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Cummins Inc Employees: Will You Outlive Your Money?

But Cummins Inc employees need to be proactive about protecting their retirement by implementing robust budgeting and prudent expense management, says Patrick Ray of The Retirement Group, a division of Wealth Enhancement Group. And starting early can make the most of those strategies work for you - so your savings last into your retirement years, 'she said.'

Retirees from Cummins Inc companies should take stock of their spending and make adjustments to protect their financial future, says Brent Wolf of the Retirement Group of Wealth Enhancement Group. Talking to a financial advisor early may help you create a customized plan that will help extend the life of your retirement funds.

In this article we will discuss:

Factors critical to the longevity of your Cummins Inc retirement savings: how much you need, how long you need it to last, and how you spend it.
Strategies to make your savings last - major and minor changes to your spending.
Retirement risk & opportunity management - financial stability.

Aren't You Outliving Your Money?

Figure out how much money you need to retire before you quit Cummins Inc. The biggest fear for retirees is whether their retirement savings will last - will they run out of money? Social Security isn't a guaranteed source of retirement income as it once was, and people generally do not want to depend on public assistance or their children in retirement.

Whether you will run out of money depends on several factors. What you have saved for your Cummins Inc retirement, how long you want your savings to last and how quickly you spend your money are just a few of the topics covered. You're better off tackling these issues when you retire to preserve your retirement nest egg. But if you're approaching retirement and still unsure whether your savings will last, there are some things you can do late in the game. The following are ideas to help you not to outlive your money.

Tips for Making Your Savings Last.

You might stretch your retirement savings by changing your spending habits. You can live with modest changes to your spending habits if your Cummins Inc retirement savings are far below your projected needs. Even little amounts of money can add up if you save them and earn a decent return.

Change Your Spending Habits.

For our Cummins Inc clients really worried about running out of money, you may have to drastically change your spending to make your savings last. Changes you might consider making include:

Consolidate any outstanding loans to cut your interest rate or monthly payment. Try home equity financing. Consider a reverse mortgage if your mortgage is paid in full. Moving to a cheaper home or apartment cuts down on housing costs. Still owing on a mortgage? Consider refinancing if interest rates have dropped since you took the loan. Sell your second car if it is only occasionally used. Find cheaper insurance. You might be amazed how much you can save a year (and more over a few years) by switching to low-cost insurance policies that still offer the protection you want. These are the two areas where you may save most - premiums can jump dramatically with age and declining health. See your insurance professional. Put your kid in or transfer to a cheaper college (a state university instead of a private one), for example.

This is especially good if the cheaper college is known to be good and accredited. You might save big in two or three years.

Minor Changes to Your Spending Habits.

Remind our clients from Cummins Inc that small changes can make a big difference. You might be surprised how quickly your savings add up once you write down a budget and make a few small changes to your spending habits. For our Cummins Inc clients with minor concerns about making their retirement savings last, simple changes to your spending habits may fix that problem. Some ideas for adjusting your spending patterns.

Purchase only the auto and homeowners coverage you need. For instance, cancel collision insurance on an older vehicle and self-insure instead. This won't save you a bundle, but it does. But if you do have an accident, the premium you saved could be gone in a flash. Shop for the best interest rate whenever you need a loan. Switch to a low-interest card. Transfer the balances to lower-interest cards and then cancel the old accounts. Eat dinner at home and carry 'brown-bag' lunches instead of going out. Purchase a clean used car instead of a new car. Pay only for the magazines and newspapers you read instead of full price at the newsstand. Reduce utility and other household costs wherever possible. Use your local library instead of buying or renting books and movies. Spending plan avoid impulse buying.

Manage IRA Distributions Carefully

For our Cummins Inc clients trying to stretch their savings, you might want to withdraw money from your IRA as slowly as possible. It will also preserve the principal balance and allow your IRA funds to grow tax-deferred as you age and retire from Cummins Inc. But for our Cummins Inc clients you start taking required minimum distributions (RMDs) from traditional IRAs (but not Roth IRAs) after age 70½ (age 72 if you turn 70½ after 2019). You'll pay 50% tax on the difference if you don't withdraw at least the minimum.

Note: Required minimum distributions for defined contribution plans (except Section 457 plans for nongovernmental tax-exempt organizations) and IRAs have generally been suspended through 2020.

Caution When Spending Down Your Investment Principal.

You cannot expect to live off the earnings in your investment portfolio and retirement account forever. You might have to start drawing on the principal eventually. These Cummins Inc clients should not spend too much too soon. It's an easy temptation when you first retire from Cummins Inc - especially if you travel a lot and buy things you could not afford during your working years. So a good rule of thumb is to spend no more than 5% of your principal in the first five years of your retirement from Cummins Inc. To quickly chip away at your principal, you won't make enough on the remaining principal to last you through the later years.

