Most corporate retirement plans look the same: a 401(k), a pension (if you’re lucky), and maybe group insurance. But if you’re a 3M employee, you have far more at your disposal.
Headquartered in St. Paul, Minnesota, 3M is known for iconic brands like Post-it Notes and Scotch Tape. What’s perhaps lesser known though, is that the company happens to offer fairly competitive retirement benefits and annual incentives.
Mega Roth conversions, BrokerageLink portfolios, retiree medical savings accounts — together, these benefits give you more levers to pull than most Fortune 500 plans, especially for minimizing taxes and maximizing income flexibility.
The only problem is that few employees ever get a clear explanation of how these benefits interact — or how to turn them into a coordinated retirement plan. This guide breaks it down step by step, so you can see how the pieces fit together and build a strong, sustainable retirement plan.
Understanding Your 3M Retirement Benefits
To make the most of your retirement, it’s important to understand what’s available to you. Unlike many companies that offer only a basic 401(k) and health plan, 3M’s retirement package is unusually diverse. It includes:
401(k) Plan Options. Traditional pre-tax contributions, Roth contributions, and even the ability to make Mega Roth conversions, giving you a powerful mix of tax-deferred and tax-free accounts.
Defined Benefit Pension Plan. For eligible employees, 3M still provides a traditional pension benefit, which can be taken as a monthly annuity or a lump sum.
BrokerageLink Investing. Through Schwab, 3M employees can move beyond the standard 401(k) lineup and build custom portfolios.
Health Accounts. Both a Health Savings Account (HSA) and a Retiree Medical Savings Account (RMSA) (including spousal RMSA) offer ways to pay for health care premiums with tax advantages.
Equity Compensation. Employee Stock Purchase Plans (ESPPs) and, for some, Restricted Stock Units (RSUs) provide a way to build wealth outside of retirement accounts.
Insurance Coverage. Group life insurance and other protections to safeguard family members and beneficiaries.
What makes this mix so valuable is the combined possibilities. The right blend of pension income, tax-free Roth assets, HSAs for healthcare, and ESPPs for after-tax savings can create a highly customized retirement income plan.
For many 3M employees, this is where the real opportunity lies: transforming a complex benefits package into a coordinated strategy that minimizes taxes, provides reliable income, and covers both lifestyle and healthcare needs in retirement.
Step 1: Maximize Your 401(k) Plan
For most 3M employees, particularly new hires who won’t receive a pension, the 401(k) plan is the foundation of retirement savings. But unlike many corporate plans, 3M’s version offers unusually broad flexibility, giving you the chance to build a truly tax-diverse portfolio.
Pre-Tax vs. Roth Contributions
- Pre-tax contributions lower your taxable income today, but all future withdrawals are taxed as ordinary income.
- Roth contributions don’t provide an upfront tax break, but withdrawals in retirement are completely tax-free.
Having a mix of both creates flexibility in managing your tax brackets later.
Mega Roth 401(k) Contributions
One of the biggest tax-saving tools available to 3M employees is the ability to make after-tax contributions above the normal IRS limits — and then convert those dollars into a Roth account.
For 2025, regular 401(k) contributions are capped at $23,500 ($31,000 for individuals 50 and older), while total annual contributions (including matches, after-tax contributions, and deferrals) are capped at $70,000 ($77,500 for individuals 50 and older).
BrokerageLink Option
3M also gives employees access to BrokerageLink through Schwab, which allows you to move beyond the standard menu of mutual funds in the 401(k).
With BrokerageLink, you can create a more customized investment strategy (including ETFs, additional mutual funds, or specific sectors) to align with your goals and risk tolerance.
3M Company Match
Don’t forget about the company’s matching contributions. 3M’s match helps accelerate your savings, so make sure you’re contributing enough to capture the full benefit.
Example: Mega Roth Savings
Let’s assume you’re a 3M executive in your mid-50s, hired in 2005, earning $275,000 a year. You’re part of Portfolio II, which means you have both a pension and access to a 401(k) with a unique matching structure (60% on the first 5% — which is 3%).
