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In light of recent market swings discussed in the article, Verizon employees should keep a conservative portfolio,' said the report. Adapting your Retirement strategy to weather market volatilities can protect your future financial security without sacrificing growth as you approach Retirement, says Tyson Mavar of the Retirement Group.
Given recent steep dives in both stocks and bonds, Wesley Boudreaux of the Retirement Group says Verizon employees should do some serious financial planning. This mitigates risks and positions you to profit from market recoveries - a resilient investment strategy in the face of economic uncertainty. '
In this article, we will discuss:
1. Market Volatility and Retirement: How market fluctuations affect retirees' savings and why a diversified investment portfolio is important.
2. Historical Market Recovery: History of how stocks have rebounded from corrections and the value of historical data in predicting market trends.
3. Economic Fundamentals and Projections: The robustness of U.S. economy fundamentals and their ability to contain short-term market volatilities.
DON'T PANIC
Several studies suggest that extreme market volatility may be especially difficult for retirees or those approaching retirement age to recover from possible losses. According to a report in October 2021 from Fidelity Investments, market volatility could wipe out retirement savings of up to 26% for those in their 60s. That underscores the need for a diversified investment portfolio and a solid retirement plan that reflects possible market volatility.
Stocks are off to among the worst starts in history for both markets. The S&P 500 Index was down 12.92% and other broad market indices were down double digits through April 2022. (1)
And worse than that, investors like those in Texas or New York are losing nearly as much as they are on the equity side of their portfolios. The Bloomberg U.S. Aggregate Bond Index measures domestic fixed income and posted its sharpest quarterly loss since 1980 to start the year (2) and is down -9.50% through April end. The current environment has left investors with nowhere to run and some have left markets or gone to cash - so we feel it important to bring this up with our Verizon clients.
A hasty reaction could leave investors missing out on a rebound, since historical equity performance following market corrections and solid underlying economic fundamentals point to a stock market rebound sooner rather than later. Contact retirement-focused advisors today if you're unsure of your situation.
A BULL CASE FOR EQUITIES:
OUR GUIDE - HISTORY. The S&P 500 entered correction territory again 22 trading days after exiting; it makes its fastest return to negative 10% performance since November 2008, when the Great Financial Crisis began. (3) For our Verizon clients, the table below excludes periods where a correction turned into a bear market and shows how the S&P 500 fared after exiting a correction. In the S&P 500, the average gain after exiting a correction was nearly 14%, based on data going back to 1928. (4)
Not every bad start to the year is indicative of things to come, we remind our Verizon clients. It marks the third worst start to 2022 for the S&P 500 Index.
In spite of this, stocks recover nicely after the worst starts - on average - and rise 10%. Double digit gains are certainly possible in the last eight months of the year based on statistics for our Verizon clients. (5)
FOR MARKETS IT IS A BULL CASE: STRONG ECONOMIC FUNDAMENTALS Aside from historical performance that backed a second-half rally in equities, fundamentals for the U.S. economy remain solid. Demand resilience, robust corporate and consumer financial positioning, and rising earnings may provide shock absorbers during the near- to medium-term volatility that market observers expect to remain.
Initial expectations for first-quarter economic development showed a surprise contraction. US real GDP lost 1.4% (adjusted for inflation) from +6.9% in the previous quarter. This sharp slowdown was due to a drag from exports, a drop in inventory spending after a large uptick in the prior quarter and, less notably, in government spending. Moreover, consumer expenditure grew at a healthy pace - it makes up almost 70% of the U.S. economy. Personal consumption grew by 2.7% from 2.5% in the previous month, with increased expenditure on services. Over the previous decade, consumer spending grew an average of 2.3% per year. (1)
Business investment jumped by 9.2%, the highest level in a year - another positive economic indicator. If companies accelerate automation and investment to cope with persistent labor shortages, the broad momentum in capital expenditures should continue. Overall, the extremely constrained labor market and wage growth help consumers. We think consumption will continue to support above-average economic growth this year as the effects of the pandemic are easing - and remind our Verizon clients of this. One last caveat: economic growth can differ greatly from stock market growth - as the markets currently stand.
Trying to predict the market by selling existing positions and entering a supposed 'safer' environment usually results in a big loss for shareholders. Investors do best if they stick to a plan, weather market downturns with conservative, risk-adjusted asset allocations, and remain invested through the turnaround when the biggest gains materialize.
Economic Definitions GDP is the ultimate market value of all goods and services made in a nation. It is the most used economic indicator. GDP by expenditure method measures total final expenditures at purchasers' prices excluding exports minus imports. This assumes inflation.
Index Definitions S&P 500:
The S&P 500 (r) is the best single indicator of large-cap U.S. equities and the basis of an enormous range of investment products. It includes 500 major companies and represents about 80% of market capitalization.
