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Healthcare Provider Update: FedEx's healthcare provider is primarily Cigna, which partners with the company to offer health insurance solutions to its employees through a range of plans, including High Deductible Health Plans paired with Health Savings Accounts. In 2026, FedEx employees may face significant healthcare cost increases, mirroring a broader trend across the nation. With the expected elimination of enhanced ACA premium subsidies, some workers could see their out-of-pocket premium costs surge by over 75%. Coupled with the anticipated double-digit rate hikes from major insurers and rising medical expenses, the financial burden on employees is poised to escalate sharply, potentially impacting their overall healthcare affordability. Click here to learn more
For FedEx employees nearing Retirement, experts like Michael Corgiat of The Retirement Group can help ensure major financial decisions like using a 401(k) to buy a home are made with a long-term strategy in mind - meeting immediate needs while preserving your wealth over time.
'Brent Wolf of The Retirement Group cautions FedEx retirees against using large Retirement accounts for home purchases and suggests renting or downsizing may provide the flexibility to protect future goals.'
In this article:
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1. Financial impact of 401(k) funds used to buy a home in retirement.
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2. Pros & cons of buying versus renting a home in retirement.
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3. Estate planning and liquidity for FedEx retirees.
And at the threshold of FedEx retirement, the question of how to spend your money to live comfortably becomes more important than ever. One gentleman nearing retirement may move to Georgia. A man with U.S. 350,000 in savings, U.S. 500,000 in a 401(k), and monthly Social Security payments of U.S. 3,000 weighs his options.
He plans to use U.S. 350,000 from savings and U.S. 100,000 from his 401(k) to buy a U.S. 450,000 condominium in Georgia. He also considers pulling another U.S. 20,000 from his 401(k) as an emergency fund. This will keep U.S. 380,000 invested and would yield about U.S. 15,000 a year at a 4% annual withdrawal rate. With Social Security income, this is expected to cover his living expenses, vacations, and major purchases.
The question is whether investing and renting is more profitable than purchasing a property in whole.
Some say the appeal of homeownership stems from avoiding rising rents. But the choice is neither black nor white. If you take a quick look, you pay about U.S. 1,000 a month for taxes and fees to buy the condominium, while renting one would run you about U.S. 2,500.
For estate planning purposes, homeownership is a consideration for FedEx retirees. A report from the National Association of Home Builders for June 2021 said homeownership can boost a person's net worth and homes account for nearly half of the assets of U.S. households over 65. So buying a property might be a place to live as well as a tool for legacy planning and wealth transfer to the next generation.
FedEx employees nearing retirement can get insight from certified financial planners (CFPs). As a Boston CFP, Sandra Gilpatrick estimates that the proposed investment, the condo, would return about 4% on savings. An annual return of 7% would be more likely if the gentleman kept his asset allocation at 60% fixed income and 40% equities. Gilpatrick also discusses unanticipated costs of homeownership. Principal worries are escalating housing association fees, rising property taxes, special assessments, and real estate transaction costs. And using that 401(k) could put the person in a higher tax bracket—potentially triggering the Medicare surcharge, the IRMAA.
Another Kansas CFP, Jamie Bosse, agrees and stresses the tax implications. But that U.S. 120,000 withdrawn from a 401(k) is not the whole amount after tax deductions. At the combined 27% federal and state tax rate, the net is about U.S. 87,600.
Some advisors suggest renting at first when moving to avoid a major financial commitment. By purchasing the condo, the gentleman has also put more than half of his assets at risk, making the gentleman less liquidity-based.
A macroeconomic lens adds additional caution against rash real estate investments. Notably, pre-pandemic home prices have jumped almost 50 percent despite rising mortgage rates in the United States. The housing affordability today is comparable to that of 2007, before the worst real estate downturn since the Great Depression, the Federal Reserve Bank of Atlanta said. There is danger nationwide and locally in Atlanta.
Otherwise, the funds would have stable returns when invested properly. Now, ten-year U.S. Treasury bonds yield 4.3%. Short-term municipal bonds like the iShares Short-Term National Muni Bond pay a 3% yield that is tax-free and low in risk. Such long-term municipal bonds have an effective tax-free yield of 3.4%, while the Schwab U.S. REIT ETF pays 4%.
Financial situations of FedEx employees vary widely. But renting seems prudent now because it gives you liquidity and various investment options.
You could use your 401(k) to buy a home in retirement like a chess master considering an endgame move. As with either case, one must anticipate the consequences of a quick decision down the road. Just as sacrificing a powerful chess piece to temporarily take over the board might risk a checkmate in the future, spending FedEx retirement funds to buy a home might be comfortable now but risky in the long haul. Before making a definitive decision, consider all angles, threats, and the changing environment.
