The volatility of recent markets forces us to remind Kroger employees to be proactive about portfolio management,' says Michael Corgiat, a financial expert with the Retirement Group. Regular portfolio reviews and rebalancing could protect retirement savings against sudden market downturns and help you stay on track with your long-term financial goals,' he added.
With all the volatility in the markets, Kroger employees need to create a resilient investment strategy, says Brent Wolf of the Retirement Group. A diversified portfolio that can ride economic cycles is essential for retirement financial security,' said Dr.
In this article we will discuss:
1. Market Volatility and Retirement Savings: Market fluctuations and how they affect retirement income challenge retirees. Factors
2. driving Market Volatility in 2021 & 2022: Exploring how the pandemic, economic policies and global events shaped market
3. changes. Strategies for Investors During Volatility: Advice on diversification and holding investment strategies during turbulent times.
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.
During the extremely volatile first 100 trading days of 2022, the constituent equities of the S&P 500 continued to fall, and the benchmark index entered a bear market on June 13, 2022 - a decline of at least 20% in stock prices. The S&P 500 was down 21.8% from its January 3 peak and the tech-heavy NASDAQ, already in bear territory, was down 32.7% from its November 19, 2021 zenith.
Some investors nervous about the future of their portfolios seem to have gone defensive and sold riskier assets like growth-oriented technology stocks.
What drives market volatility? In 2021, companies throughout the US, including Kroger, dealt with unpredictable demand shifts and supply shocks from the pandemic. Near zero interest rates and trillions in pandemic relief bolstered consumer spending, economic growth and record corporate profits. Profits from S&P 500 companies in 2021 were 75% higher than in 2020 and 33% higher than in 2019 - a nearly 29% total market return. (3-4)
In early 2022, however, investors feared that a planned loosening of monetary policy - meant to cool stubbornly high inflation - would choke economic growth and cause a recession. Demand, supply-chain issues and a labor shortage in the spring of 2021 drove prices up and wages went up. China's COVID-19 lockdowns impacted product supplies in the first quarter of 2022 and Russia's invasion of Ukraine pushed already high world food and fuel prices skyrocketing. May 2022 saw the fastest annual rate of increase in forty years, 8.6% (5).
The seemingly unstoppable acceleration of price increases puts pressure on the Federal Open Market Committee (FOMC), which meets June 14 and 15, to act aggressively against inflation. In May, the federal Open Market Committee raised the benchmark Federal funds rate by 0.5% (from 0.75-1.0%). That's the first half-percent increase since May 2000 and Fed forecasters expect more. (6)
High interest rate bond yields rise and higher returns from lower-risk bond investments make higher-risk stock investments less attractive. Stock investors also buy a component of a company's future cash flows that lose value in an inflationary environment. Higher financing costs may also depress the purchasing power of consumers and profits of debt-intensive businesses.
The downside of domination The S&P Information Technology Sector Index has fallen 29.2% more than the S&P 500 as a whole from its January 3 peak. Also, like most benchmarks, the S&P 500 is weighted by market capitalization - the value of a company's outstanding shares. This gives the largest companies - mostly technology - a disproportionate drag on index performance. As at May 31 the information technology sector had 27.1% of the market capitalization of the S&P 500, followed by 14.4% for health care and 11.2% for financials, the next two largest sectors. The four most valuable companies are Apple, Microsoft, Alphabet & Amazon; Nvidia is ranked ninth while Meta dropped to 11. (7)
The past few years saw tech stock gains lift the market. However, falling share prices of these companies dragged down broader stock indexes. In analyzing market data through May 17, just eight of the largest U.S. companies accounted for 46% of the 2022 losses (total return) of the S&P 500. (8)
Those famous technology companies have grown into huge multinational corporations affecting every day life. Some companies are so dominant in their fields - social media, smartphones, online search and advertising, e-commerce and cloud computing - that antitrust investigations and calls for tougher rules have been made in the US and abroad. And they do have plenty of cash on board to help them weather an economic slowdown better than their smaller rivals (8).
Takeaways for investors Stocks are often spread across the eleven S&P 500 sectors. Yet a once-diversified stock portfolio can become overly concentrated in a sector that has outperformed the market as a whole over time. TECH-sector equities posted huge total returns of about 50% for 2019, 44% for 2020 and 35% for 2021; therefore, some Kroger employees and retirees may wish to rebalance if they are overexposed to this volatile sector. This involves selling some investments to buy others. Remember that the sale of investments from a taxable account may be taxed. (10)
Should you feel lost after more than five months of market volatility? our Kroger clients should get perspective. Several market analysts see recent price declines as a painful but long overdue repricing of equities at overpriced valuations and a reality check from dwindling growth expectations. That ratio of forward price to earnings (P/E) ratio of S&P 500 companies fell from 23.3 at the end of 2021 to 17.8 in May 2022, closer to the 10-year average of 16.9.11-12.
