While rising interest rates continue to remake the housing market, Intel employees must be vigilant about adapting their home-buying strategies and financial planning to limit short-term impacts on long-term financial goals, 'says Paul Bergeron, a representative of the Retirement Group, a division of Wealth Enhancement Group.
For Intel employees, knowing the bigger economic picture will help them navigate these rising mortgage rates and housing costs that will affect today and into retirement, 'says Kevin Landis, of the Retirement Group, a division of Wealth Enhancement Group.
In this article we will discuss:
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1. Roaring mortgage rates & home prices affect Intel employees.
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2. Limited inventory and rising costs are among the housing market challenges.
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3. Strategies for first-time homebuyers and retirees about the current housing market.
Homebuyers who entered the hot U.S. housing market have seen a transformation. Intel employees must admit the average 30-year fixed mortgage interest rate jumped from about 3.2% at the beginning of 2022 to 5.3% in mid-May, the highest level since 2009. This increase came after the Federal Reserve raised the federal funds rate - a key benchmark for short-term interest rates - to combat some of the highest inflation in decades. As a Intel employee, you need to understand why these rates have fluctuated and what their future projections are.
Although mortgage rates aren't directly tied to the Fed funds rate, monetary policy dictates all borrowing costs. The yield on the 10-year Treasury is sensitive to changes in the federal funds rate and also depends on bond market longer-term expectations for economic growth and inflation. Intel employees can use this information to decide how to allocate funds to treasuries and other assets.
Housing Costs Are Soaring
You might be thinking how buyers have dealt with low inventory, bidding wars, and rising prices for almost two years now - as a Intel employee. The national median price of existing residences increased 14.8% last year to USD 391,200 by April 2022. Almost seven out of 185 metropolitan areas recorded double-digit annual price increases in the first quarter. Price increases in more affordable small and medium-sized cities outpaced those in more expensive metropolitan markets as more homebuyers took advantage of working remotely. Intel employees must account for these atypical gains to avoid buying property at an undervalued price.
The market conditions and home values may differ regionally and even by neighborhood in the same city. The ten most expensive cities had median home prices of USD 662,000 in Denver and USD 1,875,000 in San Jose in April. One-half of the nation's ten most expensive housing markets is in California, where there is a persistent housing shortage. Intel employees must consider the housing shortage when considering buying California real estate and, if possible, wait until prices normalize.
I've seen rent prices go up with home prices as a Intel employee looking to rent a home. The median rent for 0- to 2-bedroom properties in the 50 largest U.S. metropolitan areas was USD 1,827 in April 2022 - up 16.7% year-over-year. More pronounced increases were in Sun Belt cities like Miami (51.6%), San Diego (25.6%), and Austin (24.7%).
Those looking for a home might be in a tough spot right now - especially prospective homebuyers, renters renewing a lease, and anyone else looking for somewhere to live. Consider this article as you become a Intel employee and avoid the situation above.
Affordability Is Waning
For those Intel employees with slim financial resources, rising mortgage rates and property prices have impacted affordability. A USD 300,000 borrower would pay USD 1,666 per month at 5.3%, versus USD 1,297 per month at 3.2% today. Even more important is affordability in high-cost areas and for first-time buyers who have not benefited from gains in home equity. It suggests Intel employees in high-cost areas do market research and consider other less-expensive and more reasonable locations.
Mortgages originated by borrowers who started a home search and were prequalified by a lender before interest rates spiked may not still be approved. In recent months, demand for lower-rate adjustable-rate mortgages (ARMs) has spiked. An ARM that has a fixed rate for the first three, five, seven, or ten years of a 30-year term before adjusting to market rates might tempt borrowers who expect to move someday and need a lower monthly payment to qualify for a larger mortgage.
Other buyers adjust expectations and settle for a cheaper home. Still, others might give up the search because the homes they want are not affordable, or their dream neighborhoods are out of reach. And as a Intel employee considering buying or renting a home, you have to understand how many entry-level buyers may be priced out of the market - at least temporarily - because of these ridiculously high prices.
Because purchase contracts are signed many months before the homes are built, buyers of new homes may be particularly exposed to changing interest rates. With their deposits in jeopardy, Intel employees planning to buy may pay the extra fee to extend rate locks for six, nine, or twelve months.
