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Dow Incorporated Employees:Tech Sector Turmoil and the Bear Market

The volatility of recent markets forces us to remind Dow Incorporated employees to be proactive about portfolio management,' says Michael Corgiat, a financial expert with the Retirement Group. Regular portfolio reviews and rebalancing could protect retirement savings against sudden market downturns and help you stay on track with your long-term financial goals,' he added.

With all the volatility in the markets, Dow Incorporated employees need to create a resilient investment strategy, says Brent Wolf of the Retirement Group. A diversified portfolio that can ride economic cycles is essential for retirement financial security,' said Dr.

In this article we will discuss:

1. Market Volatility and Retirement Savings: Market fluctuations and how they affect retirement income challenge retirees. Factors

2. driving Market Volatility in 2021 & 2022: Exploring how the pandemic, economic policies and global events shaped market

3. changes. Strategies for Investors During Volatility: Advice on diversification and holding investment strategies during turbulent times.

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.

During the extremely volatile first 100 trading days of 2022, the constituent equities of the S&P 500 continued to fall, and the benchmark index entered a bear market on June 13, 2022 - a decline of at least 20% in stock prices. The S&P 500 was down 21.8% from its January 3 peak and the tech-heavy NASDAQ, already in bear territory, was down 32.7% from its November 19, 2021 zenith.

Some investors nervous about the future of their portfolios seem to have gone defensive and sold riskier assets like growth-oriented technology stocks.

What drives market volatility? In 2021, companies throughout the US, including Dow Incorporated, dealt with unpredictable demand shifts and supply shocks from the pandemic. Near zero interest rates and trillions in pandemic relief bolstered consumer spending, economic growth and record corporate profits. Profits from S&P 500 companies in 2021 were 75% higher than in 2020 and 33% higher than in 2019 - a nearly 29% total market return. (3-4)

In early 2022, however, investors feared that a planned loosening of monetary policy - meant to cool stubbornly high inflation - would choke economic growth and cause a recession. Demand, supply-chain issues and a labor shortage in the spring of 2021 drove prices up and wages went up. China's COVID-19 lockdowns impacted product supplies in the first quarter of 2022 and Russia's invasion of Ukraine pushed already high world food and fuel prices skyrocketing. May 2022 saw the fastest annual rate of increase in forty years, 8.6% (5).

The seemingly unstoppable acceleration of price increases puts pressure on the Federal Open Market Committee (FOMC), which meets June 14 and 15, to act aggressively against inflation. In May, the federal Open Market Committee raised the benchmark Federal funds rate by 0.5% (from 0.75-1.0%). That's the first half-percent increase since May 2000 and Fed forecasters expect more. (6)

High interest rate bond yields rise and higher returns from lower-risk bond investments make higher-risk stock investments less attractive. Stock investors also buy a component of a company's future cash flows that lose value in an inflationary environment. Higher financing costs may also depress the purchasing power of consumers and profits of debt-intensive businesses.

The downside of domination The S&P Information Technology Sector Index has fallen 29.2% more than the S&P 500 as a whole from its January 3 peak. Also, like most benchmarks, the S&P 500 is weighted by market capitalization - the value of a company's outstanding shares. This gives the largest companies - mostly technology - a disproportionate drag on index performance. As at May 31 the information technology sector had 27.1% of the market capitalization of the S&P 500, followed by 14.4% for health care and 11.2% for financials, the next two largest sectors. The four most valuable companies are Apple, Microsoft, Alphabet & Amazon; Nvidia is ranked ninth while Meta dropped to 11. (7)

The past few years saw tech stock gains lift the market. However, falling share prices of these companies dragged down broader stock indexes. In analyzing market data through May 17, just eight of the largest U.S. companies accounted for 46% of the 2022 losses (total return) of the S&P 500. (8)

Those famous technology companies have grown into huge multinational corporations affecting every day life. Some companies are so dominant in their fields - social media, smartphones, online search and advertising, e-commerce and cloud computing - that antitrust investigations and calls for tougher rules have been made in the US and abroad. And they do have plenty of cash on board to help them weather an economic slowdown better than their smaller rivals (8).

Takeaways for investors Stocks are often spread across the eleven S&P 500 sectors. Yet a once-diversified stock portfolio can become overly concentrated in a sector that has outperformed the market as a whole over time. TECH-sector equities posted huge total returns of about 50% for 2019, 44% for 2020 and 35% for 2021; therefore, some Dow Incorporated employees and retirees may wish to rebalance if they are overexposed to this volatile sector. This involves selling some investments to buy others. Remember that the sale of investments from a taxable account may be taxed. (10)

Should you feel lost after more than five months of market volatility? our Dow Incorporated clients should get perspective. Several market analysts see recent price declines as a painful but long overdue repricing of equities at overpriced valuations and a reality check from dwindling growth expectations. That ratio of forward price to earnings (P/E) ratio of S&P 500 companies fell from 23.3 at the end of 2021 to 17.8 in May 2022, closer to the 10-year average of 16.9.11-12.

