Sears Holdings Employees: 4 Reasons for the Return of Market Volatility

Market volatility remains a worry for many approaching retirement. 'Forty-five employees should conduct periodic portfolio reviews and adjustments to reflect their financial goals and risk tolerance,' says Paul Bergeron, of The Retirement Group, a division of Wealth Enhancement Group.

'The market conditions change and you just have to be informed and flexible.' Tyson Mavar with The Retirement Group - part of Wealth Enhancement Group - advises Sears Holdings employees not to jump ship on short-term market moves.

In this article we will discuss:

1. Impact of Market Volatility: How market downturns are a major concern for pre-retirees and retirees - particularly women and those nearing retirement age.

2. Inflation and Interest Rates: Analyzing how recent economic developments and fiscal policies may push inflation and thus affect interest rates and investment decisions.

4. Changes in Investment Strategies: Evaluation of the transition from quantitative easing to more traditional economic measures and their impact on the market, including the role of algorithmic trading and natural market cycles.

According to a new study from Fidelity Investments, market volatility is a top concern for pre-retirees and retirees - 51% said market downturns were one of their top worries. The study also found that market volatility is a top concern for women more than men - 58% to 44% in women versus 44% in men. And those nearer retirement age worry more about market volatility than those farther away from retirement.

Inflation Fears

A February 2 employment report showed continued stagnant wage growth, raising fears of rising inflation and interest rates. Inflation is a rise in general prices that reduces the purchasing power of money.

Expanding economic issues was a fiscal policy issue in the US. Recent tax cuts raised fears the 'fiscal stimulus' could be inflationary and raise interest rates.

The yield on 10-year Treasury bonds hit 2.88 percent on February 8 - the highest level in four years. While higher dividend yields do not necessarily hurt stock prices, they do create competition for investors' money. And so some investors might choose to invest in bonds instead of equities.

Algorithmic Trading

A type of investment that uses computers to quickly execute large trades based on predetermined triggers to buy or sell stocks is called algorithmic trading. One estimate is that algorithmic trading comprises about fifty percent of daily S&P 500 Index activity.

Many conditions 'push the button' on buy or sell programs, but market observers say some sell programs were activated when the 10-year Treasury yield approached 3%.

End of Easy Money.

That price decline could also signal the end of monetary easing. Recent years saw the U.S. Federal Reserve and other big global central banks adopt a quantitative easing policy of low interest rates. Quantitative easing is when central banks try to stimulate economic development by hiking interest rates. Although last fall the Federal Reserve announced the end of quantitative easing, the markets may just be beginning to feel the effects of that program end.

Natural Market Cycles

Market corrections are part of investing. There have been 76 corrections of 5 to 10 percent, 26 pullbacks of 10 to 20 percent, eight retreats of 20 to 40 percent and three drawdowns of more than 40 percent since the end of World War II. A long-term perspective is reassuring because it reminds you that fluctuations have happened many times before.

Market moves are impossible to predict over the next few weeks but likely to remain volatile. Investment portfolios of Sears Holdings employees and retirees must reflect their objectives, time horizon and risk tolerance. Keep in mind why you invested, stay the course and avoid overreactions.

Like weather, market volatility is variable and hard to predict. We check the forecast and prepare for different weather conditions just as regularly as investors should review and adjust their investment portfolios in response to market conditions. We can't control the weather but we can protect ourselves and our investments from market volatility. Staying informed makes us weather the storm and come out stronger on the other side.

Published on 29 January 2018, CNBC.com. The S&P 500 Composite index tracks stocks; it is an unmanaged index representative of the U.S. stock market. Performance of an index is not indicative of historical performance of an investment. Past performance does not warrant future results. No one can own an index directly. The return and principal value of stock prices will oscillate with changing market conditions. If sold, shares might fetch more or less than their original price.

It is a gamble - and Sears Holdings employees and retirees must invest with an understanding of their own objectives, time horizon and risk appetite. Changing market conditions will change the returns and principal values of investments. Investments can fetch more or less than their original cost when sold. The opinions expressed and materials provided are for informational purposes only and should not be construed as an offer to buy or sell any security. Any corporations or stock indices mentioned are merely illustrative. Neither is it a solicitation to buy or sell securities.

Wall Street Journal 2 February 2018.