- Employee contribution. You contribute the maximum $31,000 to your Roth 401(k) in 2025.
- 3M match. Since you put in at least 5% of your salary ($13,750), you qualify for the full company match of $8,250 (3% of $275,000). Matching is automatically pre-tax.
- After-tax contributions. Together, your contributions and the match add up to $39,250. The IRS limit for 2025 is $77,500, which means you can contribute another $38,250 in after-tax dollars.
- Mega Roth conversion. Those after-tax contributions can then be converted into your Roth 401(k), where all future growth and withdrawals are tax-free.
In one year, you’ve funneled $77,500 into your retirement accounts — including over $69,000 into Roth assets that can provide tax-free income down the road.
This “Mega Roth” strategy lets you funnel significantly more money into tax-free growth than most employees at other companies could dream of. Over time, that can mean hundreds of thousands of dollars of future tax-free retirement income.
Step 2: Evaluate Your Pension Options
If you were hired at 3M before 2009, you’re among the group of employees who still benefit from a defined benefit plan. A pension can provide reliable retirement income, but the way you choose to receive it can dramatically impact your financial future.
Monthly Benefit (Annuity Option)
- Plan participants receive a steady, guaranteed stream of income for life.
- Works well if you value predictability or don’t want to worry about managing the money yourself.
- Payments are based on factors like years of service, salary history, and age at retirement.
- Downsides: payments are fixed, which means inflation erodes purchasing power over time; little or no flexibility for beneficiaries if you pass away early.
Lump-Sum Option
- Allows you to take the present value of your pension in one payment and roll it into an IRA.
- Offers more flexibility and control over investments, withdrawals, and tax planning.
- Downsides: shifts the investment risk to you; market conditions (especially interest rates) affect the lump-sum calculation, so timing matters.
How Interest Rates Impact Your Pension
The lower the interest rate, the higher the lump sum value — and vice versa. This is because a lump sum is calculated based on the present value of future payments, using prevailing interest rates as a “discount” rate.
Lump Sum vs. Annuity
So, which is better? That depends on:
- How long you expect to live (longevity/family health history).
- Whether you prefer guaranteed income or investment flexibility.
- Your spouse’s/beneficiaries’ needs.
- Current interest rate levels.
There isn’t a “right” choice — but it’s one of the most consequential retirement decisions you’ll make at 3M. The key is to evaluate both options in the context of your broader retirement income plan, your other assets, and your long-term tax strategy.
Step 3: Leverage Health Accounts for Tax Efficiency
For most retirees, healthcare is one of the biggest wildcards — both in terms of cost and predictability. 3M employees have a leg up here, thanks to a combination of HSAs and RMSAs that provide rare tax advantages.
Health Savings Account
- Available if you’re enrolled in a high-deductible health plan.
- Offers a triple tax benefit: contributions are tax-deductible, growth is tax-deferred, and qualified withdrawals for healthcare expenses are tax-free.
- Unlike flexible spending accounts, unused balances roll over year to year — and you can even invest the funds for long-term growth.
- In retirement, HSAs can cover expenses like Medicare premiums, long-term care insurance, and out-of-pocket medical costs.
Retiree Medical Savings Account
- A unique 3M benefit: former employees may have access to an RMSA, which reimburses post-retirement healthcare premiums on a tax-free basis.
- Even better, 3M offers a Spousal RMSA, extending the benefit to eligible dependents.
- This can significantly reduce the burden of health insurance costs between early retirement and Medicare eligibility at 65.
Healthcare premiums for early retirees can easily run into the thousands per month, especially if you’re not yet Medicare eligible. By using HSAs and RMSAs strategically, you can cover much of this expense without dipping into taxable retirement accounts. That means more flexibility to manage your overall tax brackets and preserve your long-term retirement savings.
Step 4: Manage 3M Stock and Equity Compensation
Depending on when you received company stock, your equity comp could be a significant part of your financial picture — sometimes too significant. Handling it wisely can unlock major tax benefits and reduce risk as you transition into retirement.
