New Update: Healthcare Costs Increasing by Over 60% in Some States. Will you be impacted?

Planning for a Century: How USG Corporation Employees Can Navigate the Financial Landscape of a Longer Retirement

Jordi Visser monitors his heart rate daily. In addition, he monitors his breathing, tracks the quality of his sleep, and consumes a diet rich in fruits and vegetables. Visser, 56 years old, does not do this due to poor health. In contrast, he is focused on the future. His objective is a prosperous and active retirement spanning decades. In 2011, 54% of retirees believed they would not live as long as the average person of their age and gender. Only 31% reported a longer life expectancy than the population average.

According to a PlanAdviser article, 'The Society of Actuaries found that approximately 43% of retirees underestimate their own life expectancy by at least five years,' says Kate Beattie, senior retirement income strategist with Capital Group in Los Angeles. Everyone seems to be aware that Americans are living longer than ever before, except for investors.

'We are at the nexus of technology and longevity,' says Visser for a Barron’s article. USG Corporation employees must note how the chief investment officer at Weiss Multi-Strategy Advisers also believes that in the coming decade, advances in medicine and technology may allow Americans to not only live longer but also healthier lives, as published in the Barron's article. Tom Brady is a prime example of something that was deemed impossible, according to Visser.

Brady, who recently announced his retirement from football at the age of 45, is, of course, in a class by himself. But Visser's point is unmistakable: the rest of us mere mortals may need to reevaluate our assumptions about what is achievable in our senior years and our investment strategy. USG Corporation employees looking to retire should understand how a retirement that could last decades requires a portfolio designed for the long haul. Similarly, controlling your expenses while still enjoying your retirement may require a delicate balance.

Maintaining Stocks

Soon-to-be USG Corporation retirees may benefit from considering an old rule of thumb for retirement investing: subtract your age from 100 to determine the proportion of your portfolio that should be invested in stocks. A 70-year-old should allocate 30% of his or her portfolio to stocks, according to this rule.

When a healthy adult has a chance of living to 100, this rule seems hopelessly obsolete. This 70-year-old must plan for the next 30 years, which necessitates remaining invested in equities to generate the growth necessary to combat inflation.

According to a Barron’s article, Pete Bush, an advisor at Cetera Financial Group and co-founder of Horizon Financial Group in Baton Rouge, states that equities are the long-term engine your portfolio requires.

“People typically believe, oh, I'm getting close to retirement. I should play it safe. They are contemplating retirement, not retirement itself,” he says.

USG Corporation employees should consider how some 70-year-olds are actually as healthy as 50-year-olds. In light of this, Visser suggests that investors consider their biological age, which is essentially a measure of your health that may be vastly different from your chronological age. Scientists are developing accurate methods for determining biological age. Some of the techniques, such as analyzing saliva and blood samples, may appear fantastical. But Visser says there is a fundamental takeaway for investors: 'Your health should influence how you view your portfolio.'

For USG Corporationemployees, identifying the optimal asset allocation is a piece of the puzzle. Bush advises investors to strike a balance between growth and value, pointing out that growth stocks have performed well over the past decade but poorly over the past year. In the coming years, international stocks may also outperform U.S. stocks, in stark contrast to the performance of the sector over the past decade. This is partially because European and Asian stocks are typically less expensive than American stocks. The asset manager Vanguard anticipates higher 10-year annualized returns for developed markets outside the United States, between 7.2% and 9.2%, than for U.S. markets, between 4.7% and 6.2%.

According to a Barron's article, Jeremy Altfeder, a financial advisor at Captrust, claims bonds can play an important role for income and security, especially now that interest rates are higher. 'Consider a client who spends $100,000 per year. Therefore, we require a year's supply of necessities. We could reserve $100,000 in Treasury bills.”

Altfeder mentions how investors can feel more at ease when they have sufficient funds set aside, sometimes as much as seven years' worth depending on the client. 'Laddering out Treasuries and other instruments is highly predictable,' he says. If you hold the bonds until maturity, you are aware of their yield.