I also work for a Intel employee and understand how rising borrowing costs could halt homebuilding demand so as to curtail price increases - and how prices could drop in some overheated markets. Yet most economists do not foresee a collapse in property prices as market fundamentals remain relatively solid. Inventory levels are low, and lenders have been cautious, so most homeowners who bought in the last few years can still afford their mortgages. Cash purchasers include downsizing retirees and investors, who account for about 26% of transactions, are unaffected by interest rates. Assuming the economy and employment remain steady, millennials in their prime home-buying years should be in high demand.
Tips for Bewildered First Buyers.
If Intel employees will take a mortgage, buying a home would stabilize their housing costs for as long as the payment is fixed, while paying rent indefinitely might not help their finances. Or you could create equity in your home as you pay down your loan balance, especially if the home goes up in value.
No one knows where mortgage rates are heading or what will happen next in the housing market despite widespread speculation to the contrary. So how does a Intel employee know whether buying a home is financially prudent? As always, the answer is dependent on where you want to live, how you want to spend your time and money. Here are three ways Intel customers can get ready for homebuying.
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Develop into a better borrower. Intel employees should get a copy of their credit report before applying for a mortgage to catch errors and correct mistakes. High credit scores may qualify for low interest rates.
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Collect a down payment. Conventional mortgages require 20% down, but some loan programs allow down payments of 5% to 10%. Should parents or another relative 'gift' cash as a down payment, lenders might ask for a letter of verification as to where the money came from. Local programs might help Intel employees who earn enough to qualify and who attend homeownership classes with down-payment assistance.
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Figure out what you can afford to spend. Our Intel customers understand their budgets. Start with online calculators that consider income, debt, and expenses. A mortgage lender can determine how much you could borrow. Real estate transaction costs can be three to five years before they recover, so consider the stability of your Intel employment and your income.
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Bloomberg May 12 & May 19, 2022.
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The Wall Street Journal May 5, 2022.
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NPR, May 12, 2022.
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Wall Street Journal, December 14, 2021.
Added Fact:
Rising Rates Add to Long List of Housing Dilemmas:
Those 60-something Intel workers and retirees need to understand how rising interest rates could affect their retirement plans and housing decisions. A study by the National Association of Realtors in March 2023 found that 60% of homeowners over 60 have mortgage debt. It means an enormous chunk of this age group could be affected by rising interest rates, which could mean higher mortgage payments and possibly affect retirement savings and financial stability. Age-related issues include evaluating housing options and assessing whether rising rates will affect retirement plans.
Added Analogy:
So the current housing market situation of sky-high prices, low inventory, and rising interest rates is akin to sailing across rough water on a sailing trip toward retirement. Now imagine yourself as a sailor approaching turbulent seas with whipping winds and crushing waves. The housing market is like a body of water - with its moving prices and shrinking options - and rising interest rates are like winds against your financial stability. You must navigate bidding wars and mounting costs while adjusting your sails to reflect the market conditions. As a seasoned sailor looks at wind patterns and charts course to avoid rocky reefs, Intel workers planning to retire and current retirees need to evaluate market conditions, assess financial potential, and make sound decisions about how to sail toward retirement goals.
Sources:
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'How Higher Interest Rates Are Impacting Retirees.' Retirement Stewardship , 20 Sept. 2023, www.retirementstewardship.com/2023/09/20/how-higher-interest-rates-are-impacting-retirees/ .
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Malagies, Didier. 'How the Housing Crisis Impacts Your Retirement Savings.' U.S. News & World Report , 9 Jan. 2025, money.usnews.com/money/retirement/articles/how-the-housing-crisis-impacts-your-retirement-savings .
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'Nearly Half of Retirees Worry They'll Outlive Their Savings, While 25% Are Burdened by Housing Costs.' DDAMortgage , 9 Jan. 2025, www.ddamortgage.com/nearly-half-of-retirees-worry-theyll-outlive-their-savings-while-25-are-burdened-by-housing-costs .
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'Older Homeowners Are Financially Confident Aging in Place.' Fannie Mae , 29 Feb. 2024, www.fanniemae.com/research-and-insights/perspectives/older-homeowners-are-financially-confident-aging-place .
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'How Housing Can Play An Important Role in Retirement Security.' Investopedia , Nov. 2024, www.investopedia.com/how-housing-can-play-an-important-role-in-retirement-security-8746025 .
How does the Intel Pension Plan define the eligibility criteria for employees looking to retire, and what specific steps must they take to determine their benefit under the Intel Pension Plan?
