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For FedEx employees, understanding the impact of financial decisions through detailed cash flow planning is critical to retirement planning - achieving goals while optimizing tax implications and withdrawal strategies - Kevin Landis, representative of the retirement group, a division of Wealth Enhancement Group.
'Cash flow planning provides a road map for managing spending, saving and retirement so that employees know when to retire and how to spend their retirement years wisely' - Paul Bergeron, of the retirement group, a division of Wealth Enhancement Group.
In this article we will discuss:
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1. Role of cash flow planning in helping FedEx clients manage spending, saving and goal funding.
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2. How cash flow planning tools help you decide when to take your retirement & how to manage your assets post-retirement.
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3. Benefits of account aggregation & real-time data for creating accurate financial plans.
Modeling goals and expense funding for each year of a FedEx client's projected lifetime reveals how chronological and priority goal funding affects multiple client goals. The biggest decision clients face in their FedEx retirement is whether to retire from FedEx this year or next year. Showing how asset allocation changes due to withdrawals - and the tax implications of those withdrawals - our advisors can better assess client outcomes year over year and help clients decide when to retire from FedEx.
Clients can understand where their money went and where it will go to fund their life goals with cash flow planning. At any life stage, this type of planning can be used - early accumulators, mid-career accumulators, pre-retirees and FedEx retirees. Early Adopters' cash flow planning can help Early Adopters understand spending, saving and funding of emergency and FedEx retirement accounts. Starting cash flow planning should involve proper savings for early accumulators. But good planning also involves getting the client's financial house in order and getting the proceeds invested in a solid, diversified portfolio, says financial planner Michael Kitces.
Pre-and post-retirement pre-retirees from FedEx could use cash flow planning to illustrate how current spending translates to retirement spending and how current spending impacts funding all of their goals. FedEx retirees could apply cash flow planning to understand how spending affects distribution of income to fund goals and outlive retirement savings. And third-best use of our cash flow tool - decide whether FedEx employees should leave FedEx this year or next year. Cash flow planning can keep our FedEx clients on the right financial path by integrating income & expenses, investment performance, education funding, insurance and estate planning.
Cash flow planning can also help our FedEx clients understand where they lose money unnecessarily. Fees, miscalculations, wrong insurance, penalties and other charges can really add up quickly for many families. They lose on average USD 200 a month. The holistic view that cash flow planning offers means that advisors have points to discuss with clients during planning. Advisors then can analyze data better and make recommendations in the client's best interest. Gamma is a Morningstar research metric that measures how sound financial planning in five areas - asset allocation, withdrawal strategy, guaranteed income products, tax-efficient allocation and portfolio optimization - can deliver 29% more income on average to a retiree.
In addition to this value, Morningstar Research estimates that a retiree could realize 22.6% more certainty equivalent income with a Gamma-efficient retirement income strategy than in our base case. A few output options and tools are provided by our advisors via software. They range from an annual cash flow report with simulations of inflows, outflows and total portfolio assets to an interactive tool called Decision Center that allows the advisor to model recommendations live during a review meeting. Several key data points are applied to project a client's cash flow simulation.
Projections include living expenses, liability payments, insurance premiums, gifting, taxes, etc. Planned savings are also called an outflow if employee contributions to a qualified account, HSA or taxable investment are made by the employee. Total outflows minus total inflows gives a net cash flow number that is positive or negative. All liquid investments like taxable accounts, tax deferred, cash, etc. will be shown as total portfolio assets at the end of the year. Some factors that affect the ending total portfolio assets year over year are the growth rates for each account and the ending net cash flow.
Simulation uses client inflows such as income, investment distributions, planned distributions and other inflows. And if the client has negative net cash flow, that deficit will have to be financed from available portfolio assets through liquidation. With a positive net cash flow, the surplus will be deposited into the client's core cash account. The core cash account is a hypothetical wallet which measures the inflows and outflows of the client. Advisors may not save excess cash at the end of the year if a client prefers. An expense number can help advisors start cash flow planning conversations with FedEx clients. Conversations about spending can be difficult if there are problems that should be addressed.
A budgeting solution is a good starting point for discussion of client spending and impact on cash flow plan. With budgeting tools, we provide daily updates on a client's spending transactions through connections to their financial institutions. This tool budgets the client's spending so that the advisor has an accurate picture of the spending which can be used for cash flow simulation and where improvements could be made. Also for FedEx employees to remember: entering data - especially expenses - does not have to be time-consuming or too finely detailed in cash flow planning.
