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Mortgage or Retirement? Where Should Flowers Foods Employees Put Their Money?

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'Flowers Foods employees approaching retirement must balance investment opportunities with debt reduction, and as Patrick Ray of The Retirement Group, a division of Wealth Enhancement Group

'Flowers Foods employees retiring soon should consider not just the numbers, but also their comfort with debt and financial flexibility—Wesley Boudreaux of The Retirement Group, a division of Wealth Enhancement Group

In this article, we will discuss key factors influencing the decision to allocate extra funds toward investments or mortgage repayment. Specifically, we will explore:

The Financial Trade-Off – Analyzing potential investment returns versus mortgage interest savings.
Risks and Considerations – Understanding market volatility, liquidity, and tax implications.
Personalized Decision-Making – Evaluating individual financial circumstances, debt levels, and retirement goals.

In the world of personal finance, choosing to allocate extra money to investments or debt reduction can be difficult, especially for Flowers Foods employees nearing or entering retirement. This choice becomes particularly important in situations where a mortgage is one's primary source of debt. This debate's central argument frequently comes down to weighing the expense of debt versus possible investment rewards.

A financial perspective on investing versus accelerated mortgage repayment

The main justification for favoring investments over accelerated mortgage payback stems from the stock market's past success. In particular, the S&P 500 index had an average yearly return of 9.9% (including dividends) between 1965 and 2022. This implies that one could fairly anticipate long-term returns in the range of 7% to 8% for a well-diversified portfolio that includes both equities and bonds.

For the sake of illustration, let us take the following scenario: a person pays 20% down and purchases a $500,000 home, financing it with a 30-year fixed-rate mortgage at 6% interest. Let's say this person inherits $400,000. If this amount was invested with an annual return of 8%, it might gain over $4.03 million over the course of three decades instead of the $863,353 in interest and principal payments related to the mortgage. Though in a very simplified context, this example highlights the financial benefit of investing over quick debt reduction.

The Argument for Mathematical Returns' Inherent Flaws

That being said, there are some who disagree with the case for investing in accordance with mathematical returns. The returns on investments are by their very nature erratic and variable, and they seldom follow the straight line that average annual returns suggest. For example, between 1965 and 2022, the yearly returns of the S&P 500 saw significant fluctuations, ranging from a high of 37.6% to a low of minus 37%. In addition, a sizable fraction of American homeowners benefit from mortgage rates that are lower than 4%, which makes it much more difficult for individuals weighing their options between debt repayment and investment.

Other Things to Think About

When deciding weather to increase mortgage payments versus make investments Flowers Foods professionals should also consider their financial circumstances. It makes sense to pay off high-interest bills first, especially credit card debt, which has average interest rates close to 25%, before thinking about making extra mortgage payments. Another important factor to take into account is liquidity; whilst house equity is an illiquid asset, equities and exchange-traded funds (ETFs) provide comparatively faster access to capital.

This choice is also influenced by tax implications. In addition to providing instant tax savings, contributions to tax-deferred retirement accounts, like IRAs, increase the allure of investing. Further lowering the cost of borrowing is the opportunity to deduct mortgage interest on loans up to $750,000.

When the loan debt hits 80% of the home's original value, mortgage insurance can be removed, which might result in annual savings of thousands of dollars. This is another factor to consider.

Final Thoughts

To put it simply, a number of factors, such as the mortgage interest rate, investment return expectations, other outstanding debts, liquidity needs, tax implications, and personal comfort with debt levels, influence the decision of whether Flowers Foods professionals should allocate excess funds toward investments or mortgage repayment. The choice is almost always more complex, even while the economics of investment returns may favor investing, particularly in low mortgage rate situations.

When making this difficult choice, Flowers Foods professionals must carefully assess their own financial situation, risk tolerance, and long-term goals. Ultimately, moving closer to financial security and peace of mind should be the top priority, regardless of whether debt reduction or investment comes first.

