For much of the last century, retirement planning was relatively straightforward. You worked for a company, stayed for a long time, retired, and received a pension check every month for the rest of your life. The responsibility for funding that retirement largely rested with your employer. Today, the landscape looks very different.
While many long-tenured 3M employees still have a pension benefit as part of their retirement picture, the 401(k) has become the primary engine driving retirement success for many workers. That shift has created incredible opportunities, but it has also created new responsibilities. Your retirement outcome is no longer determined solely by how long you work. It’s increasingly shaped by how much you save, how you invest, and the decisions you make along the way.
For 3M employees, understanding how to make the most of your 401(k) may be one of the most important financial planning opportunities you’ll encounter during your career. Add the pension freeze beginning in 2029, and the 401(k) is only going to continue to become more important.
How We Got Here: The Shift from Pensions to 401(k)s
Traditional pensions, formally known as defined benefit plans, were built around a promise. The employer assumed the investment risk and guaranteed employees a specific income stream in retirement. Employees didn’t have to decide how to invest. They didn’t worry about market fluctuations. The company handled those responsibilities.
A 401(k) works differently. Rather than guaranteeing an outcome, it provides a framework for building one. You decide how much to contribute, how aggressively to invest, how much risk to take, and when to make changes. The employer will provide matching contributions, but ultimately the success of the account depends on the decisions made over many years.
For 3M employees, this is an especially important distinction because many individuals have access to both worlds via a pension benefit for stability and a 401(k) for growth. Understanding how those two pieces work together can create opportunities.
The Appeal and Limitation of Target Date Funds
One of the most popular investment choices within 401(k) plans today is the target date fund. You select a fund tied to your anticipated retirement year. The fund manager then handles the investment decisions on your behalf. The concept is appealing because it’s simple, and for many it works.
When retirement is decades away, the portfolio typically holds a larger allocation to stocks to pursue long-term growth. As retirement approaches, the fund gradually becomes more conservative by adding bonds and reducing stock exposure. This automatic transition is known as the fund’s glide path.
For many investors, target date funds are a significant improvement over sitting idle in cash, bonds, or undiversified equities. They provide diversification, professional management, automatic rebalancing, and a disciplined investment process. For employees who don’t want to build and manage a portfolio themselves, they can be an excellent starting point. However, the target date fund can fall short since it is not a personalized financial plan.
What Target Date Funds Can’t Know About You
Every target date fund is designed around one primary assumption: your retirement date. What it doesn’t know is whether you have a 3M pension, how much you have saved outside your 401(k), your risk tolerance, your retirement spending goals, your health, your family circumstances, or your legacy objectives. That’s important because two employees retiring in the same year may have completely different financial situations. Consider two 3M employees:
Employee A has a substantial pension benefit, strong Social Security projection, and significant outside savings that have created flexibility in terms of liquidity.
Employee B relies heavily on their 401(k) as they have no pension, fewer guaranteed income sources, and minimal taxable investments.
Both may retire in 2035, but the appropriate investment strategy could look very different. A target date fund can’t account for those distinctions. Employee A is probably someone who could afford to take more risk as they near retirement due to significant guaranteed income such as the pension and Social Security. Employee B will likely need to scrutinize the values of their 401(k) leaning toward a more risk-averse portfolio. Same year, very different objectives. That’s why we believe many employees should think of target date funds as a starting point rather than a complete retirement strategy.
Why Pension Benefits Matter When Building a Portfolio
Many 3M employees have the unique advantage of pension income. While every situation is different, a pension can often provide a dependable source of retirement cash flow that behaves similarly to a bond allocation within your overall financial plan. That stability may allow some employees to take a different approach with their 401(k) investments than a target date fund might recommend.
For example, a retiree with meaningful pension income may have the capacity to maintain a higher allocation to equities because a portion of their retirement income is already guaranteed. The key is understanding your retirement plan as a whole rather than treating each account independently.
The Most Important Investment Decision You’ll Make
Many investors spend a great deal of time worrying about which stock will outperform or whether markets are headed higher or lower. History suggests a different focus. In most cases, your long-term investment experience is driven less by individual stock selection and more by your asset allocation.
Asset allocation is the way you divide your portfolio among stocks, bonds, cash, and other investments. Asset allocation determines your expected return, your level of risk, how much volatility you should expect to experience during market downturns, and ultimately how your portfolio may perform over time. Think of it as the foundation of your retirement plan. If the foundation is wrong, the rest of the structure becomes less important.
Sequence of Returns Risk: The Hidden Retirement Threat
One of the most overlooked risks facing employees approaching retirement is something called sequence of returns risk. While the term sounds technical, the concept is straightforward. A major market decline early in retirement can have a much larger impact than a similar decline later in retirement.
Why? Because retirees are no longer just investing, they’re withdrawing money from their portfolios at the same time.
