New Update: Rising Oil Costs are Affecting Retirement Plans. Will you be impacted?
Navigating Retirement: Annuities vs. IRA Withdrawals for Big Lots Employees
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With crude oil volatility near 80% and prices spanning $50 to $120 per barrel over the past six months, energy cost uncertainty influences economic conditions across industries. Distribution diesel costs and consumer discretionary spending pressure from high fuel prices create meaningful headwinds for retail operations and growth. Big Lots employees building long-term savings should recognize that oil-driven economic conditions can affect both the growth of their portfolios and the purchasing power of their eventual retirement income. In this environment, a financial advisor can help you assess your exposure to oil-driven economic effects and build appropriately diversified strategies.
There are just a couple of things almost all Big Lots 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 Big Lots 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 Big Lots retiree about 30 years of retirement income.
As the economy constantly changes, a number of factors may force prospective Big Lots retirees to revisit the 4% rule. It may be worth considering annuities as an alternative.
As life expectancies increase, Big Lots 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 Big Lots.
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 Big Lots into retirement, understanding the company's benefit structure can help you make more informed decisions. According to publicly available information, Big Lots does not maintain a traditional defined benefit pension plan, making your 401(k) plan and personal savings the primary vehicles for retirement income. Big Lots 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 Big Lots's HR or benefits team for the most current details.
What is the 401(k) plan offered by Big Lots?
The 401(k) plan offered by Big Lots is a retirement savings plan that allows employees to save a portion of their paycheck before taxes are taken out.
How can employees of Big Lots enroll in the 401(k) plan?
Employees of Big Lots can enroll in the 401(k) plan by completing the enrollment process through the company’s benefits portal or by speaking with the HR department.
Does Big Lots match employee contributions to the 401(k) plan?
Yes, Big Lots offers a matching contribution to the 401(k) plan, which helps employees grow their retirement savings.
What is the maximum contribution limit for Big Lots employees participating in the 401(k) plan?
The maximum contribution limit for Big Lots employees in the 401(k) plan is set by the IRS and may change annually; employees should check the current limits for the specific year.
When can Big Lots employees start contributing to the 401(k) plan?
Big Lots employees can start contributing to the 401(k) plan after they have completed their eligibility requirements, typically within the first few months of employment.
Are there any fees associated with the Big Lots 401(k) plan?
Yes, there may be administrative fees associated with the Big Lots 401(k) plan, which will be disclosed to employees during the enrollment process.
What investment options are available in the Big Lots 401(k) plan?
The Big Lots 401(k) plan offers a range of investment options, including mutual funds, target-date funds, and other investment vehicles to suit different risk tolerances.
Can Big Lots employees take loans against their 401(k) savings?
Yes, Big Lots employees may have the option to take loans against their 401(k) savings, subject to the plan’s terms and conditions.
What happens to the 401(k) plan if a Big Lots employee leaves the company?
If a Big Lots employee leaves the company, they can choose to roll over their 401(k) balance to another retirement account, cash out, or leave the funds in the Big Lots plan if permitted.
How often can Big Lots employees change their 401(k) contribution amounts?
Big Lots employees can typically change their 401(k) contribution amounts at any time, subject to the plan’s rules and guidelines.
For more information you can reach the plan administrator for Big Lots at 4900 E Dublin Granville Rd Westerville, OH 43081; or by calling them at +1 614-278-6800.
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