It could be some time before investors can assess how the economy and corporate profits will fare with rising inflation and higher borrowing costs - and the stock market does not like uncertainty. Downward economic data and company earnings reports could fuel volatility in the months to come.
If you have a sufficiently diversified, all-weather investment strategy, sticking with it is often the best course of action amid grim headlines. When the market goes down, panic and leave it - you can't profit from its upswings. And if you still invest regularly to fund a long-term goal like retirement, a market decline could let you buy additional shares at a discount.
Stocks' return and principal value vary depending on market conditions. If sold, shares might fetch more or less than their original price. Investments that seek greater return usually involve greater risk. We recommend diversification as a risk management technique to our Kroger clients. But that does not mean diversification guarantees a profit or protects against investment loss for Kroger employees. The S&P 500 is an unmanaged index of stocks representative of the U.S. stock market in general. An unmanaged index does not represent any investment performance.
No one can own an index directly. The past does not predict future performance. The real results will differ. Dollar-cost averaging does not guarantee or prevent a profit or loss. These programs involve ongoing investments in securities irrespective of price movements. Kroger employees and retirees should ask themselves whether they can afford to keep buying during low and high prices. But this may be a good way for investors to get shares to fund long-term goals.
A stock market investment is like planting a tree in your backyard. Just as you choose the location, type of tree, and soil conditions for your tree, you choose your investment strategy, stocks, and market conditions. And you also need to water and fertilize your investment just as you would your tree. With patience and an investment that grows over time, you can enjoy a healthy tree that produces shade and fruit for many years to come, just as your investment can provide retirement for you and your family.
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Sources:
1. 'Market Volatility - Fidelity Can Help.' Fidelity Investments , 2021, www.fidelity.com/misc/buffers/market-volatility.shtml .
2. 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/news/home/20211011005389/en/Fidelity%C2%AE-Q3-2021-Retirement-Analysis-Retirement-Savers-%E2%80%9CStay-the-Course%E2%80%9D-in-Spite-of-Stock-Market-Swings-and-Ongoing-Economic-Uncertainty .
3. Barry, Kevin. '401k Savers 'Stay the Course' Despite Market Volatility.' 401k Specialist Magazine , 2022, www.401kspecialistmag.com/401k-savers-stay-the-course-despite-market-volatility/ .
4. 'Retiring in a Recession, Downturn, or Period of Market Volatility? Things to Consider.' Fidelity Investments , 2021, www.fidelity.com/viewpoints/retirement/retiring-in-a-recession .
5. 'Fidelity® Q3 2021 Retirement Analysis: Retirement Savers 'Stay the Course' in Spite of Stock Market Swings and Ongoing Economic Uncertainty.' Fidelity Investments , 2021, www.fidelity.com/viewpoints/retirement/q3-2021-retirement-analysis .
How does the KROGER CONSOLIDATED RETIREMENT BENEFIT PLAN ensure that employees receive adequate retirement benefits calculated based on their years of service and compensation? Are there specific formulas or formulas that KROGER uses to ensure fair distribution of benefits among its participants, particularly in regards to early retirement adjustments?
The KROGER CONSOLIDATED RETIREMENT BENEFIT PLAN ensures that employees receive adequate retirement benefits based on a formula that takes into account both years of credited service and compensation. The plan, being a defined benefit plan, calculates benefits that are typically paid out monthly upon reaching the normal retirement age, but adjustments can be made for early retirement. This formula guarantees that employees who retire early will see reductions based on the plan’s terms, ensuring a fair distribution across participants(KROGER_2023-10-01_QDRO_…).
In what ways does the cash balance formula mentioned in the KROGER CONSOLIDATED RETIREMENT BENEFIT PLAN impact the retirement planning of employees? How are these benefits expressed in more relatable terms similar to a defined contribution plan, and how might this affect an employee's perception of their retirement savings?
The cash balance formula in the KROGER CONSOLIDATED RETIREMENT BENEFIT PLAN impacts retirement planning by expressing benefits in a manner similar to defined contribution plans. Instead of a traditional annuity calculation, the benefits are often framed as a hypothetical account balance or lump sum, which might make it easier for employees to relate their retirement savings to more familiar terms, thereby influencing how they perceive the growth and adequacy of their retirement savings(KROGER_2023-10-01_QDRO_…).
