Retirement planning is a verb. And consistent action must be taken whether you’re 20 or 60.

The truth is that most Americans don’t know how much to save or the amount of income they’ll need.

No matter where you stand in the planning process, or your current age, we hope this guide gives you a good overview of the steps to take and resources that help you simplify your transition from Kraft into retirement and get the most from your benefits.

You know you need to be saving and investing, especially since time is on your side the sooner you start, but you don’t have the time or expertise to know if you’re building retirement savings that can last after leaving Kraft.

'A separate study by Russell Investments, a large money management firm, came  to a similar conclusion .  Russell estimates a  good  financial advisor can  increase investor returns by 3.75 percent.'

79% potential boost in wealth at age 65 over a 20-year period when choosing to invest in Kraft's retirement plan.

*Source: Bridging the Gap Between 401(k) Sponsors and Participants, T.Rowe Price, 2020

How much we recommend that you invest toward Kraft retirement is always based on your unique financial situation and goals. However, consider investing a minimum of 10% of your salary toward retirement through your 30s and 40s. So long as your individual circumstances allow, it should be a goal to maximize Kraft's contribution match.

Over 50? You can invest up to $19,500 into your retirement plan/401(k) with Kraft.

As you enter your 50s and 60s, you’re ideally at peak earning years with some of your major expenses, such as a mortgage or child-rearing, behind you or soon to be in the rearview mirror. This can be a good time to consider whether you have the ability to boost your retirement savings goal to 20% or more of your income. For many people, this could potentially be the last opportunity to stash away funds.

In 2020, workers age 50 or older could invest up to $19,500 into their retirement plan/401(k). Once they met this limit, they could add an additional $6,500 in catch-up contributions. These limits are adjusted annually for inflation.

If you’re a Kraft employee over 50, you may be eligible to use a catch-up contribution within your IRA.

Why are 401(k)s and matching contributions so popular?

These retirement savings vehicles give you the chance to take advantage of three main benefits:

• Compound growth opportunities (as seen above)
• Tax saving opportunities
• Matching contributions

Matching contributions are just what they sound like: Kraft matches your own 401(k) contributions with money that comes from the company. If Kraft matches, the company money typically matches up to a certain percent of the amount you put in.

Unfortunately, many people might not be taking full advantage of Kraft's match because they’re not putting in enough themselves.

$1,336 - A 2020 study from Financial Engines titled “Missing Out: How Much Employer 401(k) Matching Contributions Do Employees Leave on the Table?”, revealed that employees who don’t maximize the company match typically leave $1,336 of potential extra retirement money on the table each year.

    - If Kraft will match up to 3% of your plan contributions and you only contribute 2% of your salary, you aren’t getting the full amount of their potential match.

    - By bumping up your contribution by just 1%, Kraft is now matching 3% (the max) of your contributions for a total contribution of 6% of your salary. You aren’t leaving money on the table.

Whether you live in or Puerto Rico, you'll receive quite a bit of useful information from this article! Speak with a retirement-focused advisor by clicking the button below.

Whether you’re changing jobs or retiring from Kraft, knowing what to do with your hard-earned retirement savings can be difficult. An Kraft-sponsored plan, such as a pension and 401(k), may make up the majority of your retirement savings, but how much do you really know about that plan and how it works?

There are seemingly endless rules that vary from one retirement plan to the next, early out offers, interest rate impacts, age penalties, and complex tax impacts.

Increasing your investment balance and reducing taxes is the key to a successful retirement plan spending strategy. At The Retirement Group, we can help you understand how Kraft's 401(k) fits into your overall financial picture and how to make that plan work for you.

Workers are far more likely to rely on their workplace defined contribution (DC) retirement plans as a source of income.

'Getting help and leveraging the financial planning tools and resources your company

makes available can help you understand whether you are on track, or need to

make adjustments to meet your long-term retirement goals...'

Source: Schwab 401(k) Survey Finds Savings Goals and Stress Levels on the Rise

Craft Pension Example

Let's assume Joe is working as a Cable Splicing Technician and is in Pension Band 120. He is interested in retiring this year, in 2021 and wants to calculate his Craft Pension benefit.