The Bloomberg Barclays US Aggregate Bond Index measures the investment-grade US dollar-denominated, fixed-rate taxable bond market. It contains Treasuries, government-related and corporate securities, MBS (agency fixed-rate pass-throughs), ABS, and CMBS (agency and non-agency).
The investment is like gardening. As a gardener would plant, tend and prune his plants, so must an investor take care of his investments. You need patience, diligence & a long term vision. As a gardener might face drought, pests or extreme weather, investors face market volatility, inflation, and economic downturns. But with planning, diversification, and periodic adjustments both gardeners and investors can reap great rewards. Time and effort pays off in a satisfying harvest.
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Articles you may find interesting:
- Corporate Employees: 8 Factors When Choosing a Mutual Fund
- Use of Escrow Accounts: Divorce
- Medicare Open Enrollment for Corporate Employees: Cost Changes in 2024!
- Stages of Retirement for Corporate Employees
- 7 Things to Consider Before Leaving Your Company
- How Are Workers Impacted by Inflation & Rising Interest Rates?
- Lump-Sum vs Annuity and Rising Interest Rates
- Internal Revenue Code Section 409A (Governing Nonqualified Deferred Compensation Plans)
- Corporate Employees: Do NOT Believe These 6 Retirement Myths!
- 401K, Social Security, Pension – How to Maximize Your Options
- Have You Looked at Your 401(k) Plan Recently?
- 11 Questions You Should Ask Yourself When Planning for Retirement
- Worst Month of Layoffs In Over a Year!
- Corporate Employees: 8 Factors When Choosing a Mutual Fund
- Use of Escrow Accounts: Divorce
- Medicare Open Enrollment for Corporate Employees: Cost Changes in 2024!
- Stages of Retirement for Corporate Employees
- 7 Things to Consider Before Leaving Your Company
- How Are Workers Impacted by Inflation & Rising Interest Rates?
- Lump-Sum vs Annuity and Rising Interest Rates
- Internal Revenue Code Section 409A (Governing Nonqualified Deferred Compensation Plans)
- Corporate Employees: Do NOT Believe These 6 Retirement Myths!
- 401K, Social Security, Pension – How to Maximize Your Options
- Have You Looked at Your 401(k) Plan Recently?
- 11 Questions You Should Ask Yourself When Planning for Retirement
- Worst Month of Layoffs In Over a Year!
Sources:
1. Fidelity Investments. 'Fidelity Wealth Management - Perspectives on Inflation.' Fidelity , 30 Apr. 2022, www.fidelity.com .
2. Fidelity Investments. 'Fidelity 2023 RSA Executive Summary.' The News Market , 2023, preview.thenewsmarket.com.
3. Lannan, Kelly. 'Fidelity® Q3 2021 Retirement Analysis: Retirement Savers ‘Stay the Course’ in Spite of Stock Market Swings and Ongoing Economic Uncertainty.' Business Wire , 2021, www.businesswire.com .
4. Fidelity Investments. 'Market Volatility Resources and Insights.' Fidelity Institutional , www.institutional.fidelity.com .
5. Fidelity Investments. 'Navigating the Current Environment.' Fidelity , www.fidelity.com .
How does the Verizon Pension Plan facilitate retirement income for long-term employees, and what specific benefits can employees expect when enrolling in the retirement program provided by Verizon? What unique features does the Verizon Pension Plan offer compared to other retirement plans an employee might have encountered, and how can employees maximize the benefits of these features throughout their career at Verizon?
Verizon Pension Plan Benefits: Verizon's Pension Plan offers substantial benefits aimed at facilitating a secure retirement for long-term employees. Upon enrolling in the retirement program, employees can expect defined benefits that are based on their salary and years of service, ensuring a predictable and stable income after retirement. Unique to Verizon, compared to some other plans, may include options for early retirement under certain conditions and a choice between annuity payments or a lump-sum distribution upon retirement. Employees can maximize these features by planning for long-term service and considering their retirement income needs early in their careers.
In what ways can employees at Verizon strategize their rollover decisions when transitioning from the Verizon Pension Plan to other retirement savings plans upon leaving the company? What factors should be considered by Verizon employees to ensure they are making informed choices regarding rolling over funds to a traditional IRA or another qualified employer plan?
Rollover Strategies: When transitioning from the Verizon Pension Plan to other retirement savings options upon leaving the company, employees should strategize their rollover decisions carefully. Factors to consider include the tax implications, the investment options available in the rollover destination, and the timing of the transfer to avoid penalties. Verizon employees should evaluate the benefits of rolling over to a traditional IRA or another employer's plan, considering their future financial needs and retirement goals.
