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For Penske Automotive Group Employees: Understanding the Impact of a Strong Dollar on Your Retirement Planning

Healthcare Provider Update: Healthcare Provider for Penske Automotive Group Penske Automotive Group employees typically receive healthcare coverage through a variety of providers depending on their specific plan selections, with major national insurers like Kaiser Permanente, UnitedHealthcare, and Anthem BlueCross BlueShield being among the options available. The exact provider often varies by location and the specific plan chosen during open enrollment. Healthcare Cost Projections for 2026 The healthcare landscape is set for significant upheaval in 2026, with potential premium hikes expected to exceed 75% for many Affordable Care Act (ACA) marketplace enrollees, largely due to the expiration of enhanced federal subsidies. Penske Automotive Group employees, particularly those nearing retirement, may face steep increases in their healthcare costs as insurers respond to rising medical expenses and price inflation. With the ACA marketplace seeing some state requests for premium increases reaching as high as 66%, careful financial planning will be essential for employees heading into another challenging year in healthcare affordability. Click here to learn more

If you are employed at Penske Automotive Group, it is imperative to consider exchange rates as an opportunity to capitalize and better plan your finances. In late September 2022, the U.S. dollar hit a 20-year high in an index that measures its value against six major currencies: the euro, the Japanese yen, the British pound, the Canadian dollar, the Swedish krona, and the Swiss franc. At the same time, a broader inflation-adjusted index that captures a basket of 26 foreign currencies reached its highest level since 1985. Both indexes eased slightly but remained near their highs in October. ^1–2

Intuitively, it might seem that a strong dollar is good for the U.S. economy, but the effects are mixed in the context of other domestic and global pressures.

World Standard
Those employed by Penske Automotive Group should be aware that the U.S. dollar is the world's reserve currency. About 40% of global financial transactions are executed in dollars, with or without U.S. involvement. ³ As such, foreign governments, global financial institutions, and multinational companies all hold dollars, providing a level of demand regardless of other forces.

Demand for the dollar tends to increase during difficult times as investors seek stability and security. Despite high inflation and recession predictions, the U.S. economy remains the strongest in the world. ⁴ Other countries are battling inflation, too, and the strong dollar is making their battles more difficult. The United States recovered more quickly from the pandemic recession, putting it in a better position to weather inflationary pressures. This information may be useful for those working for Penske Automotive Group as it may help you make decisions that better protect your assets.

Employees of Penske Automotive Group should keep in mind how the Federal Reserve's aggressive policy to combat inflation by raising interest rates has driven demand for the dollar even higher because of the appealing rates on dollar-denominated assets such as U.S. Treasury securities. Some other central banks have begun to raise rates as well — to fight inflation and offer better yields on their own securities. But the strength of the U.S. economy allows the Fed to push rates higher and faster, which is likely to maintain the dollar's advantage for some time.

Exports and Imports
The strong dollar makes imported goods cheaper and exported goods more expensive. For those working for Penske Automotive Group, cheaper imports are generally good for consumers and for companies that use foreign-manufactured supplies, but they can undercut domestic sales by U.S. producers.

At the same time, the strong dollar effectively raises prices for goods that U.S. companies sell in foreign markets, making it more difficult to compete, and reducing the value of foreign purchases. Employees at Penske Automotive Group can take a U.S. company that sells 10,000 euros worth of goods as an example. The foreign buyer would receive less revenue when a euro buys fewer dollars. Some experts are concerned that the strong dollar will dampen the post-pandemic rebound in U.S. manufacturing. ⁵ More broadly, the ballooning trade deficit cuts into U.S. gross domestic product (GDP), which includes imports as a negative input and exports as a positive input.

