New Update: Rising Oil Costs are Affecting Retirement Plans. Will you be impacted?
Navigating Retirement: Annuities vs. IRA Withdrawals for Ares Management Employees
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The sustained volatility in crude oil markets, with prices ranging from $50 to $120 and annualized swings near 80%, creates economic effects that extend far beyond energy companies. Energy-sector lending exposure, investment portfolio concentrations, and the broader macro channel of inflation and interest rates connect financial institutions to oil market volatility. Retirement savings strategies at Ares Management should account for how energy price cycles influence inflation, interest rates, and market returns over the long horizons that retirement planning requires. Professional guidance can help you navigate the indirect effects of oil volatility on your retirement planning and ensure your strategy accounts for these dynamics.
There are just a couple of things almost all Ares Management retirees need when they hit retirement: predictable income and protection against a cluster of risks, which include longevity risk, performance risk and sequence-of-returns risk.
In the past we have seen retiring Ares Management employees utilize the "4% rule," where retirees take annual withdrawals start at 4% of the entire portfolio and increase with inflation. They then keep the remainder of the portfolio with at least 50% invested in equities. Based on historical data, this would give a Ares Management retiree about 30 years of retirement income.
As the economy constantly changes, a number of factors may force prospective Ares Management retirees to revisit the 4% rule. It may be worth considering annuities as an alternative.
As life expectancies increase, Ares Management retirees need to prepare for expenses over a longer time frame. In the past we would plan for a 15 to 20 year retirement, but now we need to prepare for a 30 to 35 year retirement. What is available to assist meeting the 35-year time frame?
The annuity strategy can assist with a few of the pitfalls we see in the 4% rule. For example:
If you need $50,000 per year in retirement and need that for 30 years, you may need $1.2 million in fixed income at a 3% interest rate. BUT if you look to fund $50,000 for 30 years, you can cover that expense with $800,000 by choosing the annuity option.
The other pitfall with the 4% rule is that it may not reflect a client's risk tolerance. When you are accumulating assets, you can afford more volatility and can take on more risk than when in the retirement and withdrawal phase after leaving Ares Management.
Also, should we see a drop in the market, you would be able to reduce your income using the 4% rule, which you cannot do if you choose an annuity option.
As you plan your transition from Ares Management into retirement, understanding the company's benefit structure can help you make more informed decisions. According to publicly available information, Ares Management does not maintain a traditional defined benefit pension plan, making your 401(k) plan and personal savings the primary vehicles for retirement income. Ares Management does not appear to offer a formal retiree healthcare program, so healthcare coverage planning before Medicare eligibility at age 65 is an important consideration. We encourage you to review your Summary Plan Description (SPD) or speak with Ares Management's HR or benefits team for the most current details.
What is the purpose of Ares Management's 401(k) plan?
The purpose of Ares Management's 401(k) plan is to help employees save for retirement by providing a tax-advantaged way to contribute a portion of their salary.
What types of contributions can employees make to Ares Management's 401(k) plan?
Employees can make pre-tax contributions, Roth (after-tax) contributions, and, if eligible, catch-up contributions to Ares Management's 401(k) plan.
Does Ares Management offer a company match for 401(k) contributions?
Yes, Ares Management offers a company match for employee contributions to the 401(k) plan, subject to specific terms and conditions.
How often can employees change their contribution amounts to Ares Management's 401(k) plan?
Employees can change their contribution amounts to Ares Management's 401(k) plan at any time, subject to plan rules.
What investment options are available in Ares Management's 401(k) plan?
Ares Management's 401(k) plan offers a variety of investment options, including mutual funds, target-date funds, and other investment vehicles.
Is there a vesting schedule for the company match in Ares Management's 401(k) plan?
Yes, Ares Management has a vesting schedule for the company match, which determines when employees fully own the matched contributions.
What is the maximum contribution limit for Ares Management's 401(k) plan?
The maximum contribution limit for Ares Management's 401(k) plan is set by the IRS and may change annually; employees should check the current limit for the year.
Can employees take loans against their 401(k) balance at Ares Management?
Yes, Ares Management allows employees to take loans against their 401(k) balance, subject to specific terms and conditions outlined in the plan.
What happens to an employee's 401(k) balance if they leave Ares Management?
If an employee leaves Ares Management, they can choose to roll over their 401(k) balance to another retirement account, leave it in the plan, or withdraw it, subject to tax implications.
How can employees access their 401(k) account information at Ares Management?
Employees can access their 401(k) account information through the Ares Management benefits portal or by contacting the plan administrator.
For more information you can reach the plan administrator for Ares Management at 2000 Avenue of the Stars Los Angeles, CA 90067; or by calling them at (310) 201-4100.
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