FMC Employees: Avoid the Mistake of Tapping into Your 401(k) Before Retirement

Representative Brent Wolf, from The Retirement Group—part of Wealth Enhancement Group—emphasizes the significance of planning for FMC workers. He suggests that given the complexities of today's landscape it is essential for individuals to focus on creating emergency savings and consider sustainable methods for withdrawing funds to safeguard their retirement savings.

Kevin Landis, from The Retirement Group emphasizes the importance of making informed decisions for employees of FMC companies by highlighting the need to comprehend the lasting impact of 401(k) withdrawals and the benefits of consulting financial experts and exploring different saving options to secure their retirement future against unexpected financial challenges.

In this article, we will discuss:

1. The Financial Consequences of Economic Difficulties: Exploring the impact of the economic uncertainties on the retirement funds of employees at top companies in the FMC list and the growing practice of accessing 401(k)s prematurely.

2. Factors Influencing Withdrawals from Retirement Funds Explained: Exploring the reasons for the rise in withdrawals from retirement accounts and highlighting the challenges experienced by different age groups.

3. Ways to Minimize Premature Withdrawals: steps to lessen the need to dip into retirement savings by encouraging emergency funds and considering policy adjustments that alleviate pressures.

The current pandemic situation, along with rising prices and unstable stock market conditions have put a strain on the finances of people planning to retire from companies like those in the FMC list which has affected their retirement funds adversely. New studies show that many employees are dipping into their 401(k) savings which could pose a risk to their stability in the long run. In these trying times we're facing now it's important to grasp the consequences of these actions and look into ways to avoid having to take out money.

The latest report from the Transamerica Center for Retirement Studies sheds light on the challenges that employees are grappling with nowadays. As per the findings of the report, 37 percent of workers have had to resort to borrowing money from their retirement savings accounts or making hardship withdrawals. With 30 percent opting for loans and 21 percent turning to hardship withdrawals. These statistics show an uptick compared to year's data where only 34 percent of respondents reported similar financial actions in managing their retirement savings.

The effects of the economic instability on retirement plans of FMC companies.

The pandemic and the economic uncertainties that followed have had impacts on jobs and personal finances as well as retirement plans for many individuals. Catherine Collinson from Transamerica Institute and TCRS highlights the importance of government and employer assistance in aiding workers to bounce back from these challenges. Numerous workers are facing strains as they try to balance responsibilities like meeting daily expenses, paying off debts, and setting aside funds for the future. Regrettably, they don't have emergency savings to protect themselves from financial crises.

'Factors contributing to the withdrawal of retirement funds from FMC accounts:'

Workers are feeling the pressure which has resulted in them depending on withdrawing money from their retirement accounts according to TCRS findings who point out various reasons for this action being taken; among them financial emergencies at 31% and debt repayment at 30%. Additionally, medical bills at 25%, expenses at 26%, home improvements at 23%, vehicle purchases at 19%, and unforeseen major expenses at 19% are also driving the necessity for withdrawals. Among the age groups of employees who choose to withdraw money from their accounts for reasons, Generation Z individuals are more likely to do so due to medical expenses as reported by 33% of them.

The Impact of Withdrawing Funds Early:

When you think about tapping into your retirement savings during times, it may seem like a good idea at first glance, but it actually comes with significant costs attached to it that you need to consider carefully. If you make withdrawals from your retirement account before reaching the age of 65 or your plan's designated retirement age as outlined by the Internal Revenue Service (IRS), you might end up facing a 10% income tax on the amount withdrawn on top of the taxes. Furthermore, these early withdrawals can lead to tax implications. Limit the growth of your investment returns over time which can impact how much you have saved up for retirement in the future.

Dealing with the Impact:

If you find yourself in a situation where you need to dip into your retirement savings as a resort, it might be an idea to consider borrowing from your 401(k) plan instead of going for an early or hardship withdrawal. Having a repayment plan in place is essential to steer of any financial setbacks especially when transitioning out of your current job. In scenarios, it's important to make sure the loan is paid back in full within a short period. Failing to meet this obligation could lead to default. The IRS treating it as a withdrawal, which may incur taxes and potential penalties.