Numerous financial advisors also recommend complex strategies involving alternative investments, trusts, and estate planning, depending on the individual's wealth, tax situation, desire to leave an inheritance to heirs or charity, and risk tolerance. The objective is to preserve this wealth, sometimes into the next generation.

A New Perspective on Work-Life Balance

USG Corporation employees should consider how the possibility of living a longer, healthier life generates additional incentives to work longer and delay filing for Social Security. This will ensure a larger monthly benefit as you claim at a later age. These actions can increase your savings and provide your portfolio with additional time to grow before you begin withdrawing funds.

There are two additional ways for investors who need to save more to advance their retirement savings. First, the updated contribution limits established by the Internal Revenue Service permit investors to contribute up to $22,500 to their 401(k), 403(b), and other retirement plans in 2023, an increase from the previous limit of $20,500. People over the age of 50 can save up to an additional $7,500. New legislation is phasing in an increase in the age for required minimum distributions, or RMDs, from 72 to 75, which will benefit investors who are planning for a long retirement.

Articles you may find interesting:

USG Corporation employees should keep in mind how they are not required to remain in their current position or even work full-time. Chip Munn, advisor and chief executive officer of Signature Wealth Strategies in Florence, South Carolina, has assisted clients in reorganizing their work so they are not in a hurry to retire. According to a Barron’s article, he claims 'Older workers have a great deal of value and leverage.' However, there may be no formal programs at your company to accommodate your desired schedule, so you may need to approach your employer and say, 'Hey, I don't want to retire, but I'd like to work part time.'

Additionally, there are benefits to being active. 'Those who are happiest and healthiest work longer but less,' he says.

Even for those who believe they have sufficient savings, early retirement can be riskier than you might expect. USG Corporation employees should consider the story of Cyndi Hutchins, a Bank of America employee who witnessed this firsthand. Her grandmother retired at the age of 55 after a 41-year career.

'At that point, I began to think differently about retirement,' says Hutchins, director of financial gerontology in the retirement research and insights group of a bank. 'We anticipated a 10- to 15-year retirement. There were numerous factors that we had overlooked. She had a pension, but it was a small pension, and it was difficult to make it last for 41 years. Her family was ultimately required to contribute to her grandmother's living costs.'

From 1960 to 2015, life expectancy in the United States rose by nearly 10 years, from 69.7 to 79.4 years. According to a report from the 2020 Census Bureau, the average life expectancy is projected to increase by another 6.1 years between 2016 and 2060, reaching a record high of 85.6 years. USG Corporation employees should also note how Americans are living longer than ever before. Almost one-fifth of the U.S. population is over 65 years old.

As a result of rising inflation and last year's weak stock and bond markets, it is not surprising that more people fear running out of money in old age. This includes individuals with substantial savings. According to a 2022 survey of high-net-worth investors conducted by Natixis Investment Managers, more than a third of millionaires believe that achieving a secure retirement 'will require a miracle.'

USG Corporation employees should recognize how this anxiety is driving a surge in the demand for annuities, which are insurance contracts that guarantee a lifetime income. Frank Paré, founder of PF Wealth Management, has contemplated including a single premium immediate annuity, or SPIA, in the retirement plans of some clients. With an SPIA, an investor pays a lump sum to an insurance company, which then provides a lifetime income stream to the annuity owner. The payout of the annuity depends on several factors, including the age and gender of the owner.

However, there are a few exceptions, says Paré. First, fees may be considerable. Second, you must maintain a portion of your retirement funds in stocks, bonds, and other assets. 'You do not want to leave yourself without sufficient liquidity outside the SPIA,' Paré says.

Another concern with annuities is inflation. 'Your purchasing power will be in jeopardy if you don't have an inflation rider and inflation accelerates like it did last year,' Paré says.

For USG Corporation employees considering an annuity, keep in mind that it's just one tool among many. 'I don't believe in silver bullets,' Paré says.

Expense Management

In addition to maximizing income, retirees of all wealth levels must monitor their budget and avoid major new expenses that require costly maintenance, such as a vacation home or new boat, as they enter retirement.