It is important for those who are getting close to retirement to think about the implications of required minimum distributions (RMDs) from retirement accounts, which start at age 72. Choosing to invest more money can result in these accounts being much larger, which could mean higher RMDs. A pleasant retirement may be supported by this greater income, but it may also result in a higher tax burden. Since Roth accounts have no required minimum distributions (RMDs) and retirement withdrawals are tax-free, making strategic investments in Roth IRAs or Roth conversions can provide a tax-efficient solution to handle this situation. (Source: IRS 'Retirement Plan and IRA Required Minimum Distributions FAQs,' last revised March 2023; Internal Revenue Service).

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Making the choice to pay off your mortgage early or put more money down for retirement is like a seasoned sailor choosing the best route to a far-off land. See your retirement as a peaceful, far-off island that you are trying to get to. There is a limited amount of cargo capacity on your yacht, which represents your available finances and your financial strategy. You have two options: either load up on more provisions (investments) to make sure you can comfortably weather any storms and currents along the way, or lower your load by tossing your mortgage overboard to enable a faster, more direct voyage. Every sailor's voyage is distinct, shaped by the winds (market returns) and the state of their vessel (financial circumstances). The trick is to pack your boat as efficiently as possible while maintaining safety, so that when you arrive at retirement island, you have enough money and peace of mind.

Source:

Williams, Rob. 'Should You Pay Off a Mortgage Before You Retire?' Charles Schwab , August 2023, https://www.schwab.com/learn/story/should-you-pay-off-mortgage-before-you-retire .

Hartman, Rachel. 'Should You Pay Off Your Mortgage Before You Retire?' U.S. News & World Report , January 2025, https://money.usnews.com/money/retirement/articles/should-you-pay-off-your-mortgage-before-you-retire .

Ameriprise Financial. 'Is It Better to Pay Off Your Mortgage or Invest?' Ameriprise Financial , 2024, https://www.ameriprise.com/financial-goals-priorities/personal-finance/should-you-pay-off-your-mortgage .

Carter, Erik. 'Should You Save More for Retirement or Pay Off Your Mortgage Early?' Forbes , 11 Oct. 2022, https://www.forbes.com/sites/financialfinesse/2022/10/11/should-you-save-more-for-retirement-or-pay-off-your-mortgage-early .

Vanguard. 'Paying Off Debt Before You Retire.' Vanguard , 2024, https://investor.vanguard.com/investor-resources-education/retirement/planning-paying-off-debt .

What is the 401(k) plan offered by Flowers Foods?

The 401(k) plan at Flowers Foods is a retirement savings plan that allows employees to save a portion of their salary on a pre-tax basis, helping them prepare for retirement.

Does Flowers Foods offer a company match for the 401(k) contributions?

Yes, Flowers Foods offers a company match for employee contributions to the 401(k) plan, which helps boost employees' retirement savings.

What is the eligibility requirement to participate in the Flowers Foods 401(k) plan?

Employees of Flowers Foods are eligible to participate in the 401(k) plan after completing a specified period of service, typically 30 days.

How can employees of Flowers Foods enroll in the 401(k) plan?

Employees can enroll in the Flowers Foods 401(k) plan through the company’s HR portal or by contacting the HR department for assistance.

What types of investment options are available in the Flowers Foods 401(k) plan?

The Flowers Foods 401(k) plan offers a variety of investment options, including mutual funds, stocks, and bonds, allowing employees to diversify their retirement savings.

Can employees change their contribution percentage to the Flowers Foods 401(k) plan?

Yes, employees can change their contribution percentage to the Flowers Foods 401(k) plan at any time, subject to the plan’s guidelines.

When can employees of Flowers Foods take a loan from their 401(k) plan?

Employees can take a loan from their Flowers Foods 401(k) plan under certain conditions, such as financial hardship or specific personal needs, as outlined in the plan documents.

What happens to the Flowers Foods 401(k) plan if an employee leaves the company?

If an employee leaves Flowers Foods, they can either roll over their 401(k) balance to a new employer's plan, an IRA, or withdraw the funds, subject to taxes and penalties.

Is there a vesting schedule for the company match in the Flowers Foods 401(k) plan?

Yes, Flowers Foods has a vesting schedule for the company match, meaning employees must work for a certain number of years before they fully own the matched contributions.

How often can employees of Flowers Foods review their 401(k) account statements?

Employees can review their Flowers Foods 401(k) account statements quarterly, and they can also access their accounts online at any time.