Added Fact:
A study by the American Association of Retired Persons (AARP) for 2023 concluded that aging homeowners are increasingly downsizing their homes during retirement. This unlocks the equity locked up in their larger homes and reduces ongoing housing and maintenance costs. But some FedEx workers approaching retirement find downsizing a smart financial move that frees cash for other retirement goals without tapping into 401(k)s. Such a trend shows how carefully you choose your housing when you reach retirement.
Added Analogy:
You could compare the decision to use your 401(k) to buy a home in retirement to being a ship captain in rough water. As a captain must plot his course to avoid hidden reefs and unpredictable storms, so must FedEx employees approaching retirement plan their financial course as well.
Imagine your 401(k) as a vessel for your life savings. And using it to purchase a house means launching the ship toward some pretty dangerous island. The island provides immediate comfort and shelter but financial waters are unknown and unexpected costs and uncertainties may lurk beneath the surface.
Take instead the advice of a veteran sailor who downsizes their ship to free up resources without risking the whole voyage. Downsizing keeps your financial vessel afloat as you sail into retirement. This lets you sail retirement's seas confidently without compromising long term financial security.
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?
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- Internal Revenue Code Section 409A (Governing Nonqualified Deferred Compensation Plans)
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- 401K, Social Security, Pension – How to Maximize Your Options
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- 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!
Just as a captain consults his navigational charts, financial experts and the broader economic climate should be considered before making such a big decision. The financial waters ahead may be unpredictable, but with planning you can retire comfortably and safely.
Sources:
1. Cedarhurst Living . 'A Complete Guide to Financial Planning for Senior Living.' Cedarhurst Living , September 2024, www.cedarhurstliving.com/complete-guide-financial-planning-senior-living?utm_source=chatgpt.com . Accessed 27 Feb. 2025.
2. H&R Block . 'Taxes on 401(k) Withdrawal: 401(k) Distribution Rules.' H&R Block , April 2024, www.hrblock.com/tax-center/income/retirement-income/taxes-on-401k-distribution/?srsltid=AfmBOopwY0ozdLNuGStFFyHvJU_Ic2kOaM1OrSWqL-ZAAQy70-IzWk97&utm_source=chatgpt.com . Accessed 27 Feb. 2025.
3. SeniorLiving.org . 'Planning for Housing in Retirement.' SeniorLiving.org , October 2024, www.seniorliving.org/retirement/?utm_source=chatgpt.com . Accessed 27 Feb. 2025.
4. Annuity.com . 'The Role of Housing Decisions in Financial Security.' Annuity.com , August 2024, www.annuity.com/estate-planning/the-role-of-housing-decisions-in-financial-security/?utm_source=chatgpt.com . Accessed 27 Feb. 2025.
5. Thomson Reuters . '401(k) Tax FAQ: Tax Considerations for Contributions and Withdrawals.' Thomson Reuters Tax & Accounting , June 2024, www.tax.thomsonreuters.com/blog/401k-tax-faq-tax-considerations-for-contributions-and-withdrawals/?utm_source=chatgpt.com . Accessed 27 Feb. 2025.
What are the implications of the Funding Target Attainment Percentage for FedEx Corporation employees, and how does it impact the security of the pension benefits offered by FedEx Corporation? This question seeks to explore the nuances of the funding target attainment percentage as reported in the annual funding notice, examining how this metric not only reflects the financial health of FedEx Corporation's pension plan but also how it affects employee confidence in future benefit payments and retirement planning.
Funding Target Attainment Percentage: The Funding Target Attainment Percentage for FedEx Corporation indicates the degree to which the pension plan is funded. A percentage of 101.33% for 2022 suggests that the plan has sufficient assets to cover its liabilities, providing security for employees' pension benefits. This high percentage likely increases employee confidence in the stability and reliability of their future pension payouts, essential for long-term retirement planning.
How does the merger of the FedEx Freight Pension Plan into the FedEx Corporate Employees’ Pension Plan influence the benefits currently available to FedEx Corporation employees? This question aims to delve into the practical changes that may arise due to this merger, assessing whether it aligns with employee expectations regarding their pension benefits and how the transition process is managed by FedEx Corporation.
Merger of Pension Plans: The merger of the FedEx Freight Pension Plan into the FedEx Corporate Employees’ Pension Plan appears to have been strategically managed to maintain benefit stability. Despite increasing liabilities by 5.3%, the merger was structured to ensure no negative impact on the benefit amounts payable to participants from either plan, preserving the expected pension benefits for all affected FedEx Corporation employees.
