New Update: Rising Oil Costs are Affecting Retirement Plans. Will you be impacted?
Navigating Retirement: Annuities vs. IRA Withdrawals for Franchise Group Employees
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Oil market turbulence continues to ripple through the broader economy, with crude swinging between $50 and $120 per barrel and annualized volatility near 80%. Oil price volatility ripples through the broader economy by influencing inflation expectations, interest rates, and equity market valuations. For employees at Franchise Group, energy sector holdings within retirement accounts, such as oil stocks in a 401(k), can experience significant price swings that affect portfolio allocation; if sold during downturns, realized losses or gains may create unexpected tax consequences. Retirement savings strategies at Franchise Group 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 Franchise Group 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 Franchise Group 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 Franchise Group retiree about 30 years of retirement income.
As the economy constantly changes, a number of factors may force prospective Franchise Group retirees to revisit the 4% rule. It may be worth considering annuities as an alternative.
As life expectancies increase, Franchise Group 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 Franchise Group.
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 Franchise Group into retirement, understanding the company's benefit structure can help you make more informed decisions. According to publicly available information, Franchise Group does not maintain a traditional defined benefit pension plan, making your 401(k) plan and personal savings the primary vehicles for retirement income. Franchise Group 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 Franchise Group's HR or benefits team for the most current details.
What retirement savings options does Franchise Group offer to its employees?
Franchise Group offers a 401(k) savings plan to help employees save for retirement.
How can employees at Franchise Group enroll in the 401(k) plan?
Employees at Franchise Group can enroll in the 401(k) plan by completing the enrollment forms provided during orientation or through the employee portal.
Does Franchise Group match employee contributions to the 401(k) plan?
Yes, Franchise Group offers a matching contribution up to a certain percentage of employee contributions to the 401(k) plan.
What is the vesting schedule for the 401(k) match at Franchise Group?
The vesting schedule for the 401(k) match at Franchise Group typically follows a graded vesting schedule over a period of time, which will be detailed in the plan documents.
Are there any fees associated with the Franchise Group 401(k) plan?
Yes, there may be administrative fees associated with the Franchise Group 401(k) plan, which will be disclosed in the plan documents.
Can employees take loans against their 401(k) balance at Franchise Group?
Yes, Franchise Group allows employees to take loans against their 401(k) balance, subject to the plan's terms and conditions.
What investment options are available in the Franchise Group 401(k) plan?
The Franchise Group 401(k) plan offers a variety of investment options, including mutual funds, target-date funds, and company stock.
How often can employees change their contribution amounts to the Franchise Group 401(k) plan?
Employees at Franchise Group can change their contribution amounts to the 401(k) plan typically on a quarterly basis or as specified in the plan documents.
What is the minimum contribution percentage for the Franchise Group 401(k) plan?
The minimum contribution percentage for the Franchise Group 401(k) plan is usually set at 1% of the employee's salary, but employees are encouraged to contribute more if possible.
Can employees at Franchise Group access their 401(k) funds before retirement?
Employees at Franchise Group may access their 401(k) funds before retirement under certain circumstances, such as financial hardship or termination of employment.
For more information you can reach the plan administrator for Franchise Group at , ; or by calling them at .
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