Withdrawals due to difficulties are only allowed in cases of substantial financial strain as outlined by the IRS. These withdrawals have eligibility requirements such as costs (17%) preventing eviction (16%) expenses related to disasters (15%) paying for tuition (14%) buying a home (13%) repairing a home (12%) and covering burial or funeral expenses (6%).

The Importance of Having Savings for Emergencies:

Dealing with the increasing problem of people withdrawing funds from their retirement accounts is crucially important to focus on building up emergency savings foremost of relying on retirement funds for immediate needs which could destabilize their financial situation in the long term view. The latest SECURE 2.0 bill acknowledges this necessity. Introduces an emergency savings account component into retirement plans like 401(k)s to address this issue effectively. Furthermore, some clauses in the SECURE 2.0 provide exemptions from the 10 percent withdrawal fee under circumstances are fulfilled.

Anticipating the Future:

Despite facing obstacles that remain unresolved at the moment, there is a sense of hope that the trend of people turning to their retirement savings for withdrawals will eventually level off and find stability in the run. As we aim to enhance our stability being mindful and making informed choices are key. Individuals approaching retirement within corporations and those who have already retired should consider approaches consult with experts and delve into thorough retirement planning to protect their financial well-being for the future.

In summary:

The pandemic, along with rising prices and unstable markets have really affected people's finances lately and it's pushing quite a few FMC employees to dip into their retirement funds on which is worrying to see! To make sure you're financially secure in the run it's important to avoid taking out money soon and focus on building up emergency savings instead. Some helpful ways to tackle this issue include setting up emergency savings accounts and taking advantage of the relief options under the SECURE 2.0 laws. They could be game changers! By staying updated on news and getting advice from professionals while also putting retirement plans in place early on can help individuals weather these tough times and reach their retirement dreams successfully.

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In a study carried out by Vanguard in 2023 revealed that a noteworthy percentage of savers who accessed their 401(k) funds before retirement did so to manage costs – specifically 56%. This emphasizes the increasing financial strain individuals experience during their retirement due to healthcare expenses and stresses the significance of preparing and managing finances for healthcare requirements. In their sixties and working or retired from FMC companies it's important for individuals to consider healthcare costs and options such as Health Savings Accounts (HSAs) or long term care insurance to protect their retirement funds.

Retirement planning can be likened to sailing through a sea for FMC employees and retirees in their sixties – their 401(k)s serving as vital lifeboats amidst the uncertainty ahead. However concerning it may be that a notable portion of individuals are dipping into these lifeboats prematurely of waiting to reach the shores of retirement. One should not take apart a lifeboat for short term shelter in a storm; instead, it's important to consider options like strengthening the boat with emergency funds and planning a route that steers clear of the consequences of withdrawing funds early or facing taxes while also adjusting their retirement plan for a smoother journey towards their retirement goals.

Sources:

1. Wells, Susan J. 'Retirement Savings Hit Record Highs During the Pandemic.' Investopedia , 27 May 2021, www.investopedia.com/retirement-savings-hit-record-highs-during-the-pandemic-5184756 .

2. Johnson, Richard. 'Falling Stocks: How the Bear Market Affects Retirement Plans.' Money , 2021, www.money.com/bear-market-retirement-plans-impact .

3. Henney, Megan. 'The coronavirus pandemic wrecked Americans' retirement savings.' Fox Business , 18 June 2021, www.foxbusiness.com/economy/coronavirus-pandemic-american-retirement-savings .

4. 'The Great Retirement Boom: The Pandemic-Era Surge in Retirements and Implications for Future Labor Force Participation.' Federal Reserve , 2021, www.federalreserve.gov/the-great-retirement-boom-pandemic-era-surge-in-retirements .

5. 'Why Inflation Is Still a Problem for Today’s Retirees.' Morningstar , 30 Sep. 2023, www.morningstar.com/articles/why-inflation-is-still-a-problem-for-todays-retirees .

How does FMC Technologies plan to manage the investment strategy of its pension plan to ensure it remains solvent and able to meet the benefit payments as employees retire? Given the shifting dynamics of the market, what specific measures is FMC Technologies employing to enhance the liquidity of its assets and mitigate risks associated with underfunding in the current economic climate?