Overseas Exposure
Generally, large multinational companies have the most exposure to risk from currency imbalances, and the stock market has shown signs of a shift from large companies — which have dominated the market since before the pandemic — to smaller companies that may be more nimble and less dependent on overseas sales. The S&P SmallCap 600 index has outperformed the S&P 500 index through late October; if the trend continues through the end of the year, it would be the first time since 2016 that small caps have eclipsed large caps. ⁶ The S&P MidCap 400 index has done even better. Despite that, those working for Penske Automotive Group must also account for how in the current bear market, better performance means lower losses; all three indexes have had double-digit losses through October 2022. ⁷

Global Pain
A weak currency can be a boon for a country by making its exports more competitive. But with the world economy weakening, other countries are not reaping those benefits, while paying more on debt and imported essentials such as food and fuel that are traded in dollars. Those working for Penske Automotive Group should consider how the Fed is focused on domestic concerns, but it is effectively exporting inflation while trying to control it at home, and global economic pain could ultimately spread to the U.S. economy. ⁸

Slowing the Dollar
In the near term, the Fed's aggressive rate hikes may reduce domestic demand for foreign goods, reducing the trade deficit and weakening the dollar. The advance Q3 2022 GDP estimate showed the trade gap closing, but it's unclear if the trend will last. ⁹

In the longer term, as inflation eases in the United States, the Fed will likely take its foot off the gas pedal and ultimately bring rates down. Penske Automotive Group employees should understand how this would allow other central banks to catch up if they choose to do so, and would make foreign currencies and securities more appealing. Lower oil prices (denominated in dollars) and/or any reduction in world tensions — such as a slowdown in the Russia-Ukraine war — might also help reduce demand for dollars.

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The dynamics of these factors are complex, and it may take time for any of them to unfold. In the meantime, the strong dollar is a sign of U.S. economic strength, and it would not be wise to place too much emphasis on it for long-term investment decisions. However, this could be a great time for an overseas vacation.

U.S. Treasury securities are guaranteed by the federal government as to the timely payment of principal and interest. The principal value of Treasury securities fluctuates with market conditions. If not held to maturity, they could be worth more or less than the original amount paid.

Penske Automotive Group employees should be aware of how all investments are subject to market volatility and loss of principal. Investing internationally carries additional risks such as differences in financial reporting, currency exchange risk, and economic and political risk unique to the specific country. This may result in greater share price volatility. Shares, when sold, may be worth more or less than their original cost. The value of a foreign investment, measured in U.S. dollars, could decrease because of unfavorable changes in currency exchange rates.

The S&P 500 index is an unmanaged group of securities that is considered to be representative of the U.S. stock market in general. The performance of an unmanaged index is not indicative of the performance of any specific investment. Individuals cannot invest directly in an index. Past performance is not a guarantee of future results. Actual results will vary.

1) MarketWatch, October 19, 2022 (U.S. Dollar index)
2) Federal Reserve, 2022 (Real Broad Dollar index)
3, 8) The New York Times, September 26, 2022
4, 6) The Wall Street Journal, October 17, 2022
5) The Wall Street Journal, October 9, 2022
7) S&P Dow Jones Indices, 2022
9) U.S. Bureau of Economic Analysis, 2022

What are the specific eligibility criteria for participation in the Penske Cash Balance Plan, and how can employees of Penske ensure they meet these requirements as they work towards retirement? Furthermore, how does the plan address the transition from being a participant to receiving benefits once the eligibility criteria are met?

Eligibility Criteria: Employees of Penske automatically become participants in the Penske Cash Balance Plan after completing a year in which they work 1,000 or more hours, as long as they are in an eligible group. To ensure they meet the eligibility requirements, employees should confirm they meet these conditions annually and consult the Summary Plan Description for details(Penske Cash Balance Pla…).

In what ways does the Penske Cash Balance Plan differentiate itself from traditional defined contribution plans, and how can employees of Penske navigate the choices available to them, including lump sum distributions and annuities? Additionally, what implications do these options have for long-term financial planning for retirement?

Plan Differences: The Penske Cash Balance Plan is a defined benefit plan, offering benefits similar to a defined contribution plan but providing additional options like lump-sum distributions and annuities. Employees should carefully evaluate these options, as lump sums provide immediate access to funds, while annuities ensure steady long-term payments. Both choices impact long-term financial stability(Penske Cash Balance Pla…).

