Lockheed Martin Employees: Rising Rates Join Long List of Housing Dilemmas

While rising interest rates continue to remake the housing market, Lockheed Martin employees must be vigilant about adapting their home-buying strategies and financial planning to limit short-term impacts on long-term financial goals, 'says Paul Bergeron, a representative of the Retirement Group, a division of Wealth Enhancement Group.

For Lockheed Martin employees, knowing the bigger economic picture will help them navigate these rising mortgage rates and housing costs that will affect today and into retirement, 'says Kevin Landis, of the Retirement Group, a division of Wealth Enhancement Group.

In this article we will discuss:

1. Roaring mortgage rates & home prices affect Lockheed Martin employees.
2. Limited inventory and rising costs are among the housing market challenges.
3. Strategies for first-time homebuyers and retirees about the current housing market.

Homebuyers who entered the hot U.S. housing market have seen a transformation. Lockheed Martin employees must admit the average 30-year fixed mortgage interest rate jumped from about 3.2% at the beginning of 2022 to 5.3% in mid-May, the highest level since 2009. This increase came after the Federal Reserve raised the federal funds rate - a key benchmark for short-term interest rates - to combat some of the highest inflation in decades. As a Lockheed Martin employee, you need to understand why these rates have fluctuated and what their future projections are.

Although mortgage rates aren't directly tied to the Fed funds rate, monetary policy dictates all borrowing costs. The yield on the 10-year Treasury is sensitive to changes in the federal funds rate and also depends on bond market longer-term expectations for economic growth and inflation. Lockheed Martin employees can use this information to decide how to allocate funds to treasuries and other assets.

Housing Costs Are Soaring

You might be thinking how buyers have dealt with low inventory, bidding wars, and rising prices for almost two years now - as a Lockheed Martin employee. The national median price of existing residences increased 14.8% last year to USD 391,200 by April 2022. Almost seven out of 185 metropolitan areas recorded double-digit annual price increases in the first quarter. Price increases in more affordable small and medium-sized cities outpaced those in more expensive metropolitan markets as more homebuyers took advantage of working remotely. Lockheed Martin employees must account for these atypical gains to avoid buying property at an undervalued price.

The market conditions and home values may differ regionally and even by neighborhood in the same city. The ten most expensive cities had median home prices of USD 662,000 in Denver and USD 1,875,000 in San Jose in April. One-half of the nation's ten most expensive housing markets is in California, where there is a persistent housing shortage. Lockheed Martin employees must consider the housing shortage when considering buying California real estate and, if possible, wait until prices normalize.

I've seen rent prices go up with home prices as a Lockheed Martin employee looking to rent a home. The median rent for 0- to 2-bedroom properties in the 50 largest U.S. metropolitan areas was USD 1,827 in April 2022 - up 16.7% year-over-year. More pronounced increases were in Sun Belt cities like Miami (51.6%), San Diego (25.6%), and Austin (24.7%).

Those looking for a home might be in a tough spot right now - especially prospective homebuyers, renters renewing a lease, and anyone else looking for somewhere to live. Consider this article as you become a Lockheed Martin employee and avoid the situation above.

Affordability Is Waning

For those Lockheed Martin employees with slim financial resources, rising mortgage rates and property prices have impacted affordability. A USD 300,000 borrower would pay USD 1,666 per month at 5.3%, versus USD 1,297 per month at 3.2% today. Even more important is affordability in high-cost areas and for first-time buyers who have not benefited from gains in home equity. It suggests Lockheed Martin employees in high-cost areas do market research and consider other less-expensive and more reasonable locations.

Mortgages originated by borrowers who started a home search and were prequalified by a lender before interest rates spiked may not still be approved. In recent months, demand for lower-rate adjustable-rate mortgages (ARMs) has spiked. An ARM that has a fixed rate for the first three, five, seven, or ten years of a 30-year term before adjusting to market rates might tempt borrowers who expect to move someday and need a lower monthly payment to qualify for a larger mortgage.

Other buyers adjust expectations and settle for a cheaper home. Still, others might give up the search because the homes they want are not affordable, or their dream neighborhoods are out of reach. And as a Lockheed Martin employee considering buying or renting a home, you have to understand how many entry-level buyers may be priced out of the market - at least temporarily - because of these ridiculously high prices.