Investment Strategy for Solvency and Benefit Payments: FMC Technologies' pension plan aims to ensure all benefit payments are met as they fall due. The investment strategy includes maintaining funds above the Statutory Funding Objective and transitioning towards lower-risk assets such as Liability Driven Investments (LDI), gilts, and cash. This strategy, driven by advice from LCP, seeks to reduce underfunding risks and ensure liquidity(FMC_Technologies_Pensio…).

In what ways does FMC Technologies incorporate environmental, social, and governance (ESG) factors into its investment decision-making for the pension plan? How does the commitment to ESG investing align with the broader goals of FMC Technologies, and what impact does it have on the long-term sustainability and performance of the company's pension investments?

ESG Factors in Investment Decisions: ESG factors, including climate change, are considered by FMC Technologies in investment decisions. The company encourages investment managers to integrate ESG considerations into their analysis of future performance and risks. ESG aligns with the long-term sustainability of the pension plan, though there are limited opportunities to apply ESG in the current target investment strategy of LDI, gilts, and cash(FMC_Technologies_Pensio…).

Can you elaborate on the additional voluntary contribution (AVC) arrangements available through FMC Technologies and how they are designed to support employees in building a more robust retirement income? What choices do employees have within these AVC options, and how can they tailor their investment to suit their individual risk profiles?

Additional Voluntary Contributions (AVC): FMC Technologies provides AVC arrangements designed to offer a range of investment options to help employees build a more robust retirement income. These options allow employees to tailor investments based on their risk-return preferences, ensuring flexibility in achieving personal retirement goals(FMC_Technologies_Pensio…).

As employees of FMC Technologies approach retirement, what processes are in place to evaluate their pension benefits and determine eligibility for various retirement options? What role does the pension plan's advisory team play in assisting employees with financial planning in preparation for retirement?

Pension Benefits Evaluation Process: FMC Technologies uses a structured process to evaluate pension benefits, supported by investment advisers and trustees. This process involves regularly reviewing the funding level and the benefit cash flows to ensure the pension plan is on track to meet employee retirement needs. Advisory teams help employees with financial planning during the transition to retirement(FMC_Technologies_Pensio…).

What steps is FMC Technologies taking to transition its investment strategy towards greater exposure to low-risk instruments while still aiming for satisfactory returns? How does this transition align with the companyâ€™s funding objectives, and what are the anticipated benefits for the employees in the context of their retirement planning?

Transition to Low-Risk Investments: FMC Technologies has transitioned much of its pension assets into LDI, gilts, and cash to de-risk the investment portfolio. This shift aligns with the company's funding objectives to secure pension liabilities and provide stable returns for retirees. The plan is expected to fully transition to these low-risk instruments to support long-term pension solvency(FMC_Technologies_Pensio…).

How does FMC Technologies measure the performance of its investment managers, and what criteria are used to evaluate their effectiveness in managing the pension plan's assets? In the event that an investment manager does not perform according to expectations, what procedures are in place for FMC Technologies to reassess and possibly reallocate those funds?

Investment Manager Performance: FMC Technologies evaluates the performance of its investment managers using various criteria, including their ability to meet long-term pension objectives. If an investment manager underperforms, FMC Technologies, with advice from LCP, reassesses and rebalances the portfolio as needed to ensure pension assets are properly managed(FMC_Technologies_Pensio…).

What communication channels does FMC Technologies recommend employees use if they have questions or need clarification regarding their retirement benefits and the pension plan? How can employees easily access additional resources or support to better understand their retirement options as they transition out of active employment?

Communication Channels for Retirement Benefits: Employees of FMC Technologies can access information and support regarding their pension and retirement benefits through direct communication with trustees and the pension advisory team. FMC Technologies recommends utilizing these resources for clarity on retirement options and to understand the transition out of active employment(FMC_Technologies_Pensio…).

Considering the implications of portfolio diversification, how does FMC Technologies determine the appropriate asset allocation for its pension plan's investment strategy? What considerations are taken into account to ensure that all employeesâ€™ retirement savings are managed in a way that balances risk and growth potential?