How does the concept of vesting apply to the Penske Cash Balance Plan, and what are the steps that employees of Penske should take to ensure they understand their rights to these benefits prior to retirement? Furthermore, what resources are available to help employees fully grasp the nuances of vesting in relation to their individual situations?

Vesting: Vesting refers to an employee's right to receive benefits even if they leave Penske before retirement. Employees must meet specific requirements to become vested, and they can consult the Brief Plan Summary to fully understand their rights(Penske Cash Balance Pla…).

What mechanisms does the Penske Cash Balance Plan have in place to ensure that employees can trust they will receive their benefits? How does this assurance interact with projected benefits and calculations provided through DB Online, and what should employees of Penske do if they have concerns about the accuracy of their benefit estimates?

Benefit Assurance: Benefits from the Penske Cash Balance Plan are paid from a trust fund established by the company and insured by the Pension Benefit Guaranty Corporation (PBGC). Employees can rely on the trust fund and the PBGC for benefit security, and should contact the Customer Contact Center if they have concerns about benefit estimates(Penske Cash Balance Pla…).

How are pension benefits from the Penske Cash Balance Plan typically taxed, and what strategies can employees of Penske implement to manage tax implications effectively during their retirement planning? Moreover, what are the possible ways to minimize taxes on lump sum distributions compared to annuity payments?

Taxation: Benefits from the Penske Cash Balance Plan are generally taxed as ordinary income. Employees can manage taxes effectively by rolling over lump-sum distributions to an IRA to defer tax payments. Careful consideration of lump sums versus annuities can minimize taxes over time(Penske Cash Balance Pla…).

What are the various forms of payment options available under the Penske Cash Balance Plan, and how should employees of Penske evaluate their choices regarding life annuities versus lump sum payments? Additionally, how do these payment options affect short-term and long-term financial stability in retirement?

Payment Options: Employees can choose between lump-sum payments and various types of annuities. Evaluating these options is essential for balancing short-term and long-term financial goals, as lump sums offer immediate liquidity, while annuities provide lifetime payments(Penske Cash Balance Pla…).

In the event of a divorce or separation, what specific procedures must employees of Penske follow to protect their pension benefits, and how does a Qualified Domestic Relations Order (QDRO) impact these benefits? What guidance does the Penske Cash Balance Plan provide to ensure that the division of assets is conducted appropriately?

Divorce and QDRO: In the event of a divorce, employees must obtain a Qualified Domestic Relations Order (QDRO) to divide their pension benefits. This court order ensures that the division is legally recognized, and employees should refer to plan procedures for guidance(Penske Cash Balance Pla…).

How can employees of Penske prepare for the multitude of decisions they need to make as they approach retirement, and what resources does the company offer to assist in this decision-making process? Additionally, how do the various teams and services provided by Penske streamline the retirement transition for its employees?

Retirement Preparation: Penske offers specialized retirement counseling and customer support services to help employees navigate retirement decisions. These resources can assist employees in making informed choices and smooth their transition into retirement(Penske Cash Balance Pla…).

What are the major types of annuities offered by the Penske Cash Balance Plan, and how should employees of Penske assess the suitability of these annuity options for their personal retirement needs? What does the company recommend in terms of beneficiaries and their implications for future payments from the plan?

Annuity Options: Penske offers various annuities, including life annuities and joint survivor annuities. Employees should assess these based on their personal needs and consult the company for recommendations regarding beneficiaries to ensure future payments are secure(Penske Cash Balance Pla…).

How can employees of Penske contact the company to inquire further about the Penske Cash Balance Plan and its intricacies? What methods of communication are available, and what information should employees gather beforehand to make their inquiries as productive as possible?

Contact Information: Employees can contact the Penske Cash Balance Plan administrators by calling 1-800-755-5801 for further inquiries. It's advisable to have all relevant documents and questions prepared in advance to make the discussion more productive(Penske Cash Balance Pla…).