While this formula calculates a monthly pension benefit, you can determine the lump sum equivalent by using the annuity to lump sum conversion table on Fidelity's website.

At this time in the economic cycle, there is serious interest rate risk.

Keep in mind, annuities typically do not have inflation protection, however some employees want the security of the monthly benefit. A strategy to compensate for not electing Kraft's lump-sum option implements electing the single annuity option and buying a life insurance policy (protection for spouse, children) to maximize your pension benefit.

If you are thinking about what to do with your Kraft-sponsored pension plan, you can discuss with a TRG advisor if you should take the Lump Sum or Annuity. When should you take it? What is best for you and your family?

You should routinely use the tools and resources found on The Retirement Group's E-Book library, such as the Retirekit, to model your pension benefit in retirement and the pension payment options that will be available to you after leaving Kraft.

You can also contact an energy focused advisor at The Retirement Group at (800)-900-5867. We will get you in front of an advisor dedicated to oil companies to help you start the retirement process and tell you about your payment.

Note: We recommend you read the AT&T Summary Plan Description. The Retirement Group is not affiliated with AT&T, Chevron, ExxonMobil, Shell, or any other company. 

Lump-Sum vs. Annuity

Retirees who are eligible for a pension are often offered the choice of whether to actually take the pension payments for life, or receive a lump-sum dollar amount for the “equivalent” value of the pension – with the idea that you could then take the money (rolling it over to an IRA), invest it, and generate your own cash flows by taking systematic withdrawals throughout retirement from Kraft.

The upside of keeping the pension itself is that the payments are guaranteed to continue for life (at least to the extent that the pension plan itself remains in place and solvent and doesn’t default). Thus, whether you live 10, 20, or 30 (or more!) years after leaving Kraft, you don’t have to worry about the risk of outliving the money.

In contrast, selecting the lump-sum gives you the potential to invest, earn more growth, and potentially generate even greater retirement cash flow. Additionally, if something happens to you, any unused account balance will be available to a surviving spouse or heirs. However, if you fail to invest the funds for sufficient growth, there’s a danger that the money could run out altogether and you may regret not having held onto the pension’s “income for life” guarantee.

Ultimately, the “risk” assessment that should be done to determine whether or not you should take the lump sum or the guaranteed lifetime payments that the Kraft pension offers depends on what kind of return must be generated on that lump-sum to replicate the payments of the annuity. After all, if it would only take a return of 1% to 2% on that lump-sum to create the same pension cash flows for a lifetime, there is little risk that you will outlive the lump-sum after leaving Kraft, even if you withdraw from it for life(10). However, if the pension payments can only be replaced with a higher and much riskier rate of return, there is, in turn, a greater risk those returns won’t manifest and you could run out of money.

Interest Rates and Life Expectancy

In many defined benefit plans, like the ExxonMobil pension plan, current and future retirees are offered a lump-sum payout or a monthly pension benefit. Sometimes these plans have billions of dollars worth of unfunded pension liabilities, and in order to get the liability off the books, Kraft may offer a lump-sum.

Depending on life expectancy, the initial lump-sum is typically less money than regular pension payments over a normal retirement time frame. However, most individuals that opt for the lump-sum plan to invest the majority of the proceeds, as most of the funds aren't needed immediately after retirement from Kraft.

Something else to keep in mind is that current interest rates, as well as your life expectancy at retirement, have an impact on lump-sum payout options of Kraft defined benefit pension plans. Lump-sum payouts are typically higher in a low interest rate environment, but be careful because lump-sums decrease in a rising interest rate environment.

Additionally, projected pension lump-sum benefits for active Kraft employees will often decrease as an employee ages and their life expectancy decreases. This can potentially be a detriment of continuing to work, so it is important that you run your pension numbers often and thoroughly understand the impact that timing has on your benefit. Other factors such as income needs, need for survivor benefits, and tax liabilities often dictate the decision to take the lump-sum over the annuity option on the pension.

When is the last time you reviewed your Kraft 401(k) plan account or made any changes to it?