USG Corporation employees should note how healthcare is the expense that retirees underestimate the most, particularly for healthy seniors who are fortunate enough to live a long life. According to a 2022 report by Fidelity Investments, a 65-year-old couple can anticipate spending an average of $315,000 on medical expenses during retirement. According to Fidelity, one of the nation's largest 401(k) providers, this estimate increased by 5% from 2021 and has nearly doubled since 2002, when it was $160,000.

In the first two decades of retirement, a healthy lifestyle can help keep costs down, but there are some factors that are beyond our control. Consider investing in a health savings account, which provides advantageous tax benefits, to help prepare for future medical expenses. 'If you can contribute to an HSA without using the funds to pay for current healthcare expenses, it's a fantastic way to save for long-term care,' says Hutchins of Bank of America.

For USG Corporation employees, where you choose to live in retirement will have a significant impact on your expenses, so make this decision as soon as possible. Some Americans choose to relocate to states with warmer climates and cheaper living expenses. Consider whether your new community will be able to accommodate your future medical needs, in addition to your hobbies.

In retirement, the majority of Americans do not move or do not move very far. According to a 2021 AARP survey, approximately 75 percent of adults aged 50 and older intend to remain in their current residence for the foreseeable future. 'If you're healthy and active, it's simple to remain in your current home,' says Hutchins in the Barron’s article. 'As you age, consider whether your home is age-friendly.' She says that if you do not have a bathroom on the first floor, you should include the cost of this renovation in your financial plan.

The Key to Contentment

Perhaps most importantly, advisors and healthcare professionals agree that maintaining an active social life in retirement is the key to happiness. Obtain a hobby if you do not have one already. Donate time to a charity. Share a meal with friends.

For USG Corporation employees, this recommendation may sound trite. Despite that, it has significant health benefits. The Harvard Study of Adult Development, which has been following a group of adults and their descendants for more than eighty-five years, has discovered that close personal connections are a key factor in both longevity and physical and mental health.

Isolation and loneliness, according to Bank of America's Hutchins, accelerate cognitive decline symptoms the quickest. 'You must continue to interact with others and ensure that your physical and emotional needs are met.'

Joseph Coughlin, director of the MIT AgeLab, recommends considering your lunch companions when planning for retirement. This determines not only the quality of your investment portfolio, but also the quality of your social portfolio. Do you have friends? If you retire and move, will you be able to locate them? 'It takes time to develop a strong friendship,' he says.

Ultimately, if you are going to live to be 100, you want to have close personal relationships and enough money to be worry-free.

How does the retirement plan structure at USG Corporation impact both final average earnings participants and cash balance participants, especially regarding their eligibility and benefits accrued over time? In what ways does the differentiation between these two categories influence the retirement outcomes for employees of USG Corporation?

Retirement Plan Structure: USG Corporation's retirement plan differentiates between Final Average Earnings Participants and Cash Balance Participants. Final Average Earnings participants, who joined before January 1, 2011, accrue benefits based on their final average earnings and years of service, which can result in higher benefits for longer-serving employees. Cash Balance participants, who joined after January 1, 2011, have their benefits calculated based on a cash balance account, which grows with contributions and interest credits. These differences affect retirement outcomes, as Final Average Earnings participants may see higher pension payments if they have longer service or higher wages, while Cash Balance participants have more predictable but potentially lower benefits based on their account balance(USG Corporation_Retirem…).

USG Corporation's Retirement Plan allows for different age-specific rules regarding early retirement. How do the "Rule of 90" and "Rule of 82" affect the financial planning of employees considering an early retirement option, and what should they consider regarding their long-term financial security?

Rule of 90 and Rule of 82: The "Rule of 90" allows employees to retire early without a reduction in benefits if their age plus years of service total 90, provided they retire at or after age 62. The "Rule of 82" permits early retirement with reduced benefits for those whose age and years of service total 82. Employees planning early retirement must consider these rules as they directly affect the amount of benefits they receive, making it important to assess how long-term financial security will be impacted, especially if they retire before age 62(USG Corporation_Retirem…).

