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Market volatility remains a worry for many approaching retirement. 'Forty-five employees should conduct periodic portfolio reviews and adjustments to reflect their financial goals and risk tolerance,' says Paul Bergeron, of The Retirement Group, a division of Wealth Enhancement Group.
'The market conditions change and you just have to be informed and flexible.' Tyson Mavar with The Retirement Group - part of Wealth Enhancement Group - advises Intel employees not to jump ship on short-term market moves.
In this article we will discuss:
1. Impact of Market Volatility: How market downturns are a major concern for pre-retirees and retirees - particularly women and those nearing retirement age.
2. Inflation and Interest Rates: Analyzing how recent economic developments and fiscal policies may push inflation and thus affect interest rates and investment decisions.
4. Changes in Investment Strategies: Evaluation of the transition from quantitative easing to more traditional economic measures and their impact on the market, including the role of algorithmic trading and natural market cycles.
According to a new study from Fidelity Investments, market volatility is a top concern for pre-retirees and retirees - 51% said market downturns were one of their top worries. The study also found that market volatility is a top concern for women more than men - 58% to 44% in women versus 44% in men. And those nearer retirement age worry more about market volatility than those farther away from retirement.
- Inflation Fears
A February 2 employment report showed continued stagnant wage growth, raising fears of rising inflation and interest rates. Inflation is a rise in general prices that reduces the purchasing power of money.
Expanding economic issues was a fiscal policy issue in the US. Recent tax cuts raised fears the 'fiscal stimulus' could be inflationary and raise interest rates.
The yield on 10-year Treasury bonds hit 2.88 percent on February 8 - the highest level in four years. While higher dividend yields do not necessarily hurt stock prices, they do create competition for investors' money. And so some investors might choose to invest in bonds instead of equities.
- Algorithmic Trading
A type of investment that uses computers to quickly execute large trades based on predetermined triggers to buy or sell stocks is called algorithmic trading. One estimate is that algorithmic trading comprises about fifty percent of daily S&P 500 Index activity.
Many conditions 'push the button' on buy or sell programs, but market observers say some sell programs were activated when the 10-year Treasury yield approached 3%.
- End of Easy Money.
That price decline could also signal the end of monetary easing. Recent years saw the U.S. Federal Reserve and other big global central banks adopt a quantitative easing policy of low interest rates. Quantitative easing is when central banks try to stimulate economic development by hiking interest rates. Although last fall the Federal Reserve announced the end of quantitative easing, the markets may just be beginning to feel the effects of that program end.
- Natural Market Cycles
Market corrections are part of investing. There have been 76 corrections of 5 to 10 percent, 26 pullbacks of 10 to 20 percent, eight retreats of 20 to 40 percent and three drawdowns of more than 40 percent since the end of World War II. A long-term perspective is reassuring because it reminds you that fluctuations have happened many times before.
Market moves are impossible to predict over the next few weeks but likely to remain volatile. Investment portfolios of Intel employees and retirees must reflect their objectives, time horizon and risk tolerance. Keep in mind why you invested, stay the course and avoid overreactions.
Like weather, market volatility is variable and hard to predict. We check the forecast and prepare for different weather conditions just as regularly as investors should review and adjust their investment portfolios in response to market conditions. We can't control the weather but we can protect ourselves and our investments from market volatility. Staying informed makes us weather the storm and come out stronger on the other side.
Published on 29 January 2018, CNBC.com. The S&P 500 Composite index tracks stocks; it is an unmanaged index representative of the U.S. stock market. Performance of an index is not indicative of historical performance of an investment. Past performance does not warrant future results. No one can own an index directly. The return and principal value of stock prices will oscillate with changing market conditions. If sold, shares might fetch more or less than their original price.
It is a gamble - and Intel employees and retirees must invest with an understanding of their own objectives, time horizon and risk appetite. Changing market conditions will change the returns and principal values of investments. Investments can fetch more or less than their original cost when sold. The opinions expressed and materials provided are for informational purposes only and should not be construed as an offer to buy or sell any security. Any corporations or stock indices mentioned are merely illustrative. Neither is it a solicitation to buy or sell securities.
Wall Street Journal 2 February 2018.
Employees and retirees of the Intel must remember that a bond's market value changes with interest rates. Most often, old bonds appreciate as interest rates rise. Depending on whether an investor sells a bond before maturity, its value could be greater or less than the original purchase price. In case the issuer does not default, an investor holding a bond to maturity will get the interest payments due plus the original principal amounting to $600,000. Investments with a higher yield target also are more risky.
Articles you may find interesting:
- Corporate Employees: 8 Factors When Choosing a Mutual Fund
- Use of Escrow Accounts: Divorce
- Medicare Open Enrollment for Corporate Employees: Cost Changes in 2024!
- Stages of Retirement for Corporate Employees
- 7 Things to Consider Before Leaving Your Company
- How Are Workers Impacted by Inflation & Rising Interest Rates?
- Lump-Sum vs Annuity and Rising Interest Rates
- Internal Revenue Code Section 409A (Governing Nonqualified Deferred Compensation Plans)
- Corporate Employees: Do NOT Believe These 6 Retirement Myths!
- 401K, Social Security, Pension – How to Maximize Your Options
- Have You Looked at Your 401(k) Plan Recently?
- 11 Questions You Should Ask Yourself When Planning for Retirement
- Worst Month of Layoffs In Over a Year!
- Corporate Employees: 8 Factors When Choosing a Mutual Fund
- Use of Escrow Accounts: Divorce
- Medicare Open Enrollment for Corporate Employees: Cost Changes in 2024!
- Stages of Retirement for Corporate Employees
- 7 Things to Consider Before Leaving Your Company
- How Are Workers Impacted by Inflation & Rising Interest Rates?