Eligibility Criteria for Retirement: To be eligible for the Intel Pension Plan, employees must meet specific criteria, such as age and years of service. Benefits are calculated based on final average pay and years of service, and employees can determine their benefits by logging into their Fidelity NetBenefits account, where they can view their projected monthly benefit and explore different retirement dates(Intel_Pension_Plan_Dece…).
What are the implications of choosing between a lump-sum distribution and a monthly income from the Intel Pension Plan, and how can employees assess which option is best suited for their individual financial circumstances?
Lump-Sum vs. Monthly Income: Choosing between a lump-sum distribution and monthly income under the Intel Pension Plan depends on personal financial goals. A lump-sum provides flexibility but exposes retirees to market risk, while monthly payments offer consistent income. Employees should consider factors like their financial needs, life expectancy, and risk tolerance when deciding which option fits their situation(Intel_Pension_Plan_Dece…).
In what ways can changes in interest rates affect the lump-sum benefit calculation under the Intel Pension Plan, and why is it essential for employees to be proactive about their retirement planning concerning these fluctuations?
Interest Rates and Lump-Sum Calculations: Interest rates directly affect the lump-sum calculation, as higher rates reduce the present value of future payments, leading to a smaller lump-sum benefit. Therefore, it's crucial for employees to monitor interest rate trends when planning their retirement to avoid potential reductions in their lump-sum payout(Intel_Pension_Plan_Dece…).
How do factors like final average pay and years of service impact the pension benefits calculated under the Intel Pension Plan, and what resources are available for employees to estimate their potential benefits?
Impact of Final Average Pay and Years of Service: Pension benefits under the Intel Pension Plan are calculated using final average pay (highest-earning years) and years of service. Employees can use available tools, such as the Fidelity NetBenefits calculator, to estimate their potential pension based on these factors, giving them a clearer picture of their retirement income(Intel_Pension_Plan_Dece…).
How should employees approach their financial planning in light of their Intel Pension Plan benefits, and what role does risk tolerance play in deciding between a lump-sum payment and monthly income?
Financial Planning and Risk Tolerance: Employees should incorporate their pension plan benefits into broader financial planning. Those with a lower risk tolerance might prefer the steady income of monthly payments, while individuals willing to take investment risks might opt for the lump-sum payout. Balancing these decisions with other income sources is vital(Intel_Pension_Plan_Dece…).
What considerations should Intel employees evaluate regarding healthcare and insurance needs when transitioning into retirement, based on the guidelines established by the Intel Pension Plan?
Healthcare and Insurance Needs: Intel employees approaching retirement should carefully evaluate their healthcare options, including Medicare eligibility, private insurance, and the use of their SERMA accounts. Considering how healthcare costs fit into their retirement budget is crucial, as these costs will likely increase over time(Intel_Pension_Plan_Dece…).
How can employees maximize their benefits from the Intel Pension Plan by understanding the minimum pension benefit provision, and what steps can they take if their Retirement Contribution account falls short?
Maximizing Benefits with the Minimum Pension Provision: Employees can maximize their pension benefits by understanding the minimum pension benefit provision, which ensures that retirees receive a certain income even if their Retirement Contribution (RC) account balance is insufficient. Those whose RC accounts fall short will receive a benefit from the Minimum Pension Plan (MPP)(Intel_Pension_Plan_Dece…).
What resources does Intel offer to support employees in their retirement transition, including assessment tools and financial planning services tailored to those benefiting from the Intel Pension Plan?
Resources for Retirement Transition: Intel provides several resources to support employees' transition into retirement, including financial planning tools and access to Fidelity's retirement calculators. Employees can use these tools to run scenarios and determine the most beneficial pension options based on their financial goals(Intel_Pension_Plan_Dece…).
What strategies can retirees implement to manage taxes effectively when receiving payments from the Intel Pension Plan, and how do these strategies vary between lump-sum distributions and monthly income options?
Tax Strategies for Pension Payments: Managing taxes on pension payments requires strategic planning. Lump-sum distributions are often subject to immediate taxation, while monthly income is taxed as regular income. Retirees can explore tax-deferred accounts and other strategies to minimize their tax burden(Intel_Pension_Plan_Dece…).
How can employees of Intel contact Human Resources to get personalized assistance with their pension questions or concerns regarding the Intel Pension Plan, and what specific information should they be prepared to provide during this communication?
Contacting HR for Pension Assistance: Intel employees seeking assistance with their pension plan can contact HR for personalized support. It is recommended that they have their employee ID, retirement dates, and specific pension-related questions ready to expedite the process. HR can guide them through benefit calculations and options(Intel_Pension_Plan_Dece…).
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