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

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

As life expectancies increase, Stepan 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 Stepan.

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 Stepan into retirement, it is worth understanding the company's specific benefit structure. According to publicly available information, Stepan maintains a defined benefit pension plan that has been frozen to new benefit accruals -- meaning the plan no longer accumulates future benefits for most employees, but those who were already vested may still be entitled to receive the pension benefit they accrued prior to the freeze, subject to the vesting requirements described in their plan documents. Stepan does not appear to offer a formal retiree healthcare program, making healthcare coverage planning an important consideration if you retire before age 65. Because the specifics of your pension benefit, retiree healthcare eligibility, and any matching contributions depend on your individual employment history and plan documents, We encourage you to review your Summary Plan Description (SPD) or speak with Stepan's HR or benefits team for the most current details.