If it’s been a while, you’re not alone. 73% of plan participants spend less than five hours researching their 401(k) investment choices each year, and when it comes to making account changes, the story is even worse.

When you retire from Kraft, if you have balances in your 401(k) plan, you will receive a Participant Distribution Notice in the mail. This notice will show the current value that you are eligible to receive from each plan and explain your distribution options. It will also tell you what you need to do to receive your final distribution. Please call The Retirement Group at (800)-900-5867 for more information and we can help you get in front of a Kraft retirement-focused advisor.

Next Step:

• Watch for your Participant Distribution Notice and Special Tax Notice Regarding Plan Payments. These notices will help explain your options and what the federal tax implications may be for your vested account balance.
• ' What has Worked in Investing ' & ' 8 Tenets when picking a Mutual Fund '.
• To learn about your distribution options, call The Retirement Group at (800)-900-5867. Click our e-book for more information on ' Rollover Strategies for 401(k)s '. Use the Online Beneficiary Designation to make updates to your beneficiary designations, if needed.

Note : If you voluntarily terminate your employment from Kraft, you may not be eligible to receive the annual contribution.

Over half of plan participants admit they don’t have the time, interest or knowledge needed to manage their 401(k) portfolio. But the benefits of getting help goes beyond convenience. Studies like this one, from Charles Schwab, show those plan participants who get help with their investments tend to have portfolios that perform better: The annual performance gap between those who get help and those who do not is 3.32% net of fees. This means a 45-year-old participant could see a 79% boost in wealth by age 65 simply by contacting an advisor. That’s a pretty big difference.

Getting help can be the key to better results across the 401(k) board.

A Charles Schwab study found several positive outcomes common to those using independent professional advice. They include:

• Improved savings rates – 70% of participants who used 401(k) advice increased their contributions.
• Increased diversification – Participants who managed their own portfolios invested in an average of just under four asset classes, while participants in advice-based portfolios invested in a minimum of eight asset classes.
• Increased likelihood of staying the course – Getting advice increased the chances of participants staying true to their investment objectives, making them less reactive during volatile market conditions and more likely to remain in their original 401(k) investments during a downturn. Don’t try to do it alone.

Get help with your Kraft 401(k) plan investments. Your nest egg will thank you.

In-Service Withdrawals

Generally speaking, you can withdraw amounts from your account while still employed with Kraft under the circumstances described below.

It’s important to know that certain withdrawals are subject to regular federal income tax and, if you’re under age 59½, you may also be subject to an additional 10% penalty tax. You can determine if you’re eligible for a withdrawal, and request one, online or by calling the Kraft Benefits Center.

Rolling Over Your 401(k)

As long as the plan participant is younger than age 72, an in-service distribution can be rolled over to an IRA. A direct rollover would avoid the 10% early withdrawal penalty as well as the mandatory 20% tax withholding. Your Kraft plan summary outlines more information and possible restrictions on rollovers and withdrawals.

Because a withdrawal permanently reduces your retirement savings and is subject to tax, you should always consider taking a loan from the plan instead of a withdrawal to meet your financial needs. Unlike withdrawals, loans must be repaid, and are not taxable (unless you fail to repay them). In some cases, as with hardship withdrawals, you are not allowed to make a withdrawal unless you have also taken out the maximum loan available within the Kraft plan.

You should also know that the Kraft plan administrator reserves the right to modify the rules regarding withdrawals at any time, and may further restrict or limit the availability of withdrawals for administrative or other reasons. All plan participants will be advised of any such restrictions, and they apply equally to all Kraft employees.

Net Unrealized Appreciation (NUA)

When you qualify for a distribution you have three options:

• Roll-over your qualified plan to an IRA and continue deferring taxes.
• Take a distribution and pay ordinary income tax on the full amount.
• Take advantage of NUA and reap the benefits of a more favorable tax structure on gains.

How does Net Unrealized Appreciation work?