In terms of investment strategies, what measures does FedEx Corporation implement to ensure that its pension plan investments align with the long-term liabilities expected to be paid out to retirees? This question encourages an exploration of the investment policies in place, examining the asset allocations and risk management strategies that FedEx Corporation employs to ensure sustainable funding for its pension obligations, which could potentially include detailed analyses of stocks, debts, and alternative investments.
Investment Strategies: FedEx Corporation employs a diversified investment strategy across equities, fixed income, and alternative investments, aiming to meet long-term pension liabilities. This approach, which includes both active management strategies and the limited use of derivatives, is designed to generate returns that exceed market indices, thus ensuring adequate funding of pension obligations.
What options do employees of FedEx Corporation have for accessing their pension plan statements, and how frequently are these statements generated? The focus here is to understand the communication strategies employed by FedEx Corporation regarding pension benefit statements, including technological access points and the importance of these documents for employee financial planning.
Pension Plan Statements: FedEx Corporation provides annual pension plan statements through their Retirement Service Center, available electronically each fall. Employees can access their statements online or request them if notifications are not received, ensuring transparency and aiding in personal financial planning.
How are contributions to the FedEx Corporation Employees’ Pension Plan determined, and what role do excess contributions play in the plan's overall funding strategy? This question aims to educate employees about how the company balances mandatory contribution levels with potential excess contributions, exploring how these factors interact to influence the plan's solvency and employee benefits.
Contributions to the Pension Plan: Contributions to the FedEx Corporation Employees' Pension Plan are calculated to meet at least the minimum legal requirement and potentially include voluntary excess contributions. These excess contributions can help manage the plan's funding level and ensure its solvency, benefiting overall pension security for employees.
What types of benefits are guaranteed under the Pension Benefit Guaranty Corporation (PBGC) for FedEx Corporation employees, and what limitations exist that employees should be aware of? By focusing on the guaranteed benefits, this question prompts a discussion on the security of specific benefits provided by FedEx Corporation and highlights limitations, allowing employees to understand their rights fully.
PBGC Guarantee: The Pension Benefit Guaranty Corporation guarantees certain types of benefits for FedEx Corporation employees, such as pension benefits at normal retirement age and most early retirement benefits. However, there are limitations, such as exclusions for benefits without vested rights and recently increased benefits, which employees should be aware of to fully understand their pension security.
In what ways does the FedEx Corporation plan to adjust its pension funding strategy in light of changing federal laws that impact pension obligations? Employees are encouraged to consider how legislative changes influence corporate policies surrounding retirement benefits and the proactive strategies FedEx Corporation might take to remain compliant while ensuring the security of employee pensions.
Adjustments to Funding Strategy: FedEx Corporation is likely to adjust its pension funding strategy in response to legislative changes affecting pension obligations, such as those introduced by recent acts adjusting how pension liabilities are calculated. This proactive approach aims to ensure compliance with new laws while continuing to secure the financial health of the pension plan.
What are the steps that FedEx Corporation employees must take if they are considering retirement, particularly in how to navigate the pension plan and gain access to their benefits? This question aims to provide clarity on the retirement process, ensuring that employees are equipped with the necessary information regarding required documentation, timelines, and points of contact within FedEx Corporation.
Steps for Retirement Planning: Employees considering retirement should contact the FedEx Retirement Service Center to navigate their pension plan benefits. This process involves understanding necessary documentation, timelines, and available support, facilitating a smooth transition into retirement.
How does FedEx Corporation plan to manage potential funding shortfalls in the pension plan, and what mechanisms are in place for notifying plan participants should such an event occur? Employees would need to understand the proactive measures put in place by FedEx Corporation to address funding-related challenges while also knowing what this means for their benefits.
Managing Funding Shortfalls: In the event of potential funding shortfalls, FedEx Corporation has policies in place to manage such situations, including strategic contributions to mitigate shortfalls. The company maintains transparency with plan participants about funding levels and any significant changes affecting the pension plan.
For those seeking more information about their pensions and retirement options, how can FedEx Corporation employees contact relevant departments, and what resources are available for assistance? This question provides an opportunity for employees to familiarize themselves with contact points such as the FedEx Retirement Service Center, emphasizing the importance of open communication channels for addressing inquiries related to their pensions. Feel free to consult the provided document for more in-depth exploration of these topics.
Contacting for Pension Information: FedEx Corporation employees seeking more information about their pensions or retirement options can contact the FedEx Retirement Service Center. This center provides essential resources and support, ensuring employees have access to all necessary information regarding their retirement planning.
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