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In light of recent market swings discussed in the article, Sears Holdings employees should keep a conservative portfolio,' said the report. Adapting your Retirement strategy to weather market volatilities can protect your future financial security without sacrificing growth as you approach Retirement, says Tyson Mavar of the Retirement Group.
Given recent steep dives in both stocks and bonds, Wesley Boudreaux of the Retirement Group says Sears Holdings employees should do some serious financial planning. This mitigates risks and positions you to profit from market recoveries - a resilient investment strategy in the face of economic uncertainty. '
In this article, we will discuss:
1. Market Volatility and Retirement: How market fluctuations affect retirees' savings and why a diversified investment portfolio is important.
2. Historical Market Recovery: History of how stocks have rebounded from corrections and the value of historical data in predicting market trends.
3. Economic Fundamentals and Projections: The robustness of U.S. economy fundamentals and their ability to contain short-term market volatilities.
DON'T PANIC
Several studies suggest that extreme market volatility may be especially difficult for retirees or those approaching retirement age to recover from possible losses. According to a report in October 2021 from Fidelity Investments, market volatility could wipe out retirement savings of up to 26% for those in their 60s. That underscores the need for a diversified investment portfolio and a solid retirement plan that reflects possible market volatility.
Stocks are off to among the worst starts in history for both markets. The S&P 500 Index was down 12.92% and other broad market indices were down double digits through April 2022. (1)
And worse than that, investors like those in Texas or New York are losing nearly as much as they are on the equity side of their portfolios. The Bloomberg U.S. Aggregate Bond Index measures domestic fixed income and posted its sharpest quarterly loss since 1980 to start the year (2) and is down -9.50% through April end. The current environment has left investors with nowhere to run and some have left markets or gone to cash - so we feel it important to bring this up with our Sears Holdings clients.
A hasty reaction could leave investors missing out on a rebound, since historical equity performance following market corrections and solid underlying economic fundamentals point to a stock market rebound sooner rather than later. Contact retirement-focused advisors today if you're unsure of your situation.
A BULL CASE FOR EQUITIES:
OUR GUIDE - HISTORY. The S&P 500 entered correction territory again 22 trading days after exiting; it makes its fastest return to negative 10% performance since November 2008, when the Great Financial Crisis began. (3) For our Sears Holdings clients, the table below excludes periods where a correction turned into a bear market and shows how the S&P 500 fared after exiting a correction. In the S&P 500, the average gain after exiting a correction was nearly 14%, based on data going back to 1928. (4)
Not every bad start to the year is indicative of things to come, we remind our Sears Holdings clients. It marks the third worst start to 2022 for the S&P 500 Index.
In spite of this, stocks recover nicely after the worst starts - on average - and rise 10%. Double digit gains are certainly possible in the last eight months of the year based on statistics for our Sears Holdings clients. (5)
FOR MARKETS IT IS A BULL CASE: STRONG ECONOMIC FUNDAMENTALS Aside from historical performance that backed a second-half rally in equities, fundamentals for the U.S. economy remain solid. Demand resilience, robust corporate and consumer financial positioning, and rising earnings may provide shock absorbers during the near- to medium-term volatility that market observers expect to remain.
Initial expectations for first-quarter economic development showed a surprise contraction. US real GDP lost 1.4% (adjusted for inflation) from +6.9% in the previous quarter. This sharp slowdown was due to a drag from exports, a drop in inventory spending after a large uptick in the prior quarter and, less notably, in government spending. Moreover, consumer expenditure grew at a healthy pace - it makes up almost 70% of the U.S. economy. Personal consumption grew by 2.7% from 2.5% in the previous month, with increased expenditure on services. Over the previous decade, consumer spending grew an average of 2.3% per year. (1)
Business investment jumped by 9.2%, the highest level in a year - another positive economic indicator. If companies accelerate automation and investment to cope with persistent labor shortages, the broad momentum in capital expenditures should continue. Overall, the extremely constrained labor market and wage growth help consumers. We think consumption will continue to support above-average economic growth this year as the effects of the pandemic are easing - and remind our Sears Holdings clients of this. One last caveat: economic growth can differ greatly from stock market growth - as the markets currently stand.