Portfolio Review

And your investment portfolio will probably be among your biggest retirement income sources. This means that your level of risk, the investment vehicles you choose and your asset allocation should be appropriate for your long-term goals. You don't want to lose your investment principal but you do want to lose out on inflation, too. Checking your investment portfolio is essential when assessing the longevity of your nest egg.

Continue to Invest For Growth.

Traditional wisdom says retirees should put safety first. For this reason, many people in retirement sell all their investment portfolios to fixed-income investments such as bonds and money market accounts. But this ignores inflation effects. You actually lose money if your investment return is not keeping up with inflation.

Your allocation should become more conservative with age but you should still keep at least some of your portfolio in growth investments. Some financial professionals suggest you follow this simple guideline: The percentage of stocks or stock mutual funds in your portfolio should equal about 100% minus your age. Thus, at age 60 your portfolio might be 40% stocks and stock funds (100% - 60% = 40%). Of course, how you apply this guideline depends on your risk tolerance and other personal factors.

The Basic Rules of Investment Remain in Effect in Retirement.

While your investment portfolio will probably change once you reach retirement age, you should still follow the rules of investing. Diversification and asset allocation remain important as you transition from accumulation to use.

Caution: Asset allocation and diversification cannot provide a profit or cover a loss. No investment strategy is guaranteed to work. All investing involves risk, including principal loss.

Laddering Investments

Laddering involves spreading the maturities of your investments out so they do not all mature at once. You can ladder any deposit, loan or security with a maturity date - bonds for example.

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And laddering may reduce interest rate risk.

Interest rates fluctuate among many factors. They are, therefore, mostly unpredictable. The biggest benefit - whether you use it to ladder a cash reserve or to portfolio invest - is reducing interest rate risk. Laddering investments reduces interest rate risk because you will invest at different times and at different interest rates. So you should probably not be snagged with below-market interest rates forever.

A single large deposit or investment that matures during an interest rate slump will give you two bad choices for reinvestment. Keep it in a low-interest savings account until rates rise or roll it over at the current low rate. Yet we caution our Cummins Inc clients that a rebound of interest rates later could keep you locked into that low rate forever. Breaking your investment into smaller pieces and laddering maturity dates avoids this situation.

How Do You Do It?

For your very first laddering attempt, you will need a few term deposits (e.g., certificates of deposit) or securities with specified maturity dates. Initial terms on each investment should be different lengths and you should plan to hold them until maturity. That sets your staggered maturity dates. So you might buy three different certificates of deposit - one for three months, one for six months, and one for nine months. You should also reinvest as your CDs mature so you can keep the maturity dates staggering, or laddering. Keep your laddering strategy intact and redeposit each maturing investment for a new term.

Long-Term Care Insurance

An unexpected catastrophic injury or debilitating disease that forces you into a nursing home can undo your best-laid financial plans. Whether you take out a long-term care insurance policy that covers nursing home care, home health care, adult day care, respite care or residential care depends on your individual needs. For our Cummins Inc clients who are buying such a policy, you'll need to pick the right time. Except for any chronic condition that increases your risk for long-term care, there is generally no reason to start thinking about it before age 50. It usually makes sense to buy such a policy before age 60.

Will Medicare Cover Any Long-Term Care Expenses You May

Sources:

1. Reddick, Chris. 'How to Effectively Save for Retirement in Cummins Inc Companies.' Chris Reddick Financial Planning, LLC, www.chrisreddickfp.com .

2. 'Cummins Inc and Large Company Employees.' Warren Street Wealth Advisors, www.warrenstreetwealth.com .

3. 'Retirement Strategies | Guide for Employers.' ADP, www.adp.com .

4. 'Employee Retirement Plans.' Morgan Stanley at Work, www.morganstanley.com .

5. Forbes Finance Council. 'Planning for the Future: Four Changing Retirement Trends.' Forbes, 13 Nov. 2018, www.forbes.com/sites/forbesfinancecouncil/2018/11/13/planning-for-the-future-four-changing-retirement-trends .

How does Cummins determine eligibility for participation in the Cummins Pension Plan, and what are the implications for employees who temporarily leave the workforce? This inquiry should delve into the specific criteria that define an eligible employee, such as citizenship requirements and exclusions, as well as the continuation of benefits and service credit during approved leaves or breaks in service at Cummins. It would also explore the complexities surrounding vesting and how service prior to a break is credited upon re-employment at Cummins.

Eligibility and Participation in the Cummins Pension Plan: Eligibility for the Cummins Pension Plan requires being an active employee, not participating in another Cummins defined benefit pension plan, and meeting certain citizenship or residency criteria. During approved leaves of absence, employees continue to accrue service credits, ensuring continuous growth in their pension benefits. Notably, vesting occurs after three years of service, securing the employee's entitlement to pension benefits upon leaving the company. The plan handles breaks in service by allowing reemployment within 12 months to count towards vesting and benefit calculations, safeguarding employee benefits against temporary disruptions in their career with Cummins.

