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The volatility of recent markets forces us to remind Verizon 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, Verizon 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 Verizon, 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 Verizon 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 Verizon 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 Verizon clients. But that does not mean diversification guarantees a profit or protects against investment loss for Verizon 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. Verizon 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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- Stages of Retirement for Corporate Employees
- 7 Things to Consider Before Leaving Your Company
- How Are Workers Impacted by Inflation & Rising Interest Rates?
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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 Verizon Pension Plan facilitate retirement income for long-term employees, and what specific benefits can employees expect when enrolling in the retirement program provided by Verizon? What unique features does the Verizon Pension Plan offer compared to other retirement plans an employee might have encountered, and how can employees maximize the benefits of these features throughout their career at Verizon?
Verizon Pension Plan Benefits: Verizon's Pension Plan offers substantial benefits aimed at facilitating a secure retirement for long-term employees. Upon enrolling in the retirement program, employees can expect defined benefits that are based on their salary and years of service, ensuring a predictable and stable income after retirement. Unique to Verizon, compared to some other plans, may include options for early retirement under certain conditions and a choice between annuity payments or a lump-sum distribution upon retirement. Employees can maximize these features by planning for long-term service and considering their retirement income needs early in their careers.
In what ways can employees at Verizon strategize their rollover decisions when transitioning from the Verizon Pension Plan to other retirement savings plans upon leaving the company? What factors should be considered by Verizon employees to ensure they are making informed choices regarding rolling over funds to a traditional IRA or another qualified employer plan?
Rollover Strategies: When transitioning from the Verizon Pension Plan to other retirement savings options upon leaving the company, employees should strategize their rollover decisions carefully. Factors to consider include the tax implications, the investment options available in the rollover destination, and the timing of the transfer to avoid penalties. Verizon employees should evaluate the benefits of rolling over to a traditional IRA or another employer's plan, considering their future financial needs and retirement goals.
What are the implications of the recent IRS limits for 2024 concerning contributions to retirement plans for Verizon employees, and how does Verizon align its offerings with these federal regulations? Additionally, how can Verizon employees best take advantage of these limits to enhance their retirement savings while adhering to tax regulations?
IRS Contribution Limits: The implications of IRS limits for 2024 are critical for Verizon employees as these limits dictate how much can be contributed tax-deferred into retirement plans. Verizon aligns its offerings with these federal regulations by adjusting contribution limits in their plans accordingly. Employees are encouraged to maximize their contributions to take full advantage of tax-deferred growth, especially when IRS limits increase, thereby enhancing their retirement savings while adhering to tax regulations.
How does the special tax treatment for lump sum distributions from the Verizon Pension Plan affect employees who receive their benefits early or have specific circumstances, such as being born before 1936? What options do these employees have to manage their tax burden effectively, and how can they best navigate these complicated rules while planning for their retirement?
Tax Treatment of Lump Sum Distributions: The special tax treatment for lump sum distributions from the Verizon Pension Plan can significantly affect employees who opt to receive their benefits early or under specific circumstances like being born before 1936. These employees have options to manage their tax burden effectively by opting for ten-year averaging or capital gain treatment on eligible distributions, allowing for a potentially lower tax rate on their pension benefits.
For surviving spouses and alternate payees of Verizon employees, what are the specific benefits available under the Verizon Pension Plan? How do these benefits compare to those available to employees, and what steps must surviving spouses or alternate payees take to ensure they receive their entitled benefits without delays or complications?
Benefits for Surviving Spouses and Alternate Payees: For surviving spouses and alternate payees, the Verizon Pension Plan offers benefits similar to those available to employees, such as annuity payments or lump-sum options. These beneficiaries must take certain steps to ensure they receive their benefits without delays, such as providing necessary documentation and adhering to plan rules. The plan details and processes for claiming benefits should be clearly understood to avoid complications.
How can Verizon employees utilize the resources available through the Verizon Benefits Center to better understand and manage their retirement benefits? What specific tools and services does the Benefits Center provide, and how can these resources assist employees in making informed decisions regarding their pension plan options?
Utilizing Resources at the Verizon Benefits Center: Verizon employees can utilize various tools and services provided by the Verizon Benefits Center to manage and understand their retirement benefits. The Benefits Center offers personalized consultations, detailed plan documentation, and tools for estimating pension benefits and planning retirement income, assisting employees in making informed decisions about their pension plan options.
What challenges might Verizon employees face regarding eligibility and tax withholding when receiving their pension payments, and how can they mitigate these issues? It's crucial for employees to understand the mechanics of eligibility regarding rollovers and payment processing; what key pieces of information should they be aware of to avoid unexpected taxes?
Challenges in Eligibility and Tax Withholding: Verizon employees might face challenges regarding eligibility and tax withholding when receiving pension payments. Understanding the plan's criteria for eligibility, the implications of rollovers, and the impact of mandatory withholding on distributions is crucial. Employees can mitigate these issues by consulting with the Verizon Benefits Center or a tax advisor to ensure compliance and avoid unexpected taxes.
What is the process for Verizon employees wishing to initiate a direct rollover from the Verizon Pension Plan, and what documentation will they need to prepare? Can employees receive assistance from the Verizon Benefits Center during this process, and how does using a direct rollover benefit them compared to other forms of payment?
Direct Rollover Process: The process for initiating a direct rollover involves deciding the destination of the rollover (traditional IRA or another employer plan), completing necessary documentation, and potentially seeking assistance from the Verizon Benefits Center. A direct rollover helps in avoiding immediate taxes and maintaining the tax-deferred status of retirement savings.
In terms of retirement preparedness, how does the pension plan at Verizon accommodate employees’ needs for financial security in their senior years? What additional education or resources does Verizon provide to assure that employees fully understand their retirement options and the importance of planning ahead?
Retirement Preparedness: Verizon's pension plan is designed to accommodate the financial security needs of employees in their senior years. In addition to the pension benefits, Verizon provides educational resources and planning tools to ensure employees understand their retirement options and the importance of early and consistent retirement planning.
How can employees reach out to the Verizon Benefits Center for further information about the pension plan and other retirement benefits? What specific contact methods are available to employees, and how can these interactions enhance their understanding and management of retirement benefits provided by Verizon?
Contacting the Verizon Benefits Center: Verizon employees seeking more information about their pension plan and other retirement benefits can reach out to the Verizon Benefits Center through various contact methods such as phone, email, or online portals. These interactions are crucial for enhancing understanding and effective management of retirement benefits, ensuring employees make the most of the benefits available to them.
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