45% of Americans Struggle in Retirement—4 Mistakes L3Harris Employees Should Know

Healthcare Provider Update: Healthcare Provider for L3Harris L3Harris Technologies typically provides its employees with healthcare benefits through employer-sponsored insurance plans. The exact healthcare provider may vary based on location and specific employee circumstances, but major insurers commonly used include UnitedHealthcare, Anthem, and Cigna. Potential Healthcare Cost Increases in 2026 In 2026, L3Harris and similar employers are facing significant healthcare cost increases. Reports indicate a projected rise of approximately 8.5% in employer-sponsored insurance costs due to multiple inflationary pressures, including rising medical expenses and increased claims. Additionally, if the federal premium subsidies under the Affordable Care Act expire without renewal, employees may see a drastic rise in their out-of-pocket expenses, compounding the financial impact on both the company and its workforce. Employers are likely to respond by shifting more healthcare costs to employees, necessitating a proactive approach to managing these anticipated changes. Click here to learn more

As L3Harris employees approach retirement, many believe they are well-prepared. However, statistics reveal a concerning trend. According to a study by Morningstar's Center for Retirement and Policy Studies ( Morningstar, 'Retirement Challenges in the U.S. ), about 45% of Americans retiring at the conventional age of 65 may face financial difficulties. The study highlights various factors such as health changes, healthcare costs, and demographic shifts. For single women, the risk is even higher, with a 55% likelihood of running out of retirement funds compared to 40% for single men and 41% for couples.

Spencer Look, associate director at the center, points out that those most affected are individuals without a dedicated retirement savings plan. Yet, it is noted that even those who have made efforts to save are not immune from financial risks. It is emphasized that many retirees, including those from L3Harris, are caught off guard by tax strategies, particularly with tax planning.

Misunderstanding Tax Consequences

One of the most common myths among retirees, including those at L3Harris, is the assumption that they will fall into a lower tax bracket after retirement. However, It is explained that spending habits often remain the same or even increase due to leisure activities, potentially leading to higher tax liabilities. This miscalculation can significantly impact long-term financial sustainability, especially when withdrawals from tax-deferred accounts like 401(k)s and IRAs are subject to taxes, depleting funds more quickly than anticipated.

Strategic Diversification

It is advised to consider adding a Roth IRA to complement traditional retirement accounts. For L3Harris employees, Roth IRAs, which are funded with post-tax dollars, grow tax-free and allow for tax-free withdrawals, offering greater flexibility in managing tax burdens—especially when larger withdrawals are necessary.

Effective Asset Management

Another common issue is inefficient asset management, which can lead to excessive taxes or reduced future returns. A retiree named Bob is recalled, who made the costly mistake of liquidating part of his IRA to purchase a home. This decision triggered substantial tax penalties and diminished Bob’s opportunity for tax-deferred growth. L3Harris retirees should consider the long-term implications of such decisions, particularly when managing retirement accounts and adhering to IRS regulations.

The Sequence of Return Risk

The sequence of return risk—the danger of encountering a market downturn at the start of retirement—can severely impact the longevity of retirement funds. It is explained that while the S&P 500 historically offers an average return of around 10% ( Standard & Poor’s 500 Index Historical Data ), the timing of withdrawals can jeopardize financial stability. For example, if a retiree’s portfolio drops 15% soon after retirement, it may be difficult to recover while also making regular withdrawals. L3Harris employees can address this risk by holding investments in low-volatility assets such as CDs, fixed annuities, or government bonds, which can serve as financial buffers during market downturns.

Taking Appropriate Risks

Another common reason retirees spend down their funds is highlighted: inadequate risk management during their working years. He critiques overly conservative investment strategies, which focus on low-return, high-tax accounts such as savings accounts. Instead, Baumgarten recommends a balanced approach, including substantial equity exposure through mutual funds, index funds, and blue-chip stocks, which offer higher potential returns and more favorable tax treatment.

Caution is also given against chasing risky investments, which can attract some retirees seeking quick gains but expose them to significant risks. For L3Harris employees, a thoughtful risk strategy should include selecting investments that offer growth potential without exposing them to unnecessary market fluctuations.

Longevity and Inflation

Another often overlooked factor is the impact of inflation over a potentially extended retirement. It is cautioned that as life expectancy rises, retirees could face multiple decades in retirement, during which the cost of living may increase significantly. Failing to account for inflation can severely erode retirement savings, emphasizing the importance of investing in assets that outpace inflation to maintain financial health in the long run ( Bureau of Labor Statistics, 'Historical Inflation Rates,' ).

In Conclusion

Retirement planning for L3Harris employees extends beyond savings—it involves a comprehensive approach that includes tax planning, risk management, and an understanding of market fluctuations. By addressing these common pitfalls and creating a robust financial strategy, retirees can improve their chances of maintaining a steady financial future, avoiding becoming part of the statistic of those running out of funds during retirement.

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An often overlooked aspect for L3Harris employees nearing retirement is the possibility of needing long-term care, which can drastically deplete retirement savings. According to a 2022 study by the U.S. Department of Health and Human Services ( HHS, 'Long-Term Care Statistics,' ), around 70% of people aged 65 will require some form of long-term care in their lifetime. The costs associated with this care—often not covered by Medicare—pose a significant financial risk, emphasizing the need to incorporate long-term care insurance or alternative strategies into retirement planning to address unexpected financial burdens.

Retirement without running out of funds is like embarking on a long ocean journey. Just as a seasoned captain prepares for an adventure by plotting a course, stocking supplies, and planning for all weather conditions, L3Harris retirees must also prepare for their financial future. Your retirement savings are the ship, and like a vessel facing different oceans, your savings must withstand market volatility, tax consequences, and unforeseen expenses such as healthcare. Mistakes like poor tax planning or inefficient asset management are akin to navigating without a compass, where one error could lead to financial distress. Through thoughtful planning and addressing common pitfalls, retirees can feel confident that their savings will support them throughout retirement, steering clear of financial turbulence.

• This information is not intended as a recommendation. The opinions are subject to change at any time and no forecasts can be guaranteed. Investment decisions should always be made based on an investor's specific circumstances. Investing involves risk, including possible loss of principal.

 

• There is no guarantee that asset allocation or diversification will enhance overall returns, outperform a non-diversified portfolio, nor ensure a profit or protect against a loss. Investing involves risk, including possible loss of principal.