Net Unrealized Appreciation (NUA)
If you hold 3M stock inside your 401(k), you may be eligible for a valuable tax strategy called NUA. Typically, withdrawals from a traditional 401(k) are taxed as ordinary income. However, with a NUA strategy, your 3M shares could be subject to a split tax treatment:
- The cost basis is taxed as ordinary income
- The appreciated is taxed as long-term capital gains
So, if your 401(k) plan holds highly appreciated 3M shares, this strategy can significantly reduce taxes compared to rolling everything into an IRA. For instance, let’s say you have 10,000 shares of company stock with an average cost basis of $75, and 3M trades around $150. That means your NUA is $750,000.
Without a NUA strategy, you would pay ordinary income tax (potentially up to 37%) on the $1.5 million, as you make withdrawals. With a NUA strategy, you’d pay ordinary income tax on $750,000 and long-term capital gains (up to 20%) on the other $750,000.
This can significantly reduce your tax liability. That said, your entire retirement account balance must be distributed in a single tax year, so this is not a simple exercise.
Employee Stock Purchase Plan
3M employees can buy company stock at a discount through the ESPP. By purchasing shares and selling them annually, you can build a non-retirement portfolio — an important tool if you plan to retire before accessing 401(k) or pension funds.
This after-tax portfolio can also create opportunities for Roth conversions, helping you manage taxes in early retirement.
Restricted Stock Units
While fewer 3M employees are receiving RSUs today — and many past grants remain underwater — they still can be impactful for some executives.
RSUs are taxed as ordinary income when they vest, but they can provide valuable liquidity for building taxable assets outside retirement accounts.
Generally, we recommend liquidating the majority of vested shares and diversifying the proceeds. Relying too heavily on one stock — even a blue-chip like 3M — creates concentration risk. Not to mention the fact that you’re already “invested” in the company by working there and relying on their paychecks, plus benefits.
Step 5: Building a Retirement Income Strategy With 3M Retirement Benefits
Each 3M benefit is impactful on its own, but the real value comes from how you coordinate them into a single, sustainable retirement income plan.
Coordinate Income Streams
Your 3M pension plan can provide guaranteed monthly income, while your 401(k) (pre-tax, Roth, and Mega Roth) gives you flexibility to manage taxes. Add in taxable assets from your ESPP or RSUs, and you have multiple levers to pull. The lynchpin in the entire process is sequencing withdrawals in a way that balances your taxable income, lifestyle, and savings longevity.
Plan for Healthcare
Using your HSA and RMSA to cover premiums and medical costs helps you avoid dipping into taxable retirement accounts. This preserves more of your portfolio for lifestyle expenses, travel, and legacy goals.
Balance Taxes Today and Tomorrow
- Pre-tax savings → ordinary income when withdrawn.
- Roth (including Mega Roth) → tax-free growth and withdrawals.
- Brokerage/ESPP → long-term capital gains opportunities.
A tax-aware plan blends all three, allowing you to adapt whether tax rates rise, fall, or stay the same.
Manage Risks
- Pension annuity provides stability, but inflation can erode its value. Consider pairing with growth assets in your 401(k).
- Concentrated 3M stock carries opportunity but also risk — NUA and ESPP strategies help diversify while managing taxes.
Turn Your 3M Benefits into a Sustainable Retirement Strategy
3M’s retirement package is unusually flexible — but with flexibility comes complexity. Between pension elections, 401(k) Roth opportunities, BrokerageLink portfolios, RMSAs, and ESPPs, there are dozens of moving parts that can drastically alter your retirement income and taxes.
That’s why one of the most important steps you can take is simple: review your plan documents carefully. The specifics of your benefits (eligibility, match rules, vesting schedules, and reimbursement terms) determine how these strategies work for you.
If you’re unsure how the pieces fit together, or you want a second set of eyes on your plan, this is where professional guidance helps. At Pine Grove Financial Group, we regularly work with 3M employees to coordinate benefits into clear, sustainable retirement strategies.
Ready to maximize your 3M benefits? Schedule a meeting with our team to review your plan and explore how to turn your retirement package into a tax-smart income system built for the life you want after your career.