Employees and retirees of the Sears Holdings must remember that a bond's market value changes with interest rates. Most often, old bonds appreciate as interest rates rise. Depending on whether an investor sells a bond before maturity, its value could be greater or less than the original purchase price. In case the issuer does not default, an investor holding a bond to maturity will get the interest payments due plus the original principal amounting to $600,000. Investments with a higher yield target also are more risky.

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'Retiring in a recession, downturn, or period of market volatility? Things to consider.' Fidelity, www.fidelity.com .
'FID-SORP-Data Sheet-V10.' Fidelity, www.fidelity.com .
'Navigating volatile markets.' Fidelity, sponsorcqa.fidelity.com.
'Scenario planning | Helping with market volatility.' Fidelity, www.fidelity.com .
'Market volatility: Investing strategies for volatile markets.' Fidelity, www.fidelity.com .

How does the Sears Holdings Pension Plan differentiate between normal retirement, early retirement, and late retirement options for Kmart participants? In what ways do these options influence the retirement planning process for employees of Sears Holdings, and what specific considerations should Kmart employees be aware of when choosing one of these retirement paths, particularly in relation to their vested status?

Differentiation of Retirement Options: The Sears Holdings Pension Plan offers distinct options for normal, early, and late retirement. Normal retirement is available at age 65 or after five years of plan participation, whichever is later. Early retirement can be taken from age 55 but before 65, provided the employee is vested, with benefits subject to actuarial reduction unless certain conditions are met (like having at least 90 points, which is a sum of age and years of credited service). Late retirement pertains to any retirement after the normal retirement age, with pensions recalculated to reflect the delay in benefit commencement.

Considering the frozen status of the Sears Holdings Pension Plan, how does this impact the benefits eligibility for Kmart employees, and what implications does it have for their retirement savings strategies? In what ways should current employees factor in this frozen status when evaluating their overall retirement readiness and potential alternatives outside of the company plan?

Impact of Frozen Status: The freezing of the Sears Holdings Pension Plan on January 31, 1996, means that there have been no new accruals of benefits or participants since that date. For Kmart employees, this impacts their benefits eligibility by capping the pension benefits at levels earned up to the freeze date. Employees need to consider this stagnation in benefits when planning for retirement, potentially seeking additional retirement savings avenues to bridge any shortfall.

What are the essential calculations involved in determining the retirement benefits under the Sears Holdings Pension Plan for Kmart employees? Specifically, how do the Career Average Pay and Final Average Pay formulas come into play, and what factors should employees consider when estimating their future retirement payouts?

Essential Calculations for Retirement Benefits: Pension benefits for Kmart employees under the Sears Holdings Pension Plan are calculated using either the Career Average Pay or the Final Average Pay formulas. These calculations take into account an employee's years of credited service and compensation up to the freeze date. Factors like estimated Social Security benefits and specific formulas (such as a deduction based on Social Security benefits under the Final Average Pay formula) play crucial roles in determining the final pension payout.

How can Sears Holdings employees best navigate the process of applying for benefits under the Pension Plan? What specific steps should participants take to ensure their applications are processed correctly, and what important deadlines should they be aware of to avoid any negative consequences on their retirement benefits?

Navigating the Benefits Application Process: To apply for pension benefits, employees must submit a formal application, ideally 30 to 90 days before the intended commencement date. It is crucial to ensure all personal information, including marital status and spouse details, is up-to-date to avoid delays or inaccuracies in benefit processing. Missing application deadlines can lead to postponed benefit payments or unwanted default options.

In what situations can Kmart employees expect to receive a Deferred Vested Pension, and how is the calculation for this pension affected by their previous employment and vesting service? Employees should be aware of the important factors influencing their eligibility and the steps necessary to maintain their retirement benefits after leaving the company.

Eligibility and Calculation for Deferred Vested Pension: A Deferred Vested Pension is available to employees who leave the company after becoming vested but prior to qualifying for retirement. The calculation mirrors that of a normal retirement pension, with possible early commencement reductions. Understanding the timing of benefit commencement and the potential reductions for early start is vital for planning.

How does the Sears Holdings Pension Plan address tax considerations for employees receiving both monthly payments and lump sum payments upon retirement? What tax implications should Kmart participants be aware of, particularly in relation to IRS rules for distributions and potential penalties for early withdrawal?

Tax Implications of Pension Receipt: Pension payments, whether monthly or lump sum, are subject to federal taxes. Monthly benefits are taxed as ordinary income, while lump sums might be eligible for special tax treatments or rollover options to defer taxes. It’s important for Kmart employees to consider these implications and possibly consult with a tax advisor to optimize tax liability.

