The volatility of recent markets forces us to remind L3Harris 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, L3Harris 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 L3Harris, 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 L3Harris 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 L3Harris 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 L3Harris clients. But that does not mean diversification guarantees a profit or protects against investment loss for L3Harris 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. L3Harris 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.
Featured Video
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. '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 .
What specific factors should L3Harris Technologies employees consider when determining the most suitable form of pension benefit at retirement? Employees of L3Harris Technologies may have various options, such as life annuities, contingent annuities, and lump-sum payouts. Understanding the implications of each option, including tax treatments and benefit guarantees, can be crucial in making a decision that aligns with long-term financial goals. It is also important to consider how the selected form may affect survivor benefits and overall retirement income planning.
Pension Options at Retirement: L3Harris Technologies employees have various pension benefit options to consider at retirement, such as life annuities, contingent annuities, and lump-sum payouts(L3Harris Technologies I…). Each option has different tax treatments, survivor benefits, and guarantees. For example, selecting a life annuity ensures a fixed monthly payment for life, while a lump-sum payout might offer more flexibility but comes with immediate tax implications. Employees should evaluate how each option aligns with their long-term financial goals and whether it provides adequate survivor protection for dependents(L3Harris Technologies I…).
How does L3Harris Technologies determine eligibility for early retirement, and what implications does this have for pension benefits? Employees should familiarize themselves with the criteria for qualifying for early retirement, including age and service requirements. Additionally, understanding the benefits that are available should retirement occur before the standard retirement age can affect financial planning, as these benefits can differ significantly from those available at normal retirement age due to reduction factors or penalties.
Early Retirement Eligibility: L3Harris Technologies determines eligibility for early retirement based on age and years of service. Employees may qualify for early retirement if they are at least 55 years old and have completed 10 years of service(L3Harris Technologies I…). Opting for early retirement can result in a reduced pension benefit due to the longer payment period. These reductions, known as early retirement penalties, affect financial planning since the payout is lower compared to waiting until the normal retirement age(L3Harris Technologies I…).
In what ways do the pension formulas at L3Harris Technologies differ, and how can employees assess which plan is most advantageous for their retirement? Employees participating in the L3Harris pension plan can choose between different formulas, such as the Traditional Pension Plan and the Pension Equity Plan. Assessing which formula may yield higher benefits involves understanding the benefits calculation processes, including how each formula accounts for years of service, salary history, and participation criteria, which can significantly impact total retirement income.
Pension Formulas: L3Harris employees can choose between different pension formulas, such as the Traditional Pension Plan and Pension Equity Plan(L3Harris Technologies I…). The Traditional Plan is based on years of service and final average pay, while the Pension Equity Plan uses a lump-sum formula that accrues value over time. Understanding how each formula calculates benefits is essential for employees to determine which plan will provide higher retirement income, depending on their service years and salary history(L3Harris Technologies I…).
How should L3Harris Technologies employees prepare for the selection of a beneficiary, and what are the potential impacts on their pension benefits? Selecting a beneficiary is an important component of retirement planning. Employees at L3Harris Technologies must understand the implications that come with adding a spouse or other individuals as beneficiaries, including the effect on benefit amounts and how beneficiary selection can influence survivor payouts. Moreover, they should familiarize themselves with the requirements for updating beneficiary information and the legal implications of such designations.
Beneficiary Selection: Choosing a beneficiary is a crucial step for L3Harris employees. Adding a spouse or another individual as a beneficiary may reduce the employee's pension benefit but ensures that a portion of the pension continues after the employee's death(L3Harris Technologies I…). Employees should be aware of the survivor benefit provisions, spousal consent requirements, and the need to regularly update their beneficiary information(L3Harris Technologies I…).
What procedures must L3Harris Technologies employees follow to appeal a denied pension benefit claim, and what timelines should they be aware of? Employees should be well-informed about the steps involved in the appeals process for denied claims, including how and when to file an appeal and the importance of providing adequate documentation. Understanding the statutes of limitations related to claims and appeals can significantly influence the outcomes for employees seeking to reinstate or secure their benefits.