First an employee must be eligible for a distribution from their qualified Kraft-sponsored plan. Generally at retirement or age 59 1⁄2, the employee takes a 'lump-sum' distribution from the plan, distributing all assets from the plan during a 1 year period. The portion of the plan that is made up of mutual funds and other investments can be rolled into an IRA for further tax deferral. The highly appreciated company stock is then transferred to a non-retirement account.

The tax benefit comes when you transfer the company stock from a tax-deferred account to a taxable account. At this time you apply NUA and you incur an ordinary income tax liability on only the cost basis of your stock. The appreciated value of the stock above its basis is not taxed at the higher ordinary income tax but at the lower long-term capital gains rate, currently 15%. This could mean a potential savings of over 30%.

As a Kraft employee, you may be interested in understanding NUA from a financial advisor.

IRA Withdrawal

Your retirement assets may consist of several retirement accounts: IRAs, 401(k)s, taxable accounts, and others.

So, what is the most efficient way to take your retirement income after leaving Kraft?

You may want to consider meeting your income needs in retirement by first drawing down taxable accounts rather than tax-deferred accounts.

This may help your retirement assets with Kraft last longer as they continue to potentially grow tax deferred.

You will also need to plan to take the required minimum distributions (RMDs) from any Kraft-sponsored retirement plans and traditional or rollover IRA accounts.

That is due to IRS requirements for 2020 to begin taking distributions from these types of accounts when you reach age 72. If you do not, the IRS may assess a 50% penalty on the amount you should have taken.

There is new legislation that allows individuals who didn’t turn 70½ by the end of 2019 to take RMDs on April 1 of the year they turn 72.

Two flexible distribution options for your IRA

When you need to draw on your IRA for income or take your RMDs, you have a few choices. Regardless of what you choose, IRA distributions are subject to income taxes and may be subject to penalties and other conditions if you’re under 59½.

Partial withdrawals: Withdraw any amount from your IRA at any time. If you’re 72 or over, you’ll have to take at least enough from one or more IRAs to meet your annual RMD.

Systematic withdrawal plans: Structure regular, automatic withdrawals from your IRA by choosing the amount and frequency to meet your income needs after retiring from Kraft. If you’re under 59½, you may be subject to a 10% early withdrawal penalty (unless your withdrawal plan meets Code Section 72(t) rules).

Your tax advisor can help you understand distribution options, determine RMD requirements, calculate RMDs, and set up a systematic withdrawal plan.

Company Benefits Annual Enrollment

Annual enrollment for your Kraft benefits usually occurs each fall.

Before it begins, you will be mailed enrollment materials and an upfront confirmation statement reflecting your benefit coverage to the address on file. You’ll find enrollment instructions and information about your benefit options from Kraft and contribution amounts. You will have the option to keep the benefit coverage shown on your upfront confirmation statement or select benefit options offered by Kraft that better support your needs. You may be able to choose to enroll in eBenefits and receive this information via email instead.

Next Steps:

• Watch for your annual enrollment information in the September/November time frame.
• Review your benefits information and utilize the tools and resources available on Kraft's Benefits Center website.
• Enroll in eBenefits.

Things to keep in mind :

• 47% of Americans cite healthcare as their greatest economic concern.
• Medical bills are the No. 1 cause of bankruptcy in the United States.
• For older Americans, healthcare costs represent the second-largest expense, behind housing.

Short-Term & Long-Term Disability

Short-Term: Depending on your plan, you may have access to short-term disability (STD) benefits through Kraft.

Long-Term: Your plan's long-term disability (LTD) benefits are designed to provide you with income if you are absent from Kraft for six consecutive months or longer due to an eligible illness or injury.

What Happens If Your Employment with Kraft Ends

Your life insurance coverage and any optional coverage you purchase for your spouse/domestic partner and/or children ends on the date your employment with Kraft ends, unless your employment ends due to disability. If you die within 31 days of your termination date from Kraft, benefits are paid to your beneficiary for your basic life insurance, as well as any additional life insurance coverage you elected.

Note:

• You may have the option to convert your life insurance to an individual policy or elect portability on any optional coverage.
• If you stop paying supplementary contributions, your coverage will end.
• If you are at least 65 and you pay for supplemental life insurance, you should receive information in the mail from the insurance company that explains your options.
• Make sure to update your beneficiaries. See Kraft's SPD for more details.

