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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 Lockheed Martin 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 Lockheed Martin 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 Lockheed Martin 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 Lockheed Martin 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 Lockheed Martin determine the monthly pension benefit for employees nearing retirement, and what factors should employees consider when planning their retirement based on this calculation? Specifically, how do the concepts of "Final Average Pay" and "Credited Years of Service" interact in the pension calculation under Lockheed Martin’s retirement plan?
Lockheed Martin Pension Calculation: Lockheed Martin calculates monthly pension benefits using the "Final Average Pay" (FAP) and "Credited Years of Service" (CYS). The FAP is determined by averaging the three highest annual compensations prior to 2016, while CYS counts the years from employment start to December 31, 2019, when the pension was frozen. The benefit per year of service is calculated based on whether the FAP is less than or exceeds the Social Security Covered Compensation, with specific formulas applied for each scenario. These calculations directly affect the monthly pension benefit, which may also be reduced if retirement commences before a certain age due to early retirement penalties.
Given the recent changes in Lockheed Martin's pension policy, what implications could this have for employees who are planning to retire in the near future? How should these employees navigate their expectations regarding retirement income given that the pension has been frozen since 2020?
Implications of Pension Freeze: Since Lockheed Martin froze its pension plan in 2020, no future earnings or years of service will increase pension benefits. This freeze shifts the emphasis towards maximizing contributions to 401(k) plans, where Lockheed Martin increased its maximum contribution to 10% for non-represented employees. Employees planning for imminent retirement should recalibrate their financial planning to account for this change, prioritizing 401(k) growth and other retirement savings vehicles to compensate for the pension freeze.
What options does Lockheed Martin provide for employees regarding healthcare insurance as they approach retirement age? How do these options compare in terms of coverage and cost, particularly for those who will transition to Medicare upon reaching age 65?
Healthcare Options Near Retirement: As Lockheed Martin employees approach retirement, they can choose from several health insurance options. Before Medicare eligibility, they may use COBRA, a Lockheed Martin retiree plan, or the ACA's private marketplace. Post-65, they transition to Medicare, with the possibility of additional coverage through Medicare Advantage or Medigap plans. Lockheed Martin supports this transition with a Health Reimbursement Arrangement, providing an annual credit to help cover medical expenses.
Understanding the complex nature of Lockheed Martin's pension and retirement benefits, what resources are available to employees to help them navigate their choices regarding pension claiming options? In what ways can the insights from these resources aid employees in making informed decisions about their financial future?
Resources for Navigating Retirement Benefits: Lockheed Martin employees have access to resources like the LM Employee Service Center intranet, which includes robust tools such as a pension estimator. This tool allows for modeling different retirement scenarios and understanding the impacts of various pension claiming options. Additional support is provided through HR consultations and detailed plan descriptions to ensure employees make informed decisions about their retirement strategies.
For employees with varying years of service at Lockheed Martin, how can their employment history impact their pension benefits? What strategies should individuals explore to maximize their benefits given the different legacy systems that might influence their retirement payout?
Impact of Employment History on Pension Benefits: The length and nature of an employee’s service at Lockheed Martin significantly influence pension calculations. Historical changes in pension policies, particularly the transition points of the pension freeze, play critical roles in determining the final pension benefits. Employees must consider their entire career timeline, including any represented or non-represented periods, to understand and maximize their eligible pension benefits fully.
How does the Lockheed Martin retirement plan ensure that benefits are preserved for spouses or dependents after an employee's passing? How do different claiming options affect the long-term financial security of the employee's family post-retirement?
Benefit Preservation for Dependents: Lockheed Martin's pension plan includes options that consider the welfare of spouses or dependents after an employee's passing. Options like "Joint and Survivor" ensure ongoing benefits for surviving spouses, while choices like "Life with X-Year guarantee" provide continued payments for a defined period after the employee’s death. Understanding these options helps secure long-term financial stability for beneficiaries.
What steps can Lockheed Martin employees take to prepare financially for retirement, especially if they have outstanding loans or financial obligations? How crucial is it for employees to understand the conditions under which these loans must be settled before retirement?
Financial Preparation for Retirement: Employees approaching retirement should focus on clearing any outstanding loans and maximizing their contributions to tax-advantaged accounts like 401(k)s and Health Savings Accounts (HSAs). These steps are crucial for ensuring a smooth financial transition to retirement, minimizing potential tax impacts, and maximizing available retirement income streams.
With the evolution of Lockheed Martin's retirement initiatives, particularly the shift toward higher 401(k) contributions, how should employees balance contributions to their 401(k) with their overall retirement savings strategy? What factors should they consider in optimizing their investment choices post-retirement?
Balancing 401(k) Contributions: With the pension freeze, Lockheed Martin employees should increasingly rely on 401(k) plans, where the company has increased its contribution cap. Employees must balance these contributions with other savings strategies and consider their investment choices carefully to ensure a robust retirement fund that can support their post-retirement life.
How does Lockheed Martin's approach to retirement planning include the management of health savings accounts (HSAs) for retirees? What are the tax advantages of HSAs, and how can employees effectively utilize this resource when planning for healthcare expenses in retirement?
Management of HSAs for Retirees: Lockheed Martin encourages maximizing contributions to Health Savings Accounts (HSAs), which offer significant tax advantages. These accounts not only provide funds for current medical expenses but can also be used tax-free for healthcare costs in retirement, making them a critical component of retirement health expense planning.
What is the best way for employees to contact Lockheed Martin regarding specifics or questions about their retirement benefits? What channels of communication are available, and how can they access the most current and relevant information regarding their retirement planning? These questions aim to encourage thoughtful consideration and discussion about retirement planning within Lockheed Martin, addressing various aspects of the company's benefits while promoting engagement with internal resources.
Contacting Lockheed Martin for Retirement Benefit Queries: Employees should direct specific inquiries about their retirement benefits to Lockheed Martin's HR department or consult the benefits Summary Plan Descriptions available through company resources. These channels ensure employees receive accurate and comprehensive information tailored to their individual circumstances.
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