How Kontoor Brands Employees Can Navigate the Impact of Inflation on Their Pension Choices

Healthcare Provider Update: Healthcare Provider for Kontoor Brands: Kontoor Brands does not publicly list a specific healthcare provider as it may depend on various factors including the employees' locations and specific plan options. However, companies of this size typically partner with major national insurance providers such as Aetna, Blue Cross Blue Shield, Cigna, or UnitedHealthcare, which offer a range of employer-sponsored health plans. Potential Healthcare Cost Increases in 2026: As Kontoor Brands navigates the healthcare landscape, it faces potential healthcare cost increases projected at 8.5% in 2026. This surge is attributed to several factors, including rising medical expenses, heightened claims activity, and shifts in cost-sharing strategies being implemented by employers. Furthermore, the impending expiration of enhanced ACA premium subsidies could exacerbate costs for many employees, leading to a significant 75% increase in out-of-pocket premiums for those reliant on marketplace insurance. This scenario highlights the urgent need for companies to reevaluate their health benefits strategies in preparation for the financial implications of these rising costs. Click here to learn more

Rising interest rates also play a large role in the decision of whether Kontoor Brands employees should take their pension as an annuity or a one-time lump sum payment. As inflation continues to rise, the Fed has responded by gradually increasing interest rates, which decreases the value of future pension payments as well as the lump sum value. This is because the future pension payments are worth less today as the dollar devalues and the higher investment return drives the total present value of the payments down. To show this mathematically, imagine an individual with pension payments of $48,000 annually ($4,000 monthly), a 20-year time horizon, and a 5% interest rate

 

The present value of all of these payments is worth $598,186, which should roughly be the value of the lump sum payment. With a single percentage increase in interest rates from 5% to 6%, the new present value of the payments is reduced to $550,556, just under an 8% decrease over the old present value. Evidently, rising interest rates negatively affect the present value of future payments so given Federal Reserve Chairman Jerome Powell’s mention of 2-3 more interest rate hikes this year, the decision of whether to take a lump sum now or later could have a big impact on your retirement from Kontoor Brands.

 

'Taking your pension as a lump sum and knowing how to manage your funds to last for your retirement requires hard work.'

 

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In practicality, taking your pension as a lump sum and knowing how to manage your funds to last for your years of retirement from Kontoor Brands requires hard work. Figuring out how much to withdraw, when to withdraw, and how much you can spend each year are just a few of the many decisions that are needed to be thought out in order to maximize the benefit of taking your pension as a lump sum. If you don’t take the time to think out these decisions, you could find yourself running out of funds during your years of retirement from Kontoor Brands.

For our Kontoor Brands clients who would prefer the safety of a guaranteed stream of income for the rest of their lives, taking the annuity over the lump sum may be the better option for you. With taking your pension as an annuity though, there is no certainty that the company paying your pension will remain in business for the duration of your retirement so you run the risk of receiving smaller pension payments from the PBGC (Pension Benefit Guaranty Corporation) in the event that Kontoor Brands goes under. Both options have their pros and cons and in the end up to you to decide which suits your personal financial situation and lifestyle.

 

If you are interested in more information about this topic, view our e-book here:  https://retirekit.theretirementgroup.com/effects-of-inflation-e-brochure