With the current political climate we are in it is important to keep up with current news and remain knowledgeable about your benefits.

Flowers Foods offers a 401(k) Retirement Savings Plan through Empower for its employees, known as the FLOWERS FOODS, INC. 401(K) RETIREMENT SAVINGS PLAN. This plan covers approximately 11,266 employees. Flowers Foods, headquartered in Thomasville, Georgia, has been in operation since 1919, specializing in the production of bread, buns, cakes, and pastries. Their 401(k) plan includes a company match program, encouraging employees to contribute towards their retirement. Employees have the option to roll over their 401(k) into an IRA or a new 401(k) if they no longer work at the company (Jobs at Flowers Foods) (Capitalize). The specific eligibility criteria for the 401(k) plan at Flowers Foods includes full-time employment, and the company offers professional growth opportunities as part of their benefits package. For 2023 and 2024, Flowers Foods has maintained this plan under Empower with consistent matching contributions

Restructuring Layoffs: Flowers Foods has recently undergone significant restructuring, resulting in the elimination of approximately 250 positions across various departments. This move is part of a broader strategy to streamline operations, reduce complexity, and improve profitability. Despite the layoffs, Flowers Foods continues to pursue growth opportunities through innovation and strategic investments, indicating a focus on long-term sustainability. It's crucial to address these restructuring efforts due to the current economic pressures and the need for companies to adapt to changing market conditions. Benefit Changes and Pension/401(k) Updates: The company has also made adjustments to its employee benefits, including pension plans. They recently purchased an annuity to complete the termination of a pension plan, which aligns with their strategy of focusing resources on more profitable ventures. Additionally, Flowers Foods continues to provide a standard 401(k) match of up to 6%, although the program remains underutilized by employees. This highlights the importance of staying informed about benefit changes, especially in an uncertain economic and political environment. Addressing these updates is crucial as they directly impact employees' financial security and retirement planning.

2022: Flowers Foods granted Time-Based Restricted Stock Units (TBRSUs) under its 2014 Omnibus Equity and Incentive Compensation Plan. These RSUs vest based on continued employment over a specific period, typically three years. The RSUs do not carry voting rights or dividend rights until they vest and convert into actual shares of Flowers Foods stock (Justia). 2023: The company continued to offer similar equity incentives, focusing on performance-contingent RSUs. These RSUs vest based on the company's performance metrics, such as Return on Invested Capital (ROIC) and Total Shareholder Return (TSR). The vesting periods for these RSUs run through 2024, ensuring that recipients remain with the company while contributing to its long-term success (Nasdaq). 2024: The company has not significantly altered its stock options and RSU offerings, continuing to use performance-based vesting criteria to motivate and retain key personnel. The RSUs remain a key component of compensation for Flowers Foods’ executives and upper management (Justia) (Nasdaq).

Flowers Foods offers a comprehensive health benefits package aimed at supporting the long-term well-being of its employees and their families. The company provides two main medical plan options: PPO and PPO Plus, the latter of which is associated with a Health Savings Account (HSA). Other benefits include Flexible Spending Accounts (FSA) for healthcare and dependent care, dental and vision insurance, short-term disability coverage, and voluntary long-term disability insurance. The company also offers an Employee Assistance Plan (EAP) and various supplemental insurance options

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Check Out Articles for Flowers Foods employees

For more information you can reach the plan administrator for Flowers Foods at , ; or by calling them at .

https://www.thelayoff.com/t/1qkSChku https://www.nasdaq.com/market-activity/stocks/flo https://contracts.justia.com/companies/flowers-foods-inc-535/contract/223524/ https://www.bivio.com/trez_talk/mail-thread?p=69437500003 https://www.just-food.com/news/usa-flowers-foods-inc-spin-off-completed-kellogg-acquires-keebler/ https://careers.flowersfoods.com/content/benefits/ https://www.foodmanufacturing.com/capital-investment/news/21140663/flowers-foods-cuts-250-jobs-in-restructuring https://www.foodbusinessnews.net/articles/25535-limited-growth-seen-in-24-at-flowers-foods https://www.bakingbusiness.com/articles/60300-legal-settlement-drags-down-flowers-foods https://www.idx.inc/