It could be some time before investors can assess how the economy and corporate profits will fare with rising inflation and higher borrowing costs - and the stock market does not like uncertainty. Downward economic data and company earnings reports could fuel volatility in the months to come.

If you have a sufficiently diversified, all-weather investment strategy, sticking with it is often the best course of action amid grim headlines. When the market goes down, panic and leave it - you can't profit from its upswings. And if you still invest regularly to fund a long-term goal like retirement, a market decline could let you buy additional shares at a discount.

Stocks' return and principal value vary depending on market conditions. If sold, shares might fetch more or less than their original price. Investments that seek greater return usually involve greater risk. We recommend diversification as a risk management technique to our Dow Incorporated clients. But that does not mean diversification guarantees a profit or protects against investment loss for Dow Incorporated employees. The S&P 500 is an unmanaged index of stocks representative of the U.S. stock market in general. An unmanaged index does not represent any investment performance.

No one can own an index directly. The past does not predict future performance. The real results will differ. Dollar-cost averaging does not guarantee or prevent a profit or loss. These programs involve ongoing investments in securities irrespective of price movements. Dow Incorporated employees and retirees should ask themselves whether they can afford to keep buying during low and high prices. But this may be a good way for investors to get shares to fund long-term goals.

A stock market investment is like planting a tree in your backyard. Just as you choose the location, type of tree, and soil conditions for your tree, you choose your investment strategy, stocks, and market conditions. And you also need to water and fertilize your investment just as you would your tree. With patience and an investment that grows over time, you can enjoy a healthy tree that produces shade and fruit for many years to come, just as your investment can provide retirement for you and your family.

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Sources:

1. 'Market Volatility - Fidelity Can Help.' Fidelity Investments , 2021, www.fidelity.com/misc/buffers/market-volatility.shtml .

2. 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/news/home/20211011005389/en/Fidelity%C2%AE-Q3-2021-Retirement-Analysis-Retirement-Savers-%E2%80%9CStay-the-Course%E2%80%9D-in-Spite-of-Stock-Market-Swings-and-Ongoing-Economic-Uncertainty .

3. Barry, Kevin. '401k Savers 'Stay the Course' Despite Market Volatility.' 401k Specialist Magazine , 2022, www.401kspecialistmag.com/401k-savers-stay-the-course-despite-market-volatility/ .

4. 'Retiring in a Recession, Downturn, or Period of Market Volatility? Things to Consider.' Fidelity Investments , 2021, www.fidelity.com/viewpoints/retirement/retiring-in-a-recession .

5. 'Fidelity® Q3 2021 Retirement Analysis: Retirement Savers 'Stay the Course' in Spite of Stock Market Swings and Ongoing Economic Uncertainty.' Fidelity Investments , 2021, www.fidelity.com/viewpoints/retirement/q3-2021-retirement-analysis .

How does The Dow Chemical Companyâ€™s pension plan structure impact an employee's retirement benefits when considering different retirement ages? The Dow Chemical Company offers various options in its pension plan, and understanding these can significantly affect financial planning for retirement. An employee must weigh the benefits of retiring earlier with potentially lower monthly payments against the advantages of working longer and how this aligns with personal retirement goals and expectations.

The Dow Chemical Company’s pension plan and retirement ages: The Dow Chemical Company’s pension plan structure impacts employees' retirement benefits based on their retirement age. Retiring earlier results in lower monthly payments due to reduced service time and potential early commencement penalties, while working longer allows for more service accrual and higher monthly benefits. Employees must evaluate how these factors align with personal retirement goals, as choosing to retire early might not provide as much financial security as delaying retirement(The Dow Chemical Compan…).

What are the implications of the 20% mandatory withholding tax on lump-sum distributions from The Dow Chemical Company's pension plan, and how does the option to roll over affect an employeeâ€™s tax situation? Employees taking lump-sum distributions need to be cautious about this withholding rule as it can impact their immediate financial needs. Additionally, the rollover option provides a strategy to defer taxes, which can be crucial for long-term financial health. Employees should consider how to best utilize these rules in their personal financial planning.

20% mandatory withholding tax on lump-sum distributions: Lump-sum distributions from The Dow Chemical Company’s pension plan are subject to a 20% mandatory withholding tax if not directly rolled over into another qualified retirement plan. This tax can significantly impact an employee's immediate finances. However, opting to roll over the lump sum to a qualified plan defers taxation until funds are withdrawn, allowing employees to manage their tax liabilities better while continuing to grow their retirement savings(The Dow Chemical Compan…).

How does The Dow Chemical Company ensure that employees understand their eligibility for retirement benefits based on various service and age criteria? Eligibility considerations based on service years and age can significantly influence the retirement timeline for employees. Moreover, itâ€™s essential for employees to be well-informed about these factors to make educated decisions pertaining to their retirement and whether adjustments to their career plans are needed for maximizing benefits.