What are the implications of the recent IRS limits for 2024 concerning contributions to retirement plans for Verizon employees, and how does Verizon align its offerings with these federal regulations? Additionally, how can Verizon employees best take advantage of these limits to enhance their retirement savings while adhering to tax regulations?
IRS Contribution Limits: The implications of IRS limits for 2024 are critical for Verizon employees as these limits dictate how much can be contributed tax-deferred into retirement plans. Verizon aligns its offerings with these federal regulations by adjusting contribution limits in their plans accordingly. Employees are encouraged to maximize their contributions to take full advantage of tax-deferred growth, especially when IRS limits increase, thereby enhancing their retirement savings while adhering to tax regulations.
How does the special tax treatment for lump sum distributions from the Verizon Pension Plan affect employees who receive their benefits early or have specific circumstances, such as being born before 1936? What options do these employees have to manage their tax burden effectively, and how can they best navigate these complicated rules while planning for their retirement?
Tax Treatment of Lump Sum Distributions: The special tax treatment for lump sum distributions from the Verizon Pension Plan can significantly affect employees who opt to receive their benefits early or under specific circumstances like being born before 1936. These employees have options to manage their tax burden effectively by opting for ten-year averaging or capital gain treatment on eligible distributions, allowing for a potentially lower tax rate on their pension benefits.
For surviving spouses and alternate payees of Verizon employees, what are the specific benefits available under the Verizon Pension Plan? How do these benefits compare to those available to employees, and what steps must surviving spouses or alternate payees take to ensure they receive their entitled benefits without delays or complications?
Benefits for Surviving Spouses and Alternate Payees: For surviving spouses and alternate payees, the Verizon Pension Plan offers benefits similar to those available to employees, such as annuity payments or lump-sum options. These beneficiaries must take certain steps to ensure they receive their benefits without delays, such as providing necessary documentation and adhering to plan rules. The plan details and processes for claiming benefits should be clearly understood to avoid complications.
How can Verizon employees utilize the resources available through the Verizon Benefits Center to better understand and manage their retirement benefits? What specific tools and services does the Benefits Center provide, and how can these resources assist employees in making informed decisions regarding their pension plan options?
Utilizing Resources at the Verizon Benefits Center: Verizon employees can utilize various tools and services provided by the Verizon Benefits Center to manage and understand their retirement benefits. The Benefits Center offers personalized consultations, detailed plan documentation, and tools for estimating pension benefits and planning retirement income, assisting employees in making informed decisions about their pension plan options.
What challenges might Verizon employees face regarding eligibility and tax withholding when receiving their pension payments, and how can they mitigate these issues? It's crucial for employees to understand the mechanics of eligibility regarding rollovers and payment processing; what key pieces of information should they be aware of to avoid unexpected taxes?
Challenges in Eligibility and Tax Withholding: Verizon employees might face challenges regarding eligibility and tax withholding when receiving pension payments. Understanding the plan's criteria for eligibility, the implications of rollovers, and the impact of mandatory withholding on distributions is crucial. Employees can mitigate these issues by consulting with the Verizon Benefits Center or a tax advisor to ensure compliance and avoid unexpected taxes.
What is the process for Verizon employees wishing to initiate a direct rollover from the Verizon Pension Plan, and what documentation will they need to prepare? Can employees receive assistance from the Verizon Benefits Center during this process, and how does using a direct rollover benefit them compared to other forms of payment?
Direct Rollover Process: The process for initiating a direct rollover involves deciding the destination of the rollover (traditional IRA or another employer plan), completing necessary documentation, and potentially seeking assistance from the Verizon Benefits Center. A direct rollover helps in avoiding immediate taxes and maintaining the tax-deferred status of retirement savings.
In terms of retirement preparedness, how does the pension plan at Verizon accommodate employees’ needs for financial security in their senior years? What additional education or resources does Verizon provide to assure that employees fully understand their retirement options and the importance of planning ahead?
Retirement Preparedness: Verizon's pension plan is designed to accommodate the financial security needs of employees in their senior years. In addition to the pension benefits, Verizon provides educational resources and planning tools to ensure employees understand their retirement options and the importance of early and consistent retirement planning.
How can employees reach out to the Verizon Benefits Center for further information about the pension plan and other retirement benefits? What specific contact methods are available to employees, and how can these interactions enhance their understanding and management of retirement benefits provided by Verizon?
Contacting the Verizon Benefits Center: Verizon employees seeking more information about their pension plan and other retirement benefits can reach out to the Verizon Benefits Center through various contact methods such as phone, email, or online portals. These interactions are crucial for enhancing understanding and effective management of retirement benefits, ensuring employees make the most of the benefits available to them.
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