Navigating Your GE RSP: 4 Mistakes to Avoid

The RSP’s automated nature can lead to complacency. While many GE engineers are enthusiastic about investing, not everyone is. Overlooking the RSP is imprudent, and we have seen cases where negligence resulted in missed opportunities. The RSP is an excellent means to accumulate retirement savings through regular contributions and compound growth. However, occasional plan updates, changing regulations, or personal circumstances may call for a different strategy.

On the other hand, over-managing the account should be avoided. We’ve encountered employees who attempted day trading GE stock through their RSP, a strategy that has rarely been successful, particularly given GE’s performance in the last 15 years.

There are several ways to familiarize yourself with the RSP, such as reading the Summary Plan Description or consulting an informed financial advisor. With some effort, the RSP can be a substantial benefit, as we often encounter employees with over $1M in their accounts.

There seems to be confusion regarding GE’s company match. This has changed over time as the pension has been modified and reduced. Currently, GE matches 50% of employee contributions up to 8%. To receive the full 4% match from GE, an employee must contribute 8%.

Additionally, GE has introduced a ‘Company Retirement Contribution’ (CRC) to the plan. The CRC is an extra 3% that GE contributes to employees’ RSPs who are on the payroll as of December 15th. This contribution is made the following January, even for those who retire or separate as of January 1st. In total, employees can receive up to 7% from GE annually for their RSPs.

Typically, GE employees are more resourceful than the average investor. However, recognizing the boundaries of our knowledge can be a difficult challenge. It’s not easy to identify what we don’t know.

There are potential pitfalls and opportunities in other GE benefits. Uncovering gaps in knowledge isn’t straightforward, and informal discussions aren’t always reliable sources of information. Admitting that you may not know everything can be enormously beneficial.

Unfortunately, many GE employees have an inappropriate level of investment risk in their RSPs. For some it is too much risk, and for others it is not enough. The temptation to invest too conservatively is often preceded by another investing mistake. Many GE employees held over-concentrated positions in GE stock fueled by the euphoric Welch-led growth of the 90s. Those who maintained these positions endured an unforgiving experience as it plummeted in the early 2000s and during the 2008 financial crisis.

A negative investment experience can dampen one’s appetite for risk and the broader stock market. Often, this caution can be counterproductive, as insufficient risk in the RSP can impede growth. At the same time, it’s very difficult for a lay investor to determine how much risk they have in their portfolio or how much risk they need to achieve their goals. Enlisting the help of a qualified investment professional can help you understand the risk you are taking and determine if it is in-line with your overall financial plan.