Could you elaborate on the process through which employees at USG Corporation can change their beneficiaries within the retirement plan? What steps need to be taken, and what are the implications of these changes on the benefits received upon the participant's death?

Changing Beneficiaries: To change beneficiaries, USG Corporation employees must contact Your Benefits Resources™, where they can designate a primary and contingent beneficiary. If married, the spouse must provide notarized consent to name a different primary beneficiary. The process involves completing a form, and any changes affect who receives benefits upon the participant's death. Failing to update the beneficiary could result in benefits being paid to unintended individuals(USG Corporation_Retirem…).

As part of the retirement process at USG Corporation, how are pensionable earnings calculated? What factors are included in this determination, and how might they vary among different employees based on their roles within the organization?

Pensionable Earnings Calculation: Pensionable earnings at USG Corporation include regular pay, shift differentials, and bonuses but exclude items like nonqualified deferred compensation, severance, and stock awards. These earnings are used to calculate benefits based on formulas that take into account an employee’s service years and earnings over the 36 highest consecutive months of the last 15 years of participation(USG Corporation_Retirem…).

How does the automatic enrollment in the USG Corporation Retirement Plan work, and what options do employees have if they initially chose not to participate? What implications might this have for their retirement savings strategy?

Automatic Enrollment and Opting In: Employees at USG Corporation are automatically enrolled in the retirement plan unless they choose to opt out. If employees decide not to participate initially, they can enroll later by contacting Your Benefits Resources™. Failure to participate from the start could result in lower retirement savings due to fewer years of contributions(USG Corporation_Retirem…).

In the context of USG Corporation, what are the potential tax consequences for employees withdrawing their retirement benefits, especially regarding the mandatory withholdings? How might employees effectively manage these tax liabilities when planning for retirement?

Tax Consequences of Withdrawals: Employees withdrawing their retirement benefits from USG Corporation will face mandatory federal income tax withholdings, typically 20% for lump sum distributions, unless the distribution is rolled over into an IRA. Employees must plan for these taxes when withdrawing to avoid unexpected liabilities and ensure they maximize their after-tax retirement income(USG Corporation_Retirem…).

How do employees at USG Corporation access the necessary documents related to their retirement benefits, and what is the process for obtaining copies of these documents if needed? What are the responsibilities of the Plan Administrator in this process?

Accessing Retirement Documents: Employees can access documents related to their retirement benefits through Your Benefits Resources™ online or via phone. If additional copies are needed, employees can request them from the Plan Administrator for a small fee. The Plan Administrator oversees ensuring these documents are provided to participants as required by ERISA(USG Corporation_Retirem…).

What unique provisions exist for USG Corporation employees who experience a break in service? How do these provisions impact their accumulated benefit service and overall benefits upon reemployment?

Break in Service Provisions: USG Corporation allows employees who experience a break in service to retain their accumulated benefits if they are reemployed within one year. If reemployed after one year, their previous service may not count toward future benefits unless they were vested prior to termination. This can affect the total benefits an employee accrues if they leave and later return(USG Corporation_Retirem…).

What options do employees of USG Corporation have for managing their benefits if they return to work after retirement? How does this affect their pension benefits and the overall strategy for maximizing retirement income?

Returning to Work After Retirement: Employees returning to work after retirement at USG Corporation will have their pension payments suspended and recalculated based on additional years of service. This recalculation takes into account prior payments, meaning employees should consider the impact of returning to work on their long-term pension strategy(USG Corporation_Retirem…)(USG Corporation_Retirem…).

How can employees of USG Corporation contact their Benefits Resourcesâ„¢ for more information on their retirement plan options? Are there specific channels preferred for different types of inquiries, and what resources are available to assist them?

Contacting Benefits Resources™: Employees can contact Your Benefits Resources™ via the web or a toll-free number to inquire about retirement plan options. Different inquiries, such as changes to beneficiaries or requesting benefit estimates, can be handled through these channels. Resources such as detailed benefit estimates are available to help employees plan for retirement(USG Corporation_Retirem…).