facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog search brokercheck brokercheck Play Pause
You’ve Left ExxonMobil—What About Your ExxonMobil Savings Plan Account? Thumbnail

You’ve Left ExxonMobil—What About Your ExxonMobil Savings Plan Account?

Doug Garrison, CFP, MBA - Senior Wealth Advisor



Three things came together these past few weeks, and this blog is the result.

  • People are leaving ExxonMobil and moving to new jobs, often outside the energy industry. I’ve recently noticed a lot of career updates or “Today’s my last day at XOM” posts on LinkedIn from previous ExxonMobil connections.
  • A news article I read estimated that there are about 24.3 million “forgotten” 401(k) accounts in the U.S. These accounts are not being managed by their owners and hold about $1.35 trillion in assets, over $5.5k each on average. That’s a lot of money to be “forgotten.”
  • I ran a poll on LinkedIn asking what readers believe should be done with an old 401(k) from a prior employer if they moved to a new job. Roughly half said you should roll it over to an IRA, about 30% said you should move it to a new employer’s plan, and the remainder said to leave the account at the prior employer. No clear answer apparently for this sample.

So, for ExxonMobil terminated employees or for those moving from one employer to another, in general, how should you think about your old 401(k) and the three options you likely have?

Begin by clarifying your objectives.

Most people appropriately view a 401(k) as money for retirement. And for that, you want to see it invested well and growing over time, without taking unnecessary risk. You’ll need a diversified array of investments, preferably with low management fees and the opportunity to rebalance from time to time.

Another objective is the ability to access those funds if an emergency presents itself and you have no other resource. We don’t recommend that, but stuff happens and credit cards and generous relatives all have limits.

Two other objectives are somewhat linked: it should be hard to simply forget that you have it, and management of your account should be relatively straightforward. You don’t want to add to the number of forgotten 401(k) accounts. And unless you’ve decided to become a full-time investor, you probably don’t want to spend a lot of time dealing with it.

Here’s a rough, subjective scorecard comparing these options against common objectives. Comments on each objective vs. the three alternatives follow. You may score the options differently or have other issues. But these should give you some initial thoughts on what to do with your 401(k) account when you change employers.

Investment Options and Growth

The EMSP is a good plan for accumulating assets, with generally good investment options and low-cost index funds. But the Bond fund has limited scope within the fixed income world, and there’s no opportunity at all to invest in emerging markets, an increasingly significant segment of the investment universe.

What you might find in a new employer’s plan depends on plan rules.

Your options in an IRA are extensive. At a minimum, you can invest in virtually all publicly traded stocks and bonds, mutual funds and ETFs.

Trading and Rebalancing the Account

The option to elect auto-rebalancing at the end of each quarter is a painless way to keep the EMSP allocated according to your wishes. Still, ad hoc trades are limited.

Trading options in a new plan depend on plan provisions.

An IRA offers the most flexibility, which for some can be a distraction, an opportunity, or frankly, a mistake. And you can always have a financial advisor manage an IRA for you.

Access to Funds

If you have after-tax contributions in the EMSP, you can make withdrawals while the account is at Voya. A portion of the withdrawal will be considered taxable and generally subject to a 10% penalty if you’re under 59-1/2. You can still receive dividends on shares of XOM in the account, but they’re considered ordinary income rather than qualified dividends. You won’t be able to borrow against the account.

Access at a new employer’s plan depends on plan provisions.

With an IRA, if you’re willing to pay taxes and a penalty if under age 59-1/2, you can take the money out whenever you want. And there are a few exceptions that would allow you to avoid the 10% penalty.

Incentives Not to Forget

Unless you change your address and don’t update ExxonMobil, you’re likely to get periodic statements that will remind you that you have money invested in the EMSP. But if you’ve left ExxonMobil, then it is a former employer at this point. You may get busy with other matters. Yours could become one of the 24.3 million forgotten 401(k) accounts.

You should be getting information frequently about your account with a new employer—at least once a year. And if you’re making payroll contributions, it’s not likely that you’ll forget where that money is going.

An IRA can also become “orphaned” if you change your address and don’t update the custodian. This issue is like looking after your health—taking things seriously (like where your money is) is the responsible action, but some people just can’t be bothered to do so.

Account Management

If you’re not technologically challenged, interfacing with your 401(k) or your IRA shouldn’t be too difficult these days. Online access to permitted transactions should be relatively easy. For my ExxonMobil clients, my direct contact with Voya staff has been sporadic. In helping clients with account distributions, service has been somewhat spotty. Transferring XOM stock into an IRA for one client was quite a challenge a few years ago.

At a new employer, you may have modern systems to manage your account or a good service provider. Or possibly not.

With an IRA, you can always change custodians if you’re unhappy with your current provider, and most of the large administrators have fine-tuned the client interface and worked out the service kinks.

The Bottom Line

Your decision on what to do with your prior 401(k) account when you leave ExxonMobil (or any successive employer) ultimately depends on what’s important to you. Our hope here is that we’ve raised considerations that help you make an informed decision. Assisting clients with these kinds of decisions is part of what Investec advisors do. If you have $1M in assets to manage and would like to discuss how Investec can be of service to you, give us a call. Let’s talk!



Disclaimer: The information provided here is general and intended as educational in nature. It is not intended nor should it be considered as tax, accounting, or legal advice. Investec Wealth Strategies and its advisors do not provide tax, accounting, or legal advice. We recommend you seek the counsel of your attorney, accountant or other qualified tax advisor concerning your situation. Information about the ExxonMobil Savings Plan is believed to be accurate, but no guarantees can be made, as Plan details are subject to change by the Plan sponsor. The author is not an employee of ExxonMobil and his views are his own.