- Lump-Sum vs Annuity and Rising Interest Rates
- Internal Revenue Code Section 409A (Governing Nonqualified Deferred Compensation Plans)
- Corporate Employees: Do NOT Believe These 6 Retirement Myths!
- 401K, Social Security, Pension – How to Maximize Your Options
- Have You Looked at Your 401(k) Plan Recently?
- 11 Questions You Should Ask Yourself When Planning for Retirement
- Worst Month of Layoffs In Over a Year!
Sources:
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'Retiring in a recession, downturn, or period of market volatility? Things to consider.' Fidelity, www.fidelity.com .
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'FID-SORP-Data Sheet-V10.' Fidelity, www.fidelity.com .
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'Navigating volatile markets.' Fidelity, sponsorcqa.fidelity.com.
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'Scenario planning | Helping with market volatility.' Fidelity, www.fidelity.com .
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'Market volatility: Investing strategies for volatile markets.' Fidelity, www.fidelity.com .
How does the Intel Pension Plan define the eligibility criteria for employees looking to retire, and what specific steps must they take to determine their benefit under the Intel Pension Plan?
Eligibility Criteria for Retirement: To be eligible for the Intel Pension Plan, employees must meet specific criteria, such as age and years of service. Benefits are calculated based on final average pay and years of service, and employees can determine their benefits by logging into their Fidelity NetBenefits account, where they can view their projected monthly benefit and explore different retirement dates(Intel_Pension_Plan_Dece…).
What are the implications of choosing between a lump-sum distribution and a monthly income from the Intel Pension Plan, and how can employees assess which option is best suited for their individual financial circumstances?
Lump-Sum vs. Monthly Income: Choosing between a lump-sum distribution and monthly income under the Intel Pension Plan depends on personal financial goals. A lump-sum provides flexibility but exposes retirees to market risk, while monthly payments offer consistent income. Employees should consider factors like their financial needs, life expectancy, and risk tolerance when deciding which option fits their situation(Intel_Pension_Plan_Dece…).
In what ways can changes in interest rates affect the lump-sum benefit calculation under the Intel Pension Plan, and why is it essential for employees to be proactive about their retirement planning concerning these fluctuations?
Interest Rates and Lump-Sum Calculations: Interest rates directly affect the lump-sum calculation, as higher rates reduce the present value of future payments, leading to a smaller lump-sum benefit. Therefore, it's crucial for employees to monitor interest rate trends when planning their retirement to avoid potential reductions in their lump-sum payout(Intel_Pension_Plan_Dece…).
How do factors like final average pay and years of service impact the pension benefits calculated under the Intel Pension Plan, and what resources are available for employees to estimate their potential benefits?
Impact of Final Average Pay and Years of Service: Pension benefits under the Intel Pension Plan are calculated using final average pay (highest-earning years) and years of service. Employees can use available tools, such as the Fidelity NetBenefits calculator, to estimate their potential pension based on these factors, giving them a clearer picture of their retirement income(Intel_Pension_Plan_Dece…).
How should employees approach their financial planning in light of their Intel Pension Plan benefits, and what role does risk tolerance play in deciding between a lump-sum payment and monthly income?
Financial Planning and Risk Tolerance: Employees should incorporate their pension plan benefits into broader financial planning. Those with a lower risk tolerance might prefer the steady income of monthly payments, while individuals willing to take investment risks might opt for the lump-sum payout. Balancing these decisions with other income sources is vital(Intel_Pension_Plan_Dece…).
What considerations should Intel employees evaluate regarding healthcare and insurance needs when transitioning into retirement, based on the guidelines established by the Intel Pension Plan?
Healthcare and Insurance Needs: Intel employees approaching retirement should carefully evaluate their healthcare options, including Medicare eligibility, private insurance, and the use of their SERMA accounts. Considering how healthcare costs fit into their retirement budget is crucial, as these costs will likely increase over time(Intel_Pension_Plan_Dece…).
How can employees maximize their benefits from the Intel Pension Plan by understanding the minimum pension benefit provision, and what steps can they take if their Retirement Contribution account falls short?
Maximizing Benefits with the Minimum Pension Provision: Employees can maximize their pension benefits by understanding the minimum pension benefit provision, which ensures that retirees receive a certain income even if their Retirement Contribution (RC) account balance is insufficient. Those whose RC accounts fall short will receive a benefit from the Minimum Pension Plan (MPP)(Intel_Pension_Plan_Dece…).
What resources does Intel offer to support employees in their retirement transition, including assessment tools and financial planning services tailored to those benefiting from the Intel Pension Plan?
Resources for Retirement Transition: Intel provides several resources to support employees' transition into retirement, including financial planning tools and access to Fidelity's retirement calculators. Employees can use these tools to run scenarios and determine the most beneficial pension options based on their financial goals(Intel_Pension_Plan_Dece…).
What strategies can retirees implement to manage taxes effectively when receiving payments from the Intel Pension Plan, and how do these strategies vary between lump-sum distributions and monthly income options?
Tax Strategies for Pension Payments: Managing taxes on pension payments requires strategic planning. Lump-sum distributions are often subject to immediate taxation, while monthly income is taxed as regular income. Retirees can explore tax-deferred accounts and other strategies to minimize their tax burden(Intel_Pension_Plan_Dece…).
How can employees of Intel contact Human Resources to get personalized assistance with their pension questions or concerns regarding the Intel Pension Plan, and what specific information should they be prepared to provide during this communication?
Contacting HR for Pension Assistance: Intel employees seeking assistance with their pension plan can contact HR for personalized support. It is recommended that they have their employee ID, retirement dates, and specific pension-related questions ready to expedite the process. HR can guide them through benefit calculations and options(Intel_Pension_Plan_Dece…).
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