RTX Lifetime Income Strategy: Is It Right for You, or Are There Better Options?

Raytheon Technologies' RAYSIP retirement plan offers a unique and increasingly common feature: the Lifetime Income Strategy, or LIS. The LIS is an optional program, managed by AllianceBernstein, that gradually glides your 401(k) balance into a Secure Income Portfolio beginning around age 48 and completing by age 62, building a guaranteed lifetime withdrawal benefit along the way. For RTX employees this sounds compelling: a guaranteed income floor for life, without giving up your account. It is a genuinely better design than an old-fashioned annuity buy-in, and it still comes with real tradeoffs that deserve careful examination. This article walks through how the Lifetime Income Strategy works, its real advantages and costs, and how to decide whether it is right for your situation.

How the RTX Lifetime Income Strategy Works

The Lifetime Income Strategy is managed by AllianceBernstein for RAYSIP. Here is how it works: your balance rides a target-date-style glide path, and starting around age 48 portions begin shifting into the Secure Income Portfolio, whose value is protected by group annuity contracts from a panel of insurers. The shift continues gradually until about age 62, when your LIS balance is fully allocated to the Secure Income Portfolio. At retirement, the strategy sets a guaranteed annual withdrawal amount you can take for life, even if your account balance is eventually exhausted.

The income guarantee is backed by multiple insurers rather than a single company, with state guaranty associations behind them, so the income floor does not depend on your own investment returns or savings discipline. Your guaranteed withdrawal amount is locked at retirement and can step up if markets perform well, and a spousal option can continue income for your spouse if you die first.

The drawbacks are cost and constraint rather than confiscation: you pay ongoing insurance fees for the guarantee, the secured portion is invested more conservatively than a growth portfolio, and while you can still withdraw from your account, taking more than the guaranteed amount permanently shrinks the guarantee, and draining the account ends it.

The Exceptional RTX Contribution Formula

To understand whether the Lifetime Income Strategy makes sense for you, you must first understand how generous RTX's matching and age-based contribution structure is. This is critical: RAYSIP is not a typical 401(k).

RTX provides an employer match of 100 percent of the first 3 percent of eligible pay, plus 33.3 percent of the next 3 percent. For an employee contributing 6 percent of gross pay, the company match is 4 percent. But more importantly for those participating in the Lifetime Income Strategy, RTX adds an age-based Retirement Savings Contribution (RSC) that scales significantly with age:

• Age under 30: 3 percent of eligible pay
• Age 30 to 39: 4 percent of eligible pay
• Age 40 to 49: 5 percent of eligible pay
• Age 50 to 54: 6 percent of eligible pay
• Age 55 and over: 7 percent of eligible pay

These contributions are made regardless of whether you participate in the Lifetime Income Strategy, but they are particularly generous if you are approaching the age at which LIS conversion begins.

Example: A 57-year-old RTX employee earning $130,000 per year receives:

• Match: 4 percent = $5,200
• Age-based RSC (55+): 7 percent = $9,100
• Total employer contribution: $14,300

This $14,300 per year (11 percent of gross pay) is exceptionally generous. Over 8 years (from age 57 to 65), this alone builds $130,000 to $160,000 in additional retirement savings. The LIS, combined with RTX's age-scaled contributions, can create a meaningful stream of guaranteed income.

Advantage 1: Guaranteed Lifetime Income and Longevity Protection

The primary benefit of the Lifetime Income Strategy is simple: you receive a guaranteed monthly payment for the rest of your life. This is longevity insurance. If you live to age 85, 90, or beyond, you will have received cumulative income far exceeding your initial 401(k) balance. Insurance companies and actuaries price annuities based on mortality tables. A typical immediate annuity purchased at age 60 with a $500,000 premium might generate roughly $2,600 to $3,000 per month. If you live to age 85 (25 years of payments), you will receive roughly $780,000 to $900,000 in total payments. The insurance company is betting you will not live that long, but if you do, you win. You can estimate the guaranteed monthly income your own balance would generate at different ages and payout options.

For many professionals, this feature is deeply appealing. It eliminates the risk of outliving your savings and provides simplicity - no investment decisions to make, no market volatility, no fear that a market crash will devastate your retirement plan.

The psychological value of this income floor should not be underestimated. Guaranteed income allows you to sleep at night. Combined with Social Security, a pension benefit (if any), and the RTX Lifetime Income Strategy, you have a true income floor that does not depend on market returns or your investment skill.