Can you explain the concept of "shared payment" and "separate interest" as they apply to the KROGER CONSOLIDATED RETIREMENT BENEFIT PLAN? How do these payment structures affect retirees and their alternate payees, and what considerations should participants keep in mind when navigating these options?
In the KROGER CONSOLIDATED RETIREMENT BENEFIT PLAN, "shared payment" refers to a payment structure where the alternate payee receives a portion of the participant’s benefit during the participant's lifetime. In contrast, "separate interest" means that the alternate payee receives a separate benefit, typically over their own lifetime. These structures impact how retirees and their alternate payees manage their retirement income, with shared payments being tied to the participant’s life and separate interests providing independent payments(KROGER_2023-10-01_QDRO_…).
What procedures does KROGER have in place for employees to access or review the applicable Summary Plan Description? How can understanding this document help employees make more informed decisions regarding their retirement benefits and entitlements under the KROGER plan?
KROGER provides procedures for employees to access the Summary Plan Description, typically through HR or digital platforms. Understanding this document is crucial as it outlines the plan’s specific terms, helping employees make more informed decisions about retirement benefits, including when to retire and how to maximize their benefits under the plan(KROGER_2023-10-01_QDRO_…).
With regard to early retirement options, what specific features of the KROGER CONSOLIDATED RETIREMENT BENEFIT PLAN can employees take advantage of? How does the plan's definition of "normal retirement age" influence an employee's decision to retire early, and what potential consequences might this have on their benefits?
The KROGER CONSOLIDATED RETIREMENT BENEFIT PLAN offers early retirement options that include adjustments for those retiring before the plan’s defined "normal retirement age." This early retirement can result in reduced benefits, so employees must carefully consider how retiring early will impact their overall retirement income. The definition of normal retirement age serves as a benchmark, influencing the timing of retirement decisions(KROGER_2023-10-01_QDRO_…).
How does the KROGER CONSOLIDATED RETIREMENT BENEFIT PLAN address potential changes in federal regulations or tax law that may impact retirement plans? In what ways does KROGER communicate these changes to employees, and how can participants stay informed about updates to their retirement benefits?
The KROGER CONSOLIDATED RETIREMENT BENEFIT PLAN incorporates changes in federal regulations or tax laws by updating the plan terms accordingly. KROGER communicates these changes to employees through official channels, such as newsletters or HR communications, ensuring participants are informed and can adjust their retirement planning in line with regulatory changes(KROGER_2023-10-01_QDRO_…).
What are some common misconceptions regarding participation in the KROGER CONSOLIDATED RETIREMENT BENEFIT PLAN that employees might have? How can these misconceptions impact their retirement planning strategies, and what resources does KROGER provide to clarify these issues?
A common misconception regarding participation in the KROGER CONSOLIDATED RETIREMENT BENEFIT PLAN is that it functions similarly to a defined contribution plan, which it does not. This can lead to confusion about benefit accrual and payouts. KROGER provides resources such as plan summaries and HR support to clarify these misunderstandings and help employees better strategize their retirement plans(KROGER_2023-10-01_QDRO_…).
How does the KROGER CONSOLIDATED RETIREMENT BENEFIT PLAN interact with other employer-sponsored retirement plans, specifically concerning offsetting benefits? What implications does this have for employees who may also be participating in defined contribution plans?
The KROGER CONSOLIDATED RETIREMENT BENEFIT PLAN interacts with other employer-sponsored retirement plans by offsetting benefits, particularly with defined contribution plans. This means that benefits from the defined benefit plan may be reduced if the employee is also receiving benefits from a defined contribution plan, impacting the total retirement income(KROGER_2023-10-01_QDRO_…).
What options are available to employees of KROGER regarding the distribution of their retirement benefits upon reaching retirement age? How can employees effectively plan their retirement income to ensure sustainability through their retirement years based on the features of the KROGER plan?
Upon reaching retirement age, KROGER employees have various options for distributing their retirement benefits, including lump sums or annuity payments. Employees should carefully plan their retirement income, considering the sustainability of their benefits through their retirement years. The plan’s features provide flexibility, allowing employees to choose the option that best fits their financial goals(KROGER_2023-10-01_QDRO_…).
How can employees contact KROGER for more information or assistance regarding the KROGER CONSOLIDATED RETIREMENT BENEFIT PLAN? What are the recommended channels for employees seeking guidance on their retirement benefits, and what type of support can they expect from KROGER's human resources team?
Employees seeking more information or assistance regarding the KROGER CONSOLIDATED RETIREMENT BENEFIT PLAN can contact the company through HR or dedicated plan administrators. The recommended channels include direct communication with HR or online resources. Employees can expect detailed support in understanding their benefits and planning for retirement(KROGER_2023-10-01_QDRO_…).
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