Asset Allocation and Portfolio Diversification: FMC Technologies’ pension plan employs a diversified asset allocation strategy, ensuring a balance between growth and risk. The investment strategy considers the need to match liabilities with assets while progressively reducing exposure to high-risk assets like equities and increasing exposure to low-risk instruments like LDI and gilts(FMC_Technologies_Pensio…).

How does FMC Technologies plan to maintain compliance with regulatory requirements regarding its pension plan, particularly concerning employer-related investments? What are the limitations or restrictions imposed by legislation that affect how FMC Technologies can manage its pension fund assets?

Compliance with Regulatory Requirements: FMC Technologies remains compliant with regulations regarding employer-related investments. Restrictions under the Pensions Act 1995 and the Occupational Pension Schemes (Investment) Regulations 2005 prevent significant investments in TechnipFMC or associated companies to avoid conflicts of interest(FMC_Technologies_Pensio…).

As risks associated with market fluctuations continue to evolve, how does FMC Technologies plan to adjust its investment strategy to mitigate these risks? What safeguards are put in place to protect retirement benefits during periods of economic uncertainty, and how will these strategies affect the financial well-being of FMC Technologiesâ€™ retirees?

Adjusting Investment Strategy for Market Risks: FMC Technologies employs a liability-driven approach to manage the pension fund, mitigating market risks associated with economic fluctuations. Regular reviews of the investment strategy, alongside professional advice, allow the company to adjust and protect the pension plan's assets during uncertain market conditions(FMC_Technologies_Pensio…).

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

Pension Plan (Defined Benefit Plan): FMC Corporation has a pension plan known as the "FMC Corporation Employees' Retirement Program." This plan is a traditional defined benefit plan, which provides retirement, death, and disability benefits to eligible employees. The plan's benefits are determined based on years of service and final average pay, which is a common formula used to calculate pension payouts. The plan is primarily available to employees who were hired before July 1, 2007. After that date, new hires were no longer eligible for the defined benefit plan but were instead enrolled in the defined contribution plan. 401(k) Plan: The FMC Corporation Savings and Investment Plan is the company’s 401(k) offering. For employees hired after July 1, 2007, this plan serves as their primary retirement vehicle. FMC contributes a percentage of eligible pay to the plan annually. One of the notable features of this plan is the immediate vesting on all contributions, including the company match. This means that employees have full ownership of all contributions from the outset. The plan offers a wide range of investment options managed by Fidelity Investments.

Restructuring Efforts: FMC Corporation has been actively restructuring its operations to improve efficiency and profitability. The company expects to achieve $50 million to $75 million in adjusted EBITDA contributions from restructuring actions in 2024, with a run-rate savings target of approximately $150 million by the end of 2025. This restructuring is critical for FMC as it navigates through the challenges posed by the global economic environment, including supply chain disruptions and inflationary pressures. Pension and 401(k) Plans: FMC's financial outlook includes maintaining strong adjusted EBITDA and adjusted earnings per share growth, which are key metrics that can influence the stability and benefits of its pension and 401(k) plans. As FMC continues its restructuring and cost-saving measures, these benefits could see adjustments to align with the company’s long-term financial goals.

Stock Options: FMC offers Non-Qualified Stock Options (NSOs), which allow employees to purchase company shares at a predetermined strike price after a specific vesting period. These options align employee incentives with the company's financial performance, as they offer the potential for profit if the company's stock price increases. However, employees must be aware of the risks associated with stock options, including potential forfeiture if they leave the company before the options vest. RSUs: FMC also provides RSUs, which grant employees the right to receive company shares once certain vesting conditions are met. RSUs do not require employees to purchase the shares upfront, making them less risky than stock options. Once vested, the shares are delivered to the employees, and they may choose to sell them, subject to capital gains tax.

In 2023 and 2024, FMC Corporation maintained its commitment to employee health and well-being by continuing to enhance its health benefits offerings. This included expanding mental health resources and increasing flexibility in healthcare spending accounts. Despite economic challenges, FMC has focused on providing robust support for its employees, including coverage for telemedicine services and wellness incentives to promote a healthier workforce.