New Update: Rising Oil Costs are Affecting Retirement Plans. Will you be impacted?
Navigating Retirement: Annuities vs. IRA Withdrawals for First Horizon Employees
Oil market turbulence continues to ripple through the broader economy, with crude swinging between $50 and $120 per barrel and annualized volatility near 80%. 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 First Horizon should account for how energy price cycles influence inflation, interest rates, and market returns over the long horizons that retirement planning requires. Consulting with a financial advisor can help you understand how energy conditions affect your specific situation and build a plan that adapts accordingly.
There are just a couple of things almost all First Horizon 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 First Horizon 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 First Horizon retiree about 30 years of retirement income.
As the economy constantly changes, a number of factors may force prospective First Horizon retirees to revisit the 4% rule. It may be worth considering annuities as an alternative.
As life expectancies increase, First Horizon 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 First Horizon.
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 First Horizon into retirement, understanding the company's benefit structure can help you make more informed decisions. According to publicly available information, First Horizon maintains an active defined benefit pension plan, which provides retirement income based on factors such as years of service and compensation history. First Horizon also offers retiree healthcare benefits to eligible employees, which can provide meaningful coverage for those who retire before reaching Medicare eligibility at age 65. Because the specifics of your pension formula, vesting schedule, and benefit eligibility depend on your individual employment history and plan documents, We encourage you to review your Summary Plan Description (SPD) or speak with First Horizon's HR or benefits team for the most current details.
What type of retirement savings plan does First Horizon offer to its employees?
First Horizon offers a 401(k) retirement savings plan to help employees save for their future.
Does First Horizon provide matching contributions to the 401(k) plan?
Yes, First Horizon provides a matching contribution to the 401(k) plan, which helps employees maximize their retirement savings.
What is the eligibility requirement to participate in First Horizon's 401(k) plan?
Employees at First Horizon are eligible to participate in the 401(k) plan after completing a specific period of service, typically within the first year of employment.
How can employees at First Horizon enroll in the 401(k) plan?
Employees can enroll in First Horizon's 401(k) plan through the company’s HR portal or by contacting the HR department for assistance.
What investment options are available in First Horizon's 401(k) plan?
First Horizon offers a variety of investment options in its 401(k) plan, including mutual funds, target-date funds, and other investment vehicles.
Can employees at First Horizon take loans against their 401(k) balance?
Yes, First Horizon allows employees to take loans against their 401(k) balance under certain conditions, as outlined in the plan documents.
What is the vesting schedule for First Horizon's 401(k) matching contributions?
The vesting schedule for First Horizon's matching contributions typically follows a graded schedule, which means employees earn ownership of the match over a period of time.
Are there any fees associated with First Horizon's 401(k) plan?
Yes, there may be administrative fees associated with First Horizon's 401(k) plan, which are disclosed in the plan documents.
How often can employees at First Horizon change their 401(k) contribution amount?
Employees at First Horizon can change their 401(k) contribution amount at any time, subject to the plan's guidelines.
What is the maximum contribution limit for First Horizon's 401(k) plan?
The maximum contribution limit for First Horizon's 401(k) plan is set by the IRS and may change annually; employees should refer to the latest IRS guidelines for specifics.
For more information you can reach the plan administrator for First Horizon at , ; or by calling them at .
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