Your advisor and the software give you a lot of flexibility when entering expenses - from an annualized rollup of all expenses to major expense buckets (discretionary, etc.) and the ability to fill out a digital expense worksheet or classify transactions on the FedEx client site to determine a client's true expenses for the year. Data entry takes time depending on how detailed you need it. Account aggregation is changing financial planning because it allows advisors to plan with their clients. In cash flow planning, aggregation provides an account balance with real-time information that improves a client's cash flow projection.
Using account aggregation, we connect with thousands of institutions to collect client account information like balances, holdings, asset allocations and more. By including accounts held away, aggregation makes the cash flow plan comprehensive. From this information, the advisor also understands how an account accumulates for projection purposes. This helps the advisor make recommendations that better meet the client's needs. These provide fully integrated account consolidation (assets under management) and account aggregation (assets held away) functionality across the advisor and client experiences. More than USD 2 trillion of assets are connected via the platform.
All linked accounts update values across the system - including financial plans - every day. We use a commercial aggregator - where more than 90 percent of this aggregation work is done in-house by the team with a small percentage coming from third parties. A nationwide group of financial advisors known as the Retirement group. We only plan for and design retirement portfolios for transitioning corporate employees. And each representative of the group has been hand-picked by the retirement group in select cities throughout the United States.
Each advisor was screened for pension expertise, financial planning experience and portfolio construction knowledge. TRG believes in teamwork to find solutions to our clients' problems. A conservative investment philosophy guides the team in constructing client portfolios with laddered bonds / CDs / mutual funds / ETFs / annuities / stocks and other investments. They handle retirement / pensions / tax / asset allocation / estate / elder care issues.
This document uses different research tools and techniques. All attempts to estimate future results involve assumptions and judgments and are therefore only tentative estimates. The law, investment climate, interest rates and personal circumstances will all change and will affect how accurate our estimations are and how appropriate our recommendations are. Such a plan requires ongoing change sensitivities as well as constant re-examination and alteration of the plan. So update your plan a few months before your expected retirement date and do an annual review.
Nothing contained herein shall be construed as an attempt by the Retirement Group, LLC or any of its employees to practice law or accounting. We look forward to speaking with any tax and/or legal professionals you may select regarding the implications of our recommendations. Through your retirement years, we will continue to update you on issues affecting your retirement via our complimentary and proprietary newsletters, workshops & periodic updates. Or call us at (800) 900-5867.
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. National Institute on Retirement Security (NIRS). 'Retirement Insecurity 2021.'
National Institute on Retirement Security
, Feb. 2021,
www.nirsonline.org/wp-content/uploads/2021/02/FINAL-Retirement-Insecurity-2021-.pdf
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2. U.S. Congress. 'H.R. 2954 - Securing a Strong Retirement Act of 2022.'
Congress.gov
, 2022,
www.congress.gov/bill/117th-congress/house-bill/2954/text
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3. Groom Law Group. 'Summary of Provisions in the Securing a Strong Retirement Act (H.R. 2954).'
Groom Law Group
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www.groom.com/resources/summary-of-provisions-in-the-securing-a-strong-retirement-act-h-r-2954/
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4. Börsch-Supan, Axel, and Courtney Coile. 'Social Security and Retirement around the World.'
National Bureau of Economic Research
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www.nber.org/brd/20234/social-security-and-retirement-around-world
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5. National Academy of Social Insurance. 'Social Security and Retirement around the World.'
National Academy of Social Insurance
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www.nasi.org/research/social-security-archive/
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What are the implications of the Funding Target Attainment Percentage for FedEx Corporation employees, and how does it impact the security of the pension benefits offered by FedEx Corporation? This question seeks to explore the nuances of the funding target attainment percentage as reported in the annual funding notice, examining how this metric not only reflects the financial health of FedEx Corporation's pension plan but also how it affects employee confidence in future benefit payments and retirement planning.
Funding Target Attainment Percentage: The Funding Target Attainment Percentage for FedEx Corporation indicates the degree to which the pension plan is funded. A percentage of 101.33% for 2022 suggests that the plan has sufficient assets to cover its liabilities, providing security for employees' pension benefits. This high percentage likely increases employee confidence in the stability and reliability of their future pension payouts, essential for long-term retirement planning.
How does the merger of the FedEx Freight Pension Plan into the FedEx Corporate Employees’ Pension Plan influence the benefits currently available to FedEx Corporation employees? This question aims to delve into the practical changes that may arise due to this merger, assessing whether it aligns with employee expectations regarding their pension benefits and how the transition process is managed by FedEx Corporation.
Merger of Pension Plans: The merger of the FedEx Freight Pension Plan into the FedEx Corporate Employees’ Pension Plan appears to have been strategically managed to maintain benefit stability. Despite increasing liabilities by 5.3%, the merger was structured to ensure no negative impact on the benefit amounts payable to participants from either plan, preserving the expected pension benefits for all affected FedEx Corporation employees.