Appealing Denied Claims: L3Harris Technologies employees must follow a formal process to appeal denied pension benefit claims(L3Harris Technologies I…). The process includes submitting an appeal within a specific timeframe and providing supporting documentation. It is important to be familiar with the statute of limitations and administrative remedies to ensure the best chance of success when appealing a decision(L3Harris Technologies I…).
How does L3Harris Technologies handle survivor benefits, and what actions should employees take to ensure that their surviving spouses or partners have access to these benefits? Understanding the components of survivor benefits at L3Harris Technologies is crucial. Employees should learn about the eligibility of their spouses or partners following their death, the type of benefits due, and any actions required to secure these benefits. Familiarity with the plan’s rules surrounding survivor benefits and timelines for elections can also affect the financial security of beneficiaries.
Survivor Benefits: L3Harris offers survivor benefits to spouses or designated beneficiaries(L3Harris Technologies I…). Employees must ensure that their spouse or partner is properly designated to receive these benefits, which may involve selecting an annuity option that provides continued payments to the survivor. Understanding the timelines for making these elections and the rules governing survivor benefits is crucial for securing financial support for loved ones(L3Harris Technologies I…).
What resources are available for L3Harris Technologies employees for receiving personalized retirement counseling, and how can these resources aid in making informed financial decisions? Employees may benefit from accessing professional counseling services or informational resources provided by L3Harris Technologies. These resources can include individual retirement planning sessions that help employees align their pension benefits with their overall retirement strategy, ensuring that they utilize their benefits effectively and are informed about their options.
Retirement Counseling Resources: L3Harris provides personalized retirement counseling services to assist employees with their pension and retirement planning(L3Harris Technologies I…). These resources include individual sessions to discuss how pension benefits fit into overall retirement strategies. By leveraging these services, employees can make well-informed decisions about their financial future(L3Harris Technologies I…).
How can employees of L3Harris Technologies find out more about their eligibility for the Cash Balance Plan and the advantages of this plan over traditional pension formulas? Employees should research what defines an "active Cash Balance Plan Participant" as well as the benefit calculations associated with it. Investigating the elements that set this type of plan apart—specifically regarding lump-sum distributions and the ability to track benefits—can better inform employees about the potential advantages for their future retirement income.
Cash Balance Plan: Employees interested in the Cash Balance Plan can research its advantages over traditional pension formulas. The Cash Balance Plan allows for lump-sum distributions and provides clear benefit tracking, which can be more appealing to employees looking for flexibility and control over their retirement funds(L3Harris Technologies I…).
What impact do potential changes to the L3Harris Technologies pension plan have on current employees, and what steps should they take to stay informed about such changes? Employees should remain vigilant regarding any amendments to the pension plan that could influence their retirement benefits. This includes understanding their rights under ERISA and staying engaged with communication from L3Harris regarding plan updates, ensuring that they are equipped to make timely decisions based on the latest information.
Plan Changes: L3Harris employees should stay updated on any changes to the pension plan, which could impact their benefits(L3Harris Technologies I…). Monitoring communications from the company and understanding their rights under ERISA is essential to making timely decisions based on new plan terms or amendments(L3Harris Technologies I…).
How can employees of L3Harris Technologies contact the Benefits Service Center to address specific questions regarding their pension plan or retirement strategy? It is essential for employees seeking clarity on their pension benefits or retirement planning to know how to reach out to the L3Harris Benefits Service Center. This center acts as a vital resource, and understanding its operations—including contact times, methods of contact, and the types of inquiries that can be addressed—will enable employees to receive the guidance they need regarding their benefits.
Benefits Service Center: L3Harris employees can contact the Benefits Service Center for any questions regarding their pension or retirement strategy. The center provides assistance with understanding pension benefits, resolving issues, and addressing specific inquiries related to retirement planning(L3Harris Technologies I…)(L3Harris Technologies I…).
-2.png)
.webp)