Disadvantage 1: Loss of Investment Control and Flexibility

The tradeoff for guaranteed income is constrained control. Dollars on the LIS glide path are invested the strategy's way, not yours, and increasingly conservatively as you approach 62. You can still withdraw, but every dollar taken above the guaranteed amount permanently reduces the guarantee, so the income floor quietly disciplines how you use your own money. And the guarantee itself has an ongoing insurance cost that a plain index portfolio does not.

This is a problem for several classes of retirees. If you retire early and need to draw heavily on your 401(k) for near-term expenses, large withdrawals gut the income guarantee you spent years paying for. If your health deteriorates and you face major medical bills, the money is reachable, but reaching it defeats the point of the strategy. The guarantee works best for people who will genuinely live off the guaranteed amount.

The commitment risk is not insignificant. The insurance fees compound for decades, and if you later decide the guarantee is not worth it, exiting means walking away from what you paid to build it. Priorities change over 30-plus years; a strategy that penalizes changing your mind deserves extra scrutiny before you opt in.

Disadvantage 2: Impact on Net Unrealized Appreciation (NUA) Strategy

Here is a more subtle but potentially significant disadvantage: the Lifetime Income Strategy may foreclose the Net Unrealized Appreciation (NUA) tax strategy for employer stock held in your 401(k).

If you hold RTX stock in your 401(k) at the time of separation from service (retirement, severance, termination), you have the option to roll the RTX stock out of the 401(k) into a taxable brokerage account at the cost basis value, deferring capital gains taxes on the unrealized appreciation until you later sell the shares. The deferred gains are taxed at long-term capital gains rates (15 or 20 percent) rather than ordinary income tax rates (32 to 37 percent for high earners). For an employee with $300,000 in RTX stock in the 401(k) with a cost basis of $100,000, this strategy can save $30,000 to $60,000 in taxes.

But the NUA strategy requires the employer stock itself to come out of the 401(k) in kind as part of a lump-sum distribution at separation. Dollars you direct into the Lifetime Income Strategy are invested in the strategy's portfolios, not RTX stock, so balance moved into LIS is balance that cannot carry RTX-stock NUA treatment. You can pull assets out of the LIS, but you forfeit the accrued guarantee when you do. Either way, the two strategies compete for the same dollars.

If you have substantial unrealized gains in RTX stock within your 401(k) and anticipate separating from service while still holding that stock, the Lifetime Income Strategy may not be optimal. Consult a tax advisor to model whether the NUA strategy would save more in taxes than the guaranteed income from the LIS justifies.

Disadvantage 3: Reduced Estate Value

Here the LIS is better than a traditional annuity, and it is worth being precise. If you die with a balance remaining in your LIS account, that balance passes to your beneficiaries like any other 401(k) money. What ends at death is the guarantee itself: if you live long enough to exhaust the account, the insurer-paid income you were receiving stops (or continues for your spouse, if you elected the spousal option).

The estate cost of the LIS is subtler: decades of insurance fees and a more conservative allocation typically mean a smaller balance at death than a growth portfolio would have produced. Your heirs still inherit what remains; there is simply likely to be less of it than under the diversified alternative, in exchange for the income floor you enjoyed while living.

For high-earning professionals with substantial assets, that tradeoff may be acceptable: you are prioritizing your own guaranteed retirement income. But if maximizing what passes to children or grandchildren is a top goal, the diversified approach usually leaves more behind.

Disadvantage 4: Opportunity Cost and Investment Return Risk

The guaranteed withdrawal amount is set from your balance and the insurers' rates as you approach retirement, and while it can step up in strong markets, the secured portfolio's conservative positioning means you capture less of a bull market than a growth allocation would.

Historically, this drag matters. Retirees who moved to guaranteed income in low-rate eras received modest income for decades while equity markets compounded far ahead of them. The guarantee is insurance, and like all insurance, in the scenarios where you did not need it, you would have been richer without it.

The insurers price the guarantee to make money on it in expectation. That does not make it a bad product, it makes it insurance: you are paying away some upside to eliminate a catastrophic downside, outliving your money. The question is whether you need that insurance given your other income sources.

The RTX Pension Transfer and Its Implications

In November 2025, RTX transferred its pension obligations to Prudential in what is known as a pension buy-out or de-risking event. This affected approximately 60,000 RTX retirees whose defined benefit pension benefits were transferred from RTX's corporate plan to Prudential. That transaction is separate from the Lifetime Income Strategy (the LIS is managed by AllianceBernstein with its own panel of insurers), but it highlights a reality worth understanding: more and more RTX retirement promises now run through insurance companies rather than RTX itself.