Trying to predict the market by selling existing positions and entering a supposed 'safer' environment usually results in a big loss for shareholders. Investors do best if they stick to a plan, weather market downturns with conservative, risk-adjusted asset allocations, and remain invested through the turnaround when the biggest gains materialize.
Economic Definitions GDP is the ultimate market value of all goods and services made in a nation. It is the most used economic indicator. GDP by expenditure method measures total final expenditures at purchasers' prices excluding exports minus imports. This assumes inflation.
Index Definitions S&P 500:
The S&P 500 (r) is the best single indicator of large-cap U.S. equities and the basis of an enormous range of investment products. It includes 500 major companies and represents about 80% of market capitalization.
The Bloomberg Barclays US Aggregate Bond Index measures the investment-grade US dollar-denominated, fixed-rate taxable bond market. It contains Treasuries, government-related and corporate securities, MBS (agency fixed-rate pass-throughs), ABS, and CMBS (agency and non-agency).
The investment is like gardening. As a gardener would plant, tend and prune his plants, so must an investor take care of his investments. You need patience, diligence & a long term vision. As a gardener might face drought, pests or extreme weather, investors face market volatility, inflation, and economic downturns. But with planning, diversification, and periodic adjustments both gardeners and investors can reap great rewards. Time and effort pays off in a satisfying harvest.
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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?
- 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!
- 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!
Sources:
1. Fidelity Investments. 'Fidelity Wealth Management - Perspectives on Inflation.' Fidelity , 30 Apr. 2022, www.fidelity.com .
2. Fidelity Investments. 'Fidelity 2023 RSA Executive Summary.' The News Market , 2023, preview.thenewsmarket.com.
3. Lannan, Kelly. 'Fidelity® Q3 2021 Retirement Analysis: Retirement Savers ‘Stay the Course’ in Spite of Stock Market Swings and Ongoing Economic Uncertainty.' Business Wire , 2021, www.businesswire.com .
4. Fidelity Investments. 'Market Volatility Resources and Insights.' Fidelity Institutional , www.institutional.fidelity.com .
5. Fidelity Investments. 'Navigating the Current Environment.' Fidelity , www.fidelity.com .
How does the Sears Holdings Pension Plan differentiate between normal retirement, early retirement, and late retirement options for Kmart participants? In what ways do these options influence the retirement planning process for employees of Sears Holdings, and what specific considerations should Kmart employees be aware of when choosing one of these retirement paths, particularly in relation to their vested status?
Differentiation of Retirement Options: The Sears Holdings Pension Plan offers distinct options for normal, early, and late retirement. Normal retirement is available at age 65 or after five years of plan participation, whichever is later. Early retirement can be taken from age 55 but before 65, provided the employee is vested, with benefits subject to actuarial reduction unless certain conditions are met (like having at least 90 points, which is a sum of age and years of credited service). Late retirement pertains to any retirement after the normal retirement age, with pensions recalculated to reflect the delay in benefit commencement.
Considering the frozen status of the Sears Holdings Pension Plan, how does this impact the benefits eligibility for Kmart employees, and what implications does it have for their retirement savings strategies? In what ways should current employees factor in this frozen status when evaluating their overall retirement readiness and potential alternatives outside of the company plan?
Impact of Frozen Status: The freezing of the Sears Holdings Pension Plan on January 31, 1996, means that there have been no new accruals of benefits or participants since that date. For Kmart employees, this impacts their benefits eligibility by capping the pension benefits at levels earned up to the freeze date. Employees need to consider this stagnation in benefits when planning for retirement, potentially seeking additional retirement savings avenues to bridge any shortfall.
What are the essential calculations involved in determining the retirement benefits under the Sears Holdings Pension Plan for Kmart employees? Specifically, how do the Career Average Pay and Final Average Pay formulas come into play, and what factors should employees consider when estimating their future retirement payouts?