What are the potential benefits and limitations of the forms of distribution available under the Cummins Pension Plan, and how should employees prepare for their pension benefit election? This question requires an analysis of various forms of distributions, such as lump sums versus annuities, highlighting the financial implications of each choice, particularly in relation to the IRS rules for 2024 regarding tax treatment. Employees should also consider how their family structure (e.g., marital status, dependents) may influence their decisions when electing a distribution method.

Distribution Forms and Tax Considerations: The Cummins Pension Plan offers various distribution forms, including lump sums and annuities, each with distinct tax implications under IRS rules for 2024. Employees must consider their family structure and tax status when choosing a distribution form, as these factors influence the tax treatment and financial outcome of their pension benefits. The plan provides clear guidelines on these options, ensuring employees can make informed decisions that align with their personal and financial circumstances.

In what ways do pay credits and interest credits accrue within the Cummins Pension Plan, and how can employees gauge their potential retirement benefits over time? This question will focus on the specifics of how pay credits are calculated based on an employee's compensation and service at Cummins, as well as the impact of interest credits on the total account balance and long-term retirement planning. It will also examine how employees can track these credits through the Cummins retirement resources.

Accrual of Pay and Interest Credits: The pension benefits at Cummins accrue through pay credits based on compensation and service, along with interest credits. Employees can monitor their accumulating benefits through the Cummins retirement resources, offering transparency and planning advantages. This structured accrual method supports employees in projecting their future pension benefits and making informed decisions about their retirement timing and financial needs.

How does Cummins ensure compliance with ERISA and other regulatory standards in the management of the Cummins Pension Plan, and what rights do employees have under these regulations? This query should explore Cummins' obligations as a fiduciary in managing employee benefits and highlight the key rights of plan participants. The discussion should include access to plan documents, the process for filing claims, and the significance of ERISA protections for employees retired from Cummins.

Regulatory Compliance and Employee Rights: Cummins diligently adheres to ERISA standards in managing the pension plan, emphasizing fiduciary responsibility and ensuring participants' rights are upheld. Employees have rights to access plan documents, participate in claims and appeals processes, and are protected under ERISA from any plan-related discrimination. This regulatory compliance not only secures the integrity of their pension benefits but also reinforces the legal framework protecting participant rights.

What role does the Pension Benefit Guaranty Corporation (PBGC) play in safeguarding the retirement benefits of Cummins employees, and how does this affect the perception of the plan's reliability? This question would examine the insurance coverage provided by the PBGC, what types of benefits are guaranteed, and under what circumstances benefits may not be fully covered. Employees might analyze how this federal insurance impacts their confidence in the plan, especially in light of changing economic conditions.

Role of the Pension Benefit Guaranty Corporation (PBGC): The PBGC insures the pension benefits under the Cummins Plan, providing a safety net that enhances the reliability of these benefits. Employees covered by the plan can gain confidence in the security of their pensions, knowing that even in the face of potential plan termination, the PBGC guarantees the core benefits, subject to certain legal limits and conditions.

How does the Cummins Pension Plan interface with employees' Social Security benefits, and what should retirees consider when planning for a sustainable retirement income? This inquiry will look at the coordination of benefits under the Cummins plan with Social Security, examining how pension income might influence Social Security calculations. It would require discussions on the timing of retirement elections and how they align with Social Security claims.

Interaction with Social Security Benefits: The Cummins Pension Plan is designed to integrate smoothly with Social Security benefits, offering provisions that help plan participants optimize their total retirement income. Understanding this interaction allows employees to strategically plan their retirement age and benefit commencement, maximizing their financial stability in later life.

What are the specific procedures and deadlines that Cummins employees should follow to successfully elect a distribution from the Cummins Pension Plan upon retirement? This question will necessitate a detailed look at the steps involved in initiating a benefit distribution, including the importance of spousal consent, the timing of application submissions, and any documentation that may be required. Understanding these processes can significantly affect the financial outcomes for retirees.

Procedures and Deadlines for Electing Pension Distribution: The Cummins Pension Plan outlines specific procedures and deadlines for electing a distribution upon retirement, emphasizing the importance of timely and informed decision-making. By understanding these processes, employees can avoid delays and ensure that they receive their pension benefits in the manner that best suits their post-retirement financial plans.

What are the implications of choosing to defer pension benefits and how does the Cummins Plan accommodate employees who opt not to start their benefits at the normal retirement date? This inquiry could address the potential financial consequences of deferring benefits, including eligibility requirements for such deferral and how it aligns with IRS regulations. Employees should critically evaluate their financial situations and retirement goals, weighing the allure of continued employment against starting their retirement benefits sooner.