When withdrawals occur during a significant market downturn, the portfolio has fewer assets available to participate in the eventual recovery. For employees within five years of retirement and then even more importantly in retirement, managing this risk becomes critical.
Don’t Forget About Rebalancing
Markets move constantly. A portfolio that begins the year with 70% stocks and 30% bonds may look significantly different after a strong market rally or a market correction. Over time, your actual risk level can drift away from your intended strategy. That’s why periodic rebalancing matters. Rebalancing maintains discipline and helps ensure your investment mix continues to align with your goals and risk tolerance.
Another area of rebalancing that I think is under emphasized is the importance of rebalancing for buying low and selling high. Take an example where a 70% stock, 30% bond portfolio shifts to a 60% stock, 40% bond portfolio due to market movement. For that to occur, it would have to mean that stocks’ values have declined, and bond prices have increased. As an investor these are the periods when you want to be buying stocks, on the downturn. Rebalancing effectively buys low and sells high, continually purchasing the discounted asset class as markets move.
The Schwab PCRA: Greater Flexibility for Certain Investors
Most 3M employees are familiar with the standard investment options inside the company retirement plan such as target funds and mutual funds. What many employees don’t realize or have felt nervous to pursue is that there may be access to an additional level of flexibility through the Schwab Personal Choice Retirement Account (PCRA). The PCRA functions as a self-directed brokerage window within the 401(k).
Instead of being limited to the plan’s core investment menu, employees can access a significantly broader range of investment choices, including exchange-traded funds (ETFs), additional mutual funds, individual stocks, individual bonds, and even specialized investment strategies.
For employees with larger account balances or more specific investment preferences, this expanded investment universe can be attractive. Add in the ability to more effectively manage the expense ratio costs of the funds you are using and there can be additional cost savings.
Who Might Benefit from the PCRA?
The PCRA isn’t necessary for every employee. In many cases, the standard investment menu is more than sufficient. However, the PCRA may be worth exploring if you prefer specific ETF strategies, want greater control over asset allocation, have a large 401(k) balance, want to better manage fund costs, or have a desire for more customization than the core plan offers. Like any tool, greater flexibility comes with greater responsibility. The PCRA expands your choices, but it also increases the complexity of investment management, so our recommendation would be to work with a professional when using the PCRA.
A Practical Framework for 3M Employees
When thinking about your retirement plan, consider these four priorities when it comes to asset allocation decisions.
View Retirement Holistically
Your 401(k) is only one piece of the puzzle. Your total asset allocation needs to consider your pension, Social Security, brokerage accounts, cash flow needs, and other retirement assets such as stock options, RSUs, and deferred compensation.
Review Your Allocation Regularly
Don’t assume the portfolio you selected years ago is still the right fit today. Your investment strategy should evolve accordingly as your life and the goals attached to it change. This includes which accounts you will draw from, when you will draw from them, and how they should be allocated as you are taking distributions.
Understand Your Options
Whether you’re using target date funds, building a custom portfolio using the existing options, or exploring the PCRA, make sure you understand the tools available to you.
Maximize Employer Benefits
One of the easiest wins in retirement planning is taking full advantage of employer matching contributions and the selection of which type of contribution you make. If you’re not contributing enough to receive the full 3M match, you’re potentially leaving part of your compensation behind. If you’ve built a large pre-tax balance, consider looking more into Roth contributions to build up a tax-exempt bucket.
Final Thoughts
Today’s retirement strategies offer more flexibility than ever before, but they also require more intentional decision-making. For 3M employees, the combination of a competitive 401(k), potential pension benefits, employer matching contributions, and access to tools like the Schwab PCRA creates a powerful foundation for retirement success.
The employees who retire most confidently aren’t necessarily the ones who earn the highest salaries or pick the best-performing investments. More often, they’re the ones who understand their options, stay engaged with their plan, and make consistent decisions over time. Retirement planning isn’t about finding the perfect investment. It’s about building a strategy that supports the life you want to live long after your career at 3M has ended.
For personalized financial guidance tailored to the needs of 3M and Solventum employees, click here to schedule a meeting with a Beacon Pointe advisor.
Important Disclosure: The information contained in this material is for general informational purposes only. The discussions, outlook, and viewpoints featured are not intended to be investment advice and do not consider specific investment objectives or risk tolerance you may have. Opinions referenced are as of the publication date and may be modified due to changes in the market or economic conditions and may not necessarily come to pass. Beacon Pointe has exercised all reasonable professional care in preparing this information. The information has been obtained from sources we believe to be reliable; however, Beacon Pointe has not independently verified or attested to the accuracy or authenticity of the information. Beacon Pointe Advisors does not offer legal or tax advice. Past performance is not a guarantee of future results. All investments involve risks, including the loss of principal. Consult your legal, tax, or financial professional for guidance specific to your circumstances. Beacon Pointe is not affiliated with or endorsed by 3M or its benefit or retirement plans.
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