Essential Calculations for Retirement Benefits: Pension benefits for Kmart employees under the Sears Holdings Pension Plan are calculated using either the Career Average Pay or the Final Average Pay formulas. These calculations take into account an employee's years of credited service and compensation up to the freeze date. Factors like estimated Social Security benefits and specific formulas (such as a deduction based on Social Security benefits under the Final Average Pay formula) play crucial roles in determining the final pension payout.
How can Sears Holdings employees best navigate the process of applying for benefits under the Pension Plan? What specific steps should participants take to ensure their applications are processed correctly, and what important deadlines should they be aware of to avoid any negative consequences on their retirement benefits?
Navigating the Benefits Application Process: To apply for pension benefits, employees must submit a formal application, ideally 30 to 90 days before the intended commencement date. It is crucial to ensure all personal information, including marital status and spouse details, is up-to-date to avoid delays or inaccuracies in benefit processing. Missing application deadlines can lead to postponed benefit payments or unwanted default options.
In what situations can Kmart employees expect to receive a Deferred Vested Pension, and how is the calculation for this pension affected by their previous employment and vesting service? Employees should be aware of the important factors influencing their eligibility and the steps necessary to maintain their retirement benefits after leaving the company.
Eligibility and Calculation for Deferred Vested Pension: A Deferred Vested Pension is available to employees who leave the company after becoming vested but prior to qualifying for retirement. The calculation mirrors that of a normal retirement pension, with possible early commencement reductions. Understanding the timing of benefit commencement and the potential reductions for early start is vital for planning.
How does the Sears Holdings Pension Plan address tax considerations for employees receiving both monthly payments and lump sum payments upon retirement? What tax implications should Kmart participants be aware of, particularly in relation to IRS rules for distributions and potential penalties for early withdrawal?
Tax Implications of Pension Receipt: Pension payments, whether monthly or lump sum, are subject to federal taxes. Monthly benefits are taxed as ordinary income, while lump sums might be eligible for special tax treatments or rollover options to defer taxes. It’s important for Kmart employees to consider these implications and possibly consult with a tax advisor to optimize tax liability.
What are the rights and protections afforded to Kmart participants under the Employee Retirement Income Security Act (ERISA) as they navigate their retirement benefits with the Sears Holdings Pension Plan? How can employees leverage these rights to ensure they are receiving all the benefits to which they are entitled?
ERISA Rights and Protections: Under ERISA, Kmart employees are entitled to certain rights including the ability to appeal denied benefits, access to plan information, and assurances of fair and equitable treatment of their benefits. Leveraging these protections ensures that employees receive all due benefits.
What steps should Kmart employees take to update their personal information to ensure they continue receiving their benefits without interruption, especially in the context of missing participants or uncashed checks? What resources and contacts at Sears Holdings are available to assist with these updates?
Updating Personal Information: Maintaining accurate personal information with the pension plan is crucial for uninterrupted benefit payments. Employees should promptly update changes such as address, marital status, or beneficiaries to prevent issues with benefit distributions or lost checks.
How does the process of transferring between affiliated employers impact pension benefits for Kmart employees under the Sears Holdings Pension Plan? What considerations should be taken into account concerning Credited Service and Vesting Service during such transfers, and how can employees ensure they do not lose any entitled benefits?
Impact of Transfers Between Affiliated Employers: Transferring between Sears Holdings’ affiliated employers can affect pension benefits differently depending on whether the employer participates in the pension plan. It's essential to understand how such transfers impact credited and vesting service accruals.
For Kmart employees seeking more information about their benefits under the Sears Holdings Pension Plan, what is the best way to contact company representatives? How can they effectively communicate their questions or concerns to ensure they receive accurate and timely information regarding their retirement benefits?
Contacting Plan Representatives: Kmart employees seeking clarity on their pension benefits should contact the Sears Holdings Pension Service Center. Effective communication, including prepared questions and necessary documentation, will aid in obtaining accurate and comprehensive information.
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