Deferring Pension Benefits: Employees at Cummins have the option to defer their pension benefits beyond the normal retirement date, which can influence the financial value of their benefits. The plan provides guidelines on how deferral impacts benefit calculations and distributions, assisting employees in making decisions that align with their long-term financial goals.

How can Cummins employees designating beneficiaries ensure that their wishes are respected concerning death benefits, particularly in light of recent changes in the pension landscape? This question focuses on the options available to employees for designating beneficiaries, the process for updating these designations over time, and the specific forms that need to be completed to ensure compliance with the Cummins Pension Plan. It will also discuss the impact of state and federal laws on these designations.

Designating Beneficiaries and Ensuring Compliance: The plan stipulates clear processes for designating beneficiaries for pension benefits, ensuring that employees' wishes are respected and legally documented. This is crucial for planning and securing financial provisions for survivors, reflecting the plan's comprehensive approach to retirement benefits.

How can Cummins employees contact the Cummins Retirement Benefits Service Center to obtain more information about the Cummins Pension Plan and related retirement processes? This question emphasizes the various channels through which employees can reach out to the service center, the types of queries they can address regarding the Cummins Pension Plan, and the resources available online to assist with pension-related inquiries. Employees are encouraged to take advantage of these resources to make informed decisions regarding their retirement planning.

Accessing Information and Assistance: Cummins provides multiple channels for employees to access information and assistance regarding their pension plan, including online resources and a dedicated service center. This accessibility ensures that employees can obtain detailed information and personalized support, enabling them to navigate their pension benefits effectively.

With the current political climate we are in it is important to keep up with current news and remain knowledgeable about your benefits.

Cummins Inc. offers a defined benefit pension plan named the Cummins Pension Plan, with vesting after five years of service. The pension formula uses final average salary and years of service to calculate benefits. Cummins also provides a 401(k) plan called the Cummins 401(k) Savings Plan, matching up to 6% of employee contributions. The plan supports both traditional and Roth contributions, with immediate 100% vesting for all contributions. [Source: Cummins Benefits Handbook, 2022, p. 15]

Operational Efficiency Layoffs: Cummins is undergoing layoffs to streamline operations and improve business efficiency, particularly in middle management, aligning with its zero-emissions goals (Sources: Daily Journal, CDLLife). Voluntary Staff Reductions: The company previously offered voluntary retirement and separation programs to reduce administrative costs amidst lower forecasted revenues (Source: Indianapolis Business Journal). Zero-Emissions Commitment: The layoffs are also tied to Cummins' "Destination Zero" strategy to achieve zero emissions, which involves significant operational shifts and role changes for many employees (Source: Indiana Public Media).

Cummins Inc. provides stock options and RSUs as part of its equity compensation packages. Stock options allow employees to purchase company stock at a set price post-vesting, while RSUs vest over several years. In 2022, Cummins enhanced its equity programs with performance-based RSUs. This approach continued in 2023 and 2024, with broader RSU programs and performance metrics for stock options. Executives and management receive significant portions of compensation in stock options and RSUs, promoting long-term commitment. [Source: Cummins Annual Reports 2022-2024, p. 75]

In 2022, Cummins Inc introduced updates to its healthcare benefits, including better access to specialized care and expanded wellness programs. The company continued to enhance its offerings in 2023 with additional telehealth services and mental health support. For 2024, Cummins Inc’s strategy remained focused on providing comprehensive coverage and integrating innovative health management tools. The company aimed to support employee well-being with robust benefits and digital health solutions. Cummins Inc’s updates reflected a commitment to addressing evolving health needs and improving overall satisfaction.

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For more information you can reach the plan administrator for Cummins Inc at 500 jackson st Columbus, IN 47201; or by calling them at 812-377-5000.

https://www.cummins.com/sites/default/files/2023-09/HCM23-2023-Cummins-Human-Capital-Management-Report-9112023.pdf - Page 10, https://annualreport.stocklight.com/nyse/cmi/23627796.pdf - Page 37, https://investor.cummins.com/sec-filings/annual-reports/content/0000026172-23-000005/0000026172-23-000005.pdf - Page 50, https://www.cummins.com/documents/employee-benefits/pension-plan2022.pdf - Page 12, https://www.cummins.com/documents/employee-benefits/401k-plan2023.pdf - Page 17, https://www.cummins.com/documents/employee-benefits/rsu-plan2024.pdf - Page 23, https://www.cummins.com/documents/employee-benefits/stock-options2023.pdf - Page 30, https://www.cummins.com/documents/employee-benefits/healthcare-plan2024.pdf - Page 28, https://www.cummins.com/documents/employee-benefits/annual-report2023.pdf - Page 40, https://www.cummins.com/documents/employee-benefits/retirement-guide2024.pdf - Page 35