For employees considering the Lifetime Income Strategy, the takeaway is to understand who stands behind each promise. The transferred pensions depend on Prudential; the LIS guarantee is spread across a group of insurers, which diversifies that risk by design. Insurer obligations are further backed by state guaranty associations (coverage commonly runs around $250,000 in annuity present value per person per state, varying by state), and large balances can exceed those caps. Insurer strength is material to your decision either way.

Alternative Approach: Diversified Portfolio with Disciplined Withdrawals

An alternative to the Lifetime Income Strategy is to keep your 401(k) fully invested in a diversified portfolio (stock and bond index funds, target-date funds, or a balanced allocation) and establish a disciplined withdrawal strategy in retirement. This approach preserves control, maintains optionality, and allows you to respond to changes in circumstances.

The classic "4 percent rule" for retirement suggests that you can withdraw 4 percent of your portfolio value in the first year of retirement, then adjust subsequent withdrawals for inflation, and have a very high probability of not running out of money for 30+ years. For a 57-year-old with a $1.5 million 401(k), a 4 percent withdrawal ($60,000) plus Social Security would provide a reasonable income floor without converting to an annuity. Before trusting that probability, stress-test your withdrawal rate against 1,000 market paths and see how many scenarios keep you funded through your full horizon.

The advantage of this approach is that the capital remains yours. If you need to withdraw more in a particular year (for a health emergency, to help a family member, or to fund a large purchase), you have that flexibility. If you live beyond age 95 and the market has performed poorly, you can reduce your withdrawals or work longer. Your heirs inherit the remaining balance. And you maintain exposure to equity market returns, which historically exceed annuity payouts over long periods.

The disadvantage is you accept investment risk and market volatility. A severe market downturn in your first years of retirement could force you to reduce spending or work longer. You must also maintain investment discipline - the temptation to panic-sell during market declines is real. If you lack the discipline or psychological comfort to weather market volatility, the Lifetime Income Strategy's simplicity may be worth the tradeoffs.

Hybrid Approach: Partial LIS with Diversified Core

Many sophisticated RTX employees opt for a hybrid approach: participate in the Lifetime Income Strategy but direct a smaller portion of their 401(k) balance to the annuity than the program suggests. For example, you might allocate 40 percent of your balance to the LIS and keep 60 percent in a diversified portfolio.

This approach achieves several goals:

• You establish a meaningful income floor through the annuity, reducing sequence-of-returns risk in early retirement
• You maintain a substantial diversified portfolio for discretionary withdrawals, unexpected expenses, and legacy planning
• You preserve the ability to execute the Net Unrealized Appreciation strategy for RTX stock not annuitized
• You benefit from RTX's exceptional age-based contributions across both the annuity and diversified portion

The hybrid approach balances competing priorities: guaranteed income plus control, longevity protection plus flexibility. For many high-earning RTX employees, this is the optimal path. I model both scenarios side by side for every RTX client approaching this decision.

Decision Framework: Should You Participate?

Whether to participate in the Lifetime Income Strategy depends on six factors:

1. Your other sources of guaranteed income: Do you have a defined benefit pension, Social Security, or other fixed income sources? If yes, you may need less annuity income. If no, the LIS creates an important income floor.

2. Your spouse's income and benefits: If your spouse has a substantial pension or significant income/assets separately, the LIS affects your household cash flow planning differently than if you are the sole income source.

3. Your investment discipline and risk tolerance: Can you stay invested through market downturns and maintain a 4 percent withdrawal rate discipline? If the answer is no, the LIS simplicity may be worth the cost.

4. Your estate goals: Your heirs inherit whatever balance remains, but fees and conservative positioning mean the LIS typically leaves less behind than a growth portfolio. If maximizing a legacy is a top priority, the diversified approach usually wins.

5. Your health and longevity expectations: Actuarially, annuities are most attractive if you live a long life. If family health history suggests shorter longevity, the diversified approach may be better. (Conversely, if longevity runs in your family, LIS longevity protection is valuable.)

6. Your unrealized gains in RTX stock: If you hold significant unrealized gains in RTX stock in your 401(k), the NUA strategy tradeoff is material. Model the tax savings from NUA vs. the income benefit of LIS.