Beneficiary Designations
As part of your Kraft retirement planning and estate planning, it’s important to name someone to receive the proceeds of your benefit programs in the event of your death. That’s how Kraft will know whom to send your final compensation and benefits. This can include life insurance payouts and any pension or savings balances you may have.

Next Step:

• When you retire from Kraft, make sure that you update your beneficiaries. Kraft should have an Online Beneficiary Designation form for life events such as death, marriage, divorce, child birth, adoptions, etc.

If you are unsure about Kraft's benefits, schedule a call to speak with one of our retirement-focused advisors

Schedule a Call

For many retirees, understanding and claiming Social Security can be difficult but identifying optimal ways to claim Social Security is essential to your retirement income planning. Social Security benefits are not designed to be the sole source of your retirement income, but a part of your overall withdrawal strategy.

Knowing the foundation of Social Security, and using this knowledge to your advantage, can help you claim your maximum benefit.

It’s your responsibility to enroll in Medicare parts A and B when you first become eligible — and you must stay enrolled to have coverage for Medicare-eligible expenses. This applies to your Medicare eligible dependents as well.

You should know how your retiree medical plan choices or Medicare eligibility impacts your plan options. Before you retire from Kraft, contact the U.S. Social Security Administration directly at 800-772-1213, call your local Social Security Office or visit ssa.gov .

They can help determine your eligibility, get you and/or your eligible dependents enrolled in Medicare or provide you with other government program information. For more in-depth information on Social Security, please call us.

Check the status of your Social Security benefits before you retire from Kraft. Contact the U.S. Social Security Administration, your local Social Security office, or visit ssa.gov.

Are you eligible for Medicare or will be soon?

If you or your dependents are eligible after you leave your telecom industry company, Medicare generally becomes the primary coverage for you or any of your dependents as soon as they are eligible for Medicare. This will affect Kraft-provided medical benefits.

You and your Medicare-eligible dependents must enroll in Medicare Parts A and B when you first become eligible. Medical and MH/SA benefits payable under the Kraft-sponsored plan will be reduced by the amounts Medicare Parts A and B would have paid whether you actually enroll in them or not.

For details on coordination of benefits, refer to Kraft's summary plan description.

If you or your eligible dependent don’t enroll in Medicare Parts A and B, your provider can bill you for the amounts that are not paid by Medicare or your Kraft-specific medical plan … making your out-of-pocket expenses significantly higher.

According to the Employee Benefit Research Institute (EBRI), Medicare will only cover about 60% of an individual’s medical expenses. This means a 65-year-old couple, with average prescription-drug expenses for their age, will need $259,000 in savings to have a 90% chance of covering their healthcare expenses. A single male will need $124,000 and a single female, thanks to her longer life expectancy, will need $140,000.

The ideas of happily ever after and until death do us part won’t happen for 28% of couples over the age of 53. Most couples saved together for decades, assuming they would retire together. After a divorce, they face the expenses of a pre-or post-retirement life, but with half their savings.

If you’re divorced or in the process of divorcing, your former spouse(s) may have an interest in a portion of your retirement benefits from Kraft. Before you can start your pension — and for each former spouse who may have an interest — you’ll need to provide Kraft with the following documentation:

• A copy of the court-filed Judgment of Dissolution or Judgment of Divorce along with any Marital Settlement Agreement (MSA)
• A copy of the court-filed Qualified Domestic Relations Order (QDRO)

Provide Kraft with any requested documentation to avoid having your pension benefit delayed or suspended. To find out more information on strategies if divorce is affecting your Kraft retirement benefits, please give us a call.

You’ll need to submit this documentation to Kraft’s online pension center regardless of how old the divorce or how short the marriage. *Source: The Retirement Group, “Retirement Plans - Benefits and Savings,” U.S. Department of Labor, 2019; “Generating Income That Will Last Throughout Retirement,” Fidelity, 2019

Unlike with a married couple, your ex-spouse doesn’t have to have filed for Social Security

before you can apply for your divorced spouse’s benefit.

