and decided to look at some of the replies I received. I wish I could say I have a definitive answer on the Empower "monthly distribution" controversy, but I don't. I'm sharing the notes I received with some editing as needed:
Mike sent me a few notes
From Mike #1:
No other restrictions others than then ones you noted.
I did my first withdrawal last year. I took out enough to keep within the 12 percent tax bracket. Hopefully avoid a larger tax bracket when I'm forced to take RMD. And yes, you are correct. An equal proportion was taken from each bucket.
I'm not working with any advisor. I'm happy with my return, and my net worth has only been climbing since retirement.
Mike also contacted Empower to talk about my story
From Mike #2:
I know you were recently collecting information on limitations with the Corning Investment 401k plan. I've just spoken with Bob Brown of Empower. We talked about monthly distributions. I know you mentioned someone was unable to stop distributions, and was forced to rollover everything into an IRA. Bob assured me, that's not the case. They can be stopped at any time.
You may want to dig into this a little deeper
Also, Bob mentioned that we are not able to do Charitable distributions from our 401k. I was actually planning on doing this as part of my RMD when I turn 73.
From Bob (Empower):
I want to preface everything I say from this point forward by saying that for safety and security purposes there is just not a lot of account specific information I can discuss via email. If we want to discuss in as much detail as possible, it would be best to have that discussion on the phone.
With the understanding that I did not work with this employee and do not know what was discusses or determined, I can give you a broad overview of installment payments. They typically come in one of two ways:
Standard: These are payments set up based on a specific amount or time frame. ($1000/month, Annual RMD distribution, $30,000/ye for 5 years, etc). These standard payments can typically be adjusted or canceled at any time.
Annuities: This payments operate more similar to a pension. Once you annuitize and begin to receive these payments, they cannot be adjusted or canceled.
Some plans require all payments to be made in the form of annuity; others do not. Some plans may have a specific money type (your employer match for example) that operates on different distribution rules that the other money types. Again, without knowing the discussion that was had with your co-worker or what was set up or why, I cannot definitively say one way or any other why they were told what they were told. What I can reiterate is that I am a resource available to discuss your specific situation and options and make sure to provide the necessary detail in regard to each option. Let me know if I can provide any more clarity on this.
I did contact Roger (aka "the horses mouth) to verify the story I heard. Here's how that set of notes went:
From Mark to Roger:
We may need to talk, but here's the deal. Your Empower "can't stop the regular distributions" story was conveyed to me by someone. I reference that story frequently when someone talks about Empower. Here are the points as I remember them:
- You were retired.
- You went to the Corning Credit Union (CCU) for a loan. You didn't have a high enough income stream to secure the loan.
- You asked Empower to start monthly distributions from your 401k.
- You showed the CCU your new income stream, and secured the loan you wanted.
- You asked Empower to stop the monthly distributions, but they either would not, or could not.
- You rolled your Empower 401k into an IRA somewhere else to stop the monthly distributions.
Many people I've shared this story with have a difficult time believing that the Empower monthly 401k distributions couldn't be stopped.
(I also shared Bob's (Empower) reply above.)
Reply from Roger:
I made several calls to Empower and each person I spoke to I explained I needed to have $XXXX amount taken out every month for about 4-6 months and stop after that. Each one told me no problem. After 4 months I call to discontinue monthly distributions and was told they can't do that. I went through several levels of management with dates, times and names of multiple people I spoke to prior to setting the distributions up so they could review the audio. They record every transaction so they can review for just this exact issue. After getting as high as I could in management they said they would review the issue and have a definitive answer for me in 10 days. Two weeks later they contacted me and said they reviewed everything and all the people I spoke to misunderstood the rules. Their correction plan for this transaction was a general training session not just for the operators I worked with but everyone was getting training so it wouldn't happen again. The bottom line was even though it was their error they couldn't stop the payments so I was gonna have to deal with it. So I dealt with it and rolled it out into an independent financial advisor who has done great by me so all good.
I never spoke to them about setting it up as an annuity nor did that ever come up in any conversation, before or after the whole ordeal. I also never signed anything to that effect but that could very well have been what happened.
Other people sent me notes on their distributions since retiring
From Tim:
I took periodic (about quarterly) 'manual' distributions from my 401K account, requesting a specific dollar amount - the same amount each time. I could not specify which investment buckets sourced those funds.
When later I needed some debt financing, showing those equal periodic manual distributions and the account balance satisfied the lender's recurring income requirement, no issue. But I never triggered any automatic distributions. If I had NOT resumed employment after that, I probably would have still opted to make my own periodic requests rather than adopt the automatic method - much more flexibility keeping my own finger on the trigger, when things like mad market swings would have me wanting to delay withdrawals.
I did roll over to Fidelity a couple years ago, no more Empower. I have taken one 'manual' distribution from Fidelity so far to pay for some recent larger home improvements. No current plans to take any recurring withdrawals though, as our combined income from my pension and both SSI's is on target to meet our needs - assuming stable tax rates and SSI viability.
From Keith:
Empower sucks.
But for the second retiree, couldn't he just re-balance the account to whatever funds he wanted after the distribution? Maybe he was not sure what Empower was saying. The 'buckets' might be referring to the origin of the funds, not the current investment option. For example, they might withdraw proportionally from employee contributions and company match. Either way, he could still re-balance post withdrawal so that doesn't seem like a big deal at all.
I am generally against Empower anyway, I'd rather have freedom to invest however I want. I don't know why anyone would keep their money locked up with Empower in retirement.
From Fred:
I've rolled over 99.5% of mine into a brokerage IRA already. I need to rollover my remaining paycheck contributions.
Each time I call for a rollover request (3X), Empower slow walks it on the telephone and reminds me I can keep investments with them.
No thanks!
From Donna:
I think I may have told you this before, but when I was trying to move my 401k and lump sum retirement funds from Empower to my advisor's accounts, Empower was difficult to work with.
They told me that I couldn't move my Corning stock from my 401k to my advisor's platform utilizing the NUA rule. It took several calls with me and my advisor on the line before they agreed to give us the correct form to do that. Once we got the form submitted there was a long (several week) delay where my 401k showed zero balance of Corning stock and my advisor account showed zero balance, which left me very uncomfortable, but it finally showed up.
For the cashing out of my regular 401k balance and my lump sum pension balance, I received paper checks in regular envelopes that were left on my front porch with no advance notification and no signature required. In the case of my 401k check, it snowed on the day it was delivered, so it was wet when my husband noticed it leaning against the front door. Just crazy!!
I'm not a fan of Empower.