Navigating Retirement: Annuities vs. IRA Withdrawals for Coca-Cola Employees

Healthcare Provider Update: Coca-Cola's primary healthcare provider is Anthem Blue Cross Blue Shield, offering coverage options for its employees that includes a variety of plan choices to address their diverse healthcare needs. As we look ahead to 2026, significant increases in healthcare costs are anticipated, particularly in the wake of potential changes to the Affordable Care Act. A perfect storm of factors is contributing to this forecast; namely, the expiration of enhanced federal premium subsidies may lead many consumers to face out-of-pocket premium increases exceeding 75%. Coupled with anticipated medical cost inflation, which is projected to rise around 8% annually, employees of Coca-Cola and others could see their healthcare expenses surge dramatically, prompting companies to adapt their health benefits strategies. Click here to learn more

There are just a couple of things almost all Coca-Cola 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 Coca-Cola 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 Coca-Cola retiree about 30 years of retirement income.

As the economy constantly changes, a number of factors may force prospective Coca-Cola retirees to revisit the 4% rule. It may be worth considering annuities as an alternative.

As life expectancies increase, Coca-Cola 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 Coca-Cola. 

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.

 

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