Eligibility for retirement benefits: The Dow Chemical Company outlines eligibility for pension benefits based on a combination of service years and age. Typically, employees become vested after three years of service or upon reaching age 65 while still employed. The company ensures that employees are informed about these eligibility criteria through various resources, such as the Dow Benefits Service Center, enabling them to make informed retirement decisions(The Dow Chemical Compan…).

In what ways can employees of The Dow Chemical Company appeal decisions regarding their pension benefits, and what processes are in place to facilitate these appeals? The appeal process is critical for employees who might feel that their benefits have not been administered correctly. Understanding the correct procedures and having access to the right resources can empower employees to effectively advocate for themselves in the face of administrative decisions.

Appealing pension benefit decisions: If employees believe there has been an error in the administration of their pension benefits, The Dow Chemical Company provides a formal appeal process. Employees can file a claim, and if denied, they have the right to appeal the decision. The Retirement Board oversees these appeals, and employees must follow the outlined procedures for their appeal to be considered(The Dow Chemical Compan…).

What strategies can employees of The Dow Chemical Company employ to maximize their pension benefits while transitioning to retirement? Employees must navigate complexities such as contribution limits, benefit formulas, and personal retirement savings. A strategic approach, which includes understanding the timing of retirement and how it interacts with pension claims, can lead to more favorable financial outcomes in their retirement years.

Maximizing pension benefits: Employees at The Dow Chemical Company can maximize their pension benefits by carefully planning their retirement timing. Key strategies include working longer to accrue more service years, reviewing contribution limits, and understanding the benefit formula used. Aligning personal savings and pension claims with the optimal retirement age can result in more favorable financial outcomes(The Dow Chemical Compan…).

How can retirees from The Dow Chemical Company navigate survivor benefits, and what are the eligibility criteria for spouses or domestic partners? Survivor benefits are an essential aspect of retirement planning, especially for employees concerned about providing for their loved ones after death. Itâ€™s vital for employees to understand both eligibility and what benefits their partners might receive, fostering peace of mind during retirement planning endeavors.

Survivor benefits for retirees: Retirees from The Dow Chemical Company can opt for survivor benefits to provide financial security for their spouses or domestic partners. Eligibility for these benefits depends on the plan's structure, and employees should understand the options available to ensure their loved ones are covered after their death. These benefits include continued monthly payments or lump-sum options depending on the election made at retirement(The Dow Chemical Compan…).

How does The Dow Chemical Companyâ€™s defined benefit pension plan differ from other retirement plans, and what should employees know when comparing their options? Employees need to understand the distinctions between defined benefit plans and other types such as defined contribution plans for effective retirement planning. This understanding will help them better appreciate the benefits and risks associated with their choices and aid with decision-making processes.

Comparing defined benefit pension plan: The Dow Chemical Company offers a defined benefit pension plan, which differs from defined contribution plans like 401(k)s. In a defined benefit plan, the company guarantees a specific monthly benefit upon retirement, typically based on years of service and salary, whereas defined contribution plans depend on employee contributions and investment performance(The Dow Chemical Compan…).

What resources does The Dow Chemical Company provide to employees seeking detailed information about their retirement options, and how can they effectively utilize these? Accessing the right resources can bridge knowledge gaps regarding pension plans. Employees should know about dedicated pathways to assistance, such as benefit service centers and consultation avenues, to fully leverage their benefits package.

Resources for retirement information: The Dow Chemical Company provides several resources for employees to access detailed information about their retirement options. The Dow Benefits Service Center and My HR Connection are key tools where employees can request pension estimates, understand payment options, and clarify eligibility criteria. These resources help employees make informed decisions regarding their retirement planning(The Dow Chemical Compan…).

With changes in IRS rules becoming increasingly relevant, how do employees of The Dow Chemical Company stay informed about updates that may impact their retirement savings? Employees need to be active participants in their retirement planning by staying abreast of legal and regulatory changes that can influence their financial strategies. Having a clear understanding of these regulations can help ensure compliance while maximizing possible financial benefits under updated laws.

Staying informed about IRS rules: Employees of The Dow Chemical Company must stay informed about IRS rules that may affect their retirement savings. Changes in tax laws, contribution limits, or distribution rules can significantly impact financial planning. The company provides updates and resources to ensure employees are aware of relevant regulatory changes that might affect their retirement strategies(The Dow Chemical Compan…).

How can employees of The Dow Chemical Company reach the benefits service center for additional inquiries regarding their pension plan, and what information should they prepare beforehand? Knowing how to contact the benefits service center is crucial for employees seeking clarity on their pension plan benefits. Preparing relevant information ahead of time can streamline the process, allowing for a more productive engagement with benefits specialists and ensuring that employees receive precise guidance tailored to their situations.

Contacting the benefits service center: Employees seeking clarification about their pension benefits can reach the Dow Benefits Service Center via phone or online through the Message Center. It is recommended to have personal identification and details of the pension plan ready to streamline the inquiry process. Proper preparation ensures a productive conversation with benefits specialists(The Dow Chemical Compan…).

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For more information you can reach the plan administrator for Dow Incorporated at 1919 torrance blvd Torrance, CA 90501; or by calling them at 900-999-1009.