Divorce doesn’t disqualify you from survivor benefits. You can claim a divorced spouse’s survivor benefit if the following are true:

• Your ex-spouse is deceased.
• You are at least 60 years of age.
• You were married for at least 10 years prior to the divorce.
• You are single (or you remarried after age 60).

In the process of divorcing?

If your divorce isn’t final before your retirement date from Kraft, you’re still considered married. You have two options:

• Retire from Kraft before your divorce is final and elect a joint pension of at least 50% with your spouse — or get your spouse’s signed, notarized consent to a different election or lump sum.
• Delay your retirement from Kraft until after your divorce is final and you can provide the required divorce documentation.*

Source: The Retirement Group, “Retirement Plans - Benefits and Savings,” U.S. Department of Labor, 2019; “Generating Income That Will Last Throughout Retirement,” Fidelity, 2019

What your survivor needs to do:

• Report your death. Your spouse, a family member or even a friend should call Kraft’s benefits service center as soon as possible to report your death.

• Collect life insurance benefits. Your spouse, or other named beneficiary, will need to call Kraft’s benefits service center to collect life insurance benefits.

If you have a joint pension:

• Start the joint pension payments. The joint pension is not automatic. Your joint pensioner will need to complete and return the paperwork from Kraft's pension center to start receiving joint pension payments.

• Be prepared financially to cover living expenses. Your spouse will need to be prepared with enough savings to bridge at least one month between the end of your pension payments from Kraft and the beginning of his or her own pension payments.

If your survivor has medical coverage through Kraft:

• Decide whether to keep medical coverage.

• If your survivor is enrolled as a dependent in your Kraft-sponsored retiree medical coverage when you die, he or she needs to decide whether to keep it. Survivors have to pay the full monthly premium.

Financial benefits of working

Make up for decreased value of savings or investments. Low interest rates make it great for lump sums but harder for generating portfolio income. Some people continue to work to make up for poor performance of their savings and investments.

Maybe you took an offer from Kraft and left earlier than you wanted with less retirement savings than you needed. Instead of drawing down savings, you may decide to work a little longer to pay for extras you’ve always denied yourself in the past.

Meet financial requirements of day-to-day living. Expenses can increase during your retirement from Kraft and working can be a logical and effective solution. You might choose to continue working in order to keep your insurance or other benefits — many employers offer free to low cost health insurance for part-time workers.

Emotional benefits of working

You might find yourself with very tempting job opportunities at a time when you thought you’d be withdrawing from the workforce.

Staying active and involved. Retaining employment after Kraft, even if it’s just part-time, can be a great way to use the skills you’ve worked so hard to build over the years and keep up with friends and colleagues.

Enjoying yourself at work. Just because the government has set a retirement age with its Social Security program doesn’t mean you have to schedule your own life that way. Many people genuinely enjoy their employment and continue working because their jobs enrich their lives.

Kraft employees interested in planning their retirement may be interested in live webinars hosted by experienced financial advisors. Click here to register for our upcoming webinars for Kraft employees.

• “National Compensation Survey: Employee Benefits in the United States, March 2019,' Bureau of Labor Statistics, U.S. Department of Labor.
• “Generating Income That Will Last throughout Retirement.” Fidelity, 22 Jan. 2019, www.fidelity.com/viewpoints/retirement/income-that-can-last-lifetime .
• “Retirement Plans-Benefits & Savings.” U.S. Department of Labor, 2019, www.dol.gov/general/topic/retirement .
• AT&T Summary Plan Description, 2019
• Chevron Summary Plan Description, 2019
• Shell Summary Plan Description, 2019
• ExxonMobil Summary Plan Description, 2019
• https://seekingalpha.com/article/4268237-order-withdrawals-retirement-assets
• https://www.aon.com/empowerresults/ensuring-retirees-get-health-care-need/
• 8 Tenets when picking a Mutual Fund e-book
• Determining Cash Flow Need in Retirement e-book
• Early Retirement Offers e-book
• Lump Sum vs. Annuity e-book
• Social Security e-book