In terms of investment strategies, what measures does FedEx Corporation implement to ensure that its pension plan investments align with the long-term liabilities expected to be paid out to retirees? This question encourages an exploration of the investment policies in place, examining the asset allocations and risk management strategies that FedEx Corporation employs to ensure sustainable funding for its pension obligations, which could potentially include detailed analyses of stocks, debts, and alternative investments.
Investment Strategies: FedEx Corporation employs a diversified investment strategy across equities, fixed income, and alternative investments, aiming to meet long-term pension liabilities. This approach, which includes both active management strategies and the limited use of derivatives, is designed to generate returns that exceed market indices, thus ensuring adequate funding of pension obligations.
What options do employees of FedEx Corporation have for accessing their pension plan statements, and how frequently are these statements generated? The focus here is to understand the communication strategies employed by FedEx Corporation regarding pension benefit statements, including technological access points and the importance of these documents for employee financial planning.
Pension Plan Statements: FedEx Corporation provides annual pension plan statements through their Retirement Service Center, available electronically each fall. Employees can access their statements online or request them if notifications are not received, ensuring transparency and aiding in personal financial planning.
How are contributions to the FedEx Corporation Employees’ Pension Plan determined, and what role do excess contributions play in the plan's overall funding strategy? This question aims to educate employees about how the company balances mandatory contribution levels with potential excess contributions, exploring how these factors interact to influence the plan's solvency and employee benefits.
Contributions to the Pension Plan: Contributions to the FedEx Corporation Employees' Pension Plan are calculated to meet at least the minimum legal requirement and potentially include voluntary excess contributions. These excess contributions can help manage the plan's funding level and ensure its solvency, benefiting overall pension security for employees.
What types of benefits are guaranteed under the Pension Benefit Guaranty Corporation (PBGC) for FedEx Corporation employees, and what limitations exist that employees should be aware of? By focusing on the guaranteed benefits, this question prompts a discussion on the security of specific benefits provided by FedEx Corporation and highlights limitations, allowing employees to understand their rights fully.
PBGC Guarantee: The Pension Benefit Guaranty Corporation guarantees certain types of benefits for FedEx Corporation employees, such as pension benefits at normal retirement age and most early retirement benefits. However, there are limitations, such as exclusions for benefits without vested rights and recently increased benefits, which employees should be aware of to fully understand their pension security.
In what ways does the FedEx Corporation plan to adjust its pension funding strategy in light of changing federal laws that impact pension obligations? Employees are encouraged to consider how legislative changes influence corporate policies surrounding retirement benefits and the proactive strategies FedEx Corporation might take to remain compliant while ensuring the security of employee pensions.
Adjustments to Funding Strategy: FedEx Corporation is likely to adjust its pension funding strategy in response to legislative changes affecting pension obligations, such as those introduced by recent acts adjusting how pension liabilities are calculated. This proactive approach aims to ensure compliance with new laws while continuing to secure the financial health of the pension plan.
What are the steps that FedEx Corporation employees must take if they are considering retirement, particularly in how to navigate the pension plan and gain access to their benefits? This question aims to provide clarity on the retirement process, ensuring that employees are equipped with the necessary information regarding required documentation, timelines, and points of contact within FedEx Corporation.
Steps for Retirement Planning: Employees considering retirement should contact the FedEx Retirement Service Center to navigate their pension plan benefits. This process involves understanding necessary documentation, timelines, and available support, facilitating a smooth transition into retirement.
How does FedEx Corporation plan to manage potential funding shortfalls in the pension plan, and what mechanisms are in place for notifying plan participants should such an event occur? Employees would need to understand the proactive measures put in place by FedEx Corporation to address funding-related challenges while also knowing what this means for their benefits.
Managing Funding Shortfalls: In the event of potential funding shortfalls, FedEx Corporation has policies in place to manage such situations, including strategic contributions to mitigate shortfalls. The company maintains transparency with plan participants about funding levels and any significant changes affecting the pension plan.
For those seeking more information about their pensions and retirement options, how can FedEx Corporation employees contact relevant departments, and what resources are available for assistance? This question provides an opportunity for employees to familiarize themselves with contact points such as the FedEx Retirement Service Center, emphasizing the importance of open communication channels for addressing inquiries related to their pensions. Feel free to consult the provided document for more in-depth exploration of these topics.
Contacting for Pension Information: FedEx Corporation employees seeking more information about their pensions or retirement options can contact the FedEx Retirement Service Center. This center provides essential resources and support, ensuring employees have access to all necessary information regarding their retirement planning.
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