New Update: Rising Oil Costs are Affecting Retirement Plans. Will you be impacted?
Navigating Retirement: Annuities vs. IRA Withdrawals for D.R. Horton Employees
Oil prices between $50 and $120 per barrel with 80% annualized volatility have created ripple effects throughout the economy over the past six months. Petroleum-based materials, heavy equipment diesel, and the mortgage rate inflation driven by energy costs create multiple layers of oil price exposure for construction and homebuilding. D.R. Horton 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 D.R. Horton 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 D.R. Horton 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 D.R. Horton retiree about 30 years of retirement income.
As the economy constantly changes, a number of factors may force prospective D.R. Horton retirees to revisit the 4% rule. It may be worth considering annuities as an alternative.
As life expectancies increase, D.R. Horton 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 D.R. Horton.
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 D.R. Horton into retirement, understanding the company's benefit structure can help you make more informed decisions. According to publicly available information, D.R. Horton does not maintain a traditional defined benefit pension plan, making your 401(k) plan and personal savings the primary vehicles for retirement income. D.R. Horton 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 D.R. Horton's HR or benefits team for the most current details.
What type of retirement plan does D.R. Horton offer to its employees?
D.R. Horton offers a 401(k) retirement savings plan to its employees.
Is there a company match for contributions made to the D.R. Horton 401(k) plan?
Yes, D.R. Horton provides a company match for employee contributions to the 401(k) plan, subject to certain limits.
How can employees enroll in the D.R. Horton 401(k) plan?
Employees can enroll in the D.R. Horton 401(k) plan through the company’s benefits portal or by contacting the HR department for assistance.
What is the eligibility requirement for D.R. Horton employees to participate in the 401(k) plan?
Generally, D.R. Horton employees are eligible to participate in the 401(k) plan after completing a specified period of service, as outlined in the plan documents.
Can D.R. Horton employees take loans against their 401(k) savings?
Yes, D.R. Horton allows employees to take loans against their 401(k) savings, subject to the plan's terms and conditions.
What investment options are available in the D.R. Horton 401(k) plan?
The D.R. Horton 401(k) plan offers a variety of investment options, including mutual funds, target-date funds, and other investment vehicles.
How often can D.R. Horton employees change their 401(k) contribution amounts?
D.R. Horton employees can change their 401(k) contribution amounts at designated times throughout the year, as specified in the plan rules.
What is the vesting schedule for D.R. Horton’s company match in the 401(k) plan?
The vesting schedule for D.R. Horton’s company match typically follows a graded vesting schedule, which means employees earn ownership of the match over time.
Are there any fees associated with managing the D.R. Horton 401(k) plan?
Yes, there may be fees associated with managing the D.R. Horton 401(k) plan, which are disclosed in the plan documents and annual statements.
How can D.R. Horton employees access their 401(k) account information?
D.R. Horton employees can access their 401(k) account information online through the plan’s designated website or by contacting the plan administrator.
For more information you can reach the plan administrator for D.R. Horton at 1341 Horton Cir Arlington, TX 76011; or by calling them at (817) 390-8200.
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