What are the rights and protections afforded to Kmart participants under the Employee Retirement Income Security Act (ERISA) as they navigate their retirement benefits with the Sears Holdings Pension Plan? How can employees leverage these rights to ensure they are receiving all the benefits to which they are entitled?

ERISA Rights and Protections: Under ERISA, Kmart employees are entitled to certain rights including the ability to appeal denied benefits, access to plan information, and assurances of fair and equitable treatment of their benefits. Leveraging these protections ensures that employees receive all due benefits.

What steps should Kmart employees take to update their personal information to ensure they continue receiving their benefits without interruption, especially in the context of missing participants or uncashed checks? What resources and contacts at Sears Holdings are available to assist with these updates?

Updating Personal Information: Maintaining accurate personal information with the pension plan is crucial for uninterrupted benefit payments. Employees should promptly update changes such as address, marital status, or beneficiaries to prevent issues with benefit distributions or lost checks.

How does the process of transferring between affiliated employers impact pension benefits for Kmart employees under the Sears Holdings Pension Plan? What considerations should be taken into account concerning Credited Service and Vesting Service during such transfers, and how can employees ensure they do not lose any entitled benefits?

Impact of Transfers Between Affiliated Employers: Transferring between Sears Holdings’ affiliated employers can affect pension benefits differently depending on whether the employer participates in the pension plan. It's essential to understand how such transfers impact credited and vesting service accruals.

For Kmart employees seeking more information about their benefits under the Sears Holdings Pension Plan, what is the best way to contact company representatives? How can they effectively communicate their questions or concerns to ensure they receive accurate and timely information regarding their retirement benefits?

Contacting Plan Representatives: Kmart employees seeking clarity on their pension benefits should contact the Sears Holdings Pension Service Center. Effective communication, including prepared questions and necessary documentation, will aid in obtaining accurate and comprehensive information.

With the current political climate we are in it is important to keep up with current news and remain knowledgeable about your benefits.

Sears Holdings Corporation's pension plans were taken over by the Pension Benefit Guaranty Corporation (PBGC) following the company's bankruptcy. The two defined benefit pension plans have been frozen since 2005, meaning no new benefit accruals are added. The plans are underfunded by approximately $1.4 billion, with PBGC assuming responsibility to ensure pension payments continue. These plans cover about 90,000 participants who worked for Sears, Roebuck and Co., and Kmart Corporation. Despite the underfunding, PBGC is expected to cover the vast majority of pension benefits owed under these plans. Participants can manage their benefits and verify information through PBGC's online platform or service center.

Bankruptcy and Store Closures: Sears Holdings emerged from bankruptcy with significant store closures, reducing from nearly 700 stores to less than 25. The company has been liquidating its remaining assets and recently announced more store closures in 2024. The focus is on resolving bankruptcy-related issues and managing the liquidation process effectively (Sources: The Layoff, Yahoo Finance).

Sears Holdings offered both RSUs and stock options before its bankruptcy. RSUs vested over time, providing shares, while stock options allowed employees to buy shares at a fixed price.

Sears Holdings, now part of Transformco, has faced numerous challenges in recent years, impacting its ability to provide comprehensive employee healthcare benefits. The strategic transformations initiated since 2017 aimed to improve operational performance and liquidity, which included measures such as obtaining additional loan proceeds and real estate sales. However, the company's financial struggles and store closures have also led to significant changes in employee benefits, including healthcare. As part of its efforts to stabilize and restructure, Sears has focused on reducing outstanding debt and pension obligations, contributing almost $4 billion to its pension plan since 2005 due to prolonged low interest rates. In 2023, Transformco continued to navigate its financial challenges, which have influenced its healthcare benefits offerings. The company has aimed to maintain basic healthcare coverage for its employees despite ongoing restructuring efforts. This includes providing access to medical, dental, and vision plans, although the specifics of these benefits and any enhancements over the past years have been less prominently highlighted compared to the broader financial strategies and operational changes. The focus on financial stability and cost reduction remains critical for Transformco as it seeks to ensure the viability of its employee benefits programs amid economic uncertainties.

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Check Out Articles for Sears Holdings employees

For more information you can reach the plan administrator for Sears Holdings at 3333 beverly road Hoffman Estates, IL 60179; or by calling them at 1-800-697-3277.

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