Because purchase contracts are signed many months before the homes are built, buyers of new homes may be particularly exposed to changing interest rates. With their deposits in jeopardy, Lockheed Martin employees planning to buy may pay the extra fee to extend rate locks for six, nine, or twelve months.

I also work for a Lockheed Martin employee and understand how rising borrowing costs could halt homebuilding demand so as to curtail price increases - and how prices could drop in some overheated markets. Yet most economists do not foresee a collapse in property prices as market fundamentals remain relatively solid. Inventory levels are low, and lenders have been cautious, so most homeowners who bought in the last few years can still afford their mortgages. Cash purchasers include downsizing retirees and investors, who account for about 26% of transactions, are unaffected by interest rates. Assuming the economy and employment remain steady, millennials in their prime home-buying years should be in high demand.

Tips for Bewildered First Buyers.

If Lockheed Martin employees will take a mortgage, buying a home would stabilize their housing costs for as long as the payment is fixed, while paying rent indefinitely might not help their finances. Or you could create equity in your home as you pay down your loan balance, especially if the home goes up in value.

No one knows where mortgage rates are heading or what will happen next in the housing market despite widespread speculation to the contrary. So how does a Lockheed Martin employee know whether buying a home is financially prudent? As always, the answer is dependent on where you want to live, how you want to spend your time and money. Here are three ways Lockheed Martin customers can get ready for homebuying.

Develop into a better borrower. Lockheed Martin employees should get a copy of their credit report before applying for a mortgage to catch errors and correct mistakes. High credit scores may qualify for low interest rates.
Collect a down payment. Conventional mortgages require 20% down, but some loan programs allow down payments of 5% to 10%. Should parents or another relative 'gift' cash as a down payment, lenders might ask for a letter of verification as to where the money came from. Local programs might help Lockheed Martin employees who earn enough to qualify and who attend homeownership classes with down-payment assistance.

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Figure out what you can afford to spend. Our Lockheed Martin customers understand their budgets. Start with online calculators that consider income, debt, and expenses. A mortgage lender can determine how much you could borrow. Real estate transaction costs can be three to five years before they recover, so consider the stability of your Lockheed Martin employment and your income.

Bloomberg May 12 & May 19, 2022.

2-3, 7) National Association of Realtors, 2022
Realtor.com, 2022
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The Wall Street Journal May 5, 2022.
NPR, May 12, 2022.
Wall Street Journal, December 14, 2021.

Added Fact:

Rising Rates Add to Long List of Housing Dilemmas:
Those 60-something Lockheed Martin workers and retirees need to understand how rising interest rates could affect their retirement plans and housing decisions. A study by the National Association of Realtors in March 2023 found that 60% of homeowners over 60 have mortgage debt. It means an enormous chunk of this age group could be affected by rising interest rates, which could mean higher mortgage payments and possibly affect retirement savings and financial stability. Age-related issues include evaluating housing options and assessing whether rising rates will affect retirement plans.

Added Analogy:

So the current housing market situation of sky-high prices, low inventory, and rising interest rates is akin to sailing across rough water on a sailing trip toward retirement. Now imagine yourself as a sailor approaching turbulent seas with whipping winds and crushing waves. The housing market is like a body of water - with its moving prices and shrinking options - and rising interest rates are like winds against your financial stability. You must navigate bidding wars and mounting costs while adjusting your sails to reflect the market conditions. As a seasoned sailor looks at wind patterns and charts course to avoid rocky reefs, Lockheed Martin workers planning to retire and current retirees need to evaluate market conditions, assess financial potential, and make sound decisions about how to sail toward retirement goals.

Sources:

'How Higher Interest Rates Are Impacting Retirees.' Retirement Stewardship , 20 Sept. 2023, www.retirementstewardship.com/2023/09/20/how-higher-interest-rates-are-impacting-retirees/ .
Malagies, Didier. 'How the Housing Crisis Impacts Your Retirement Savings.' U.S. News & World Report , 9 Jan. 2025, money.usnews.com/money/retirement/articles/how-the-housing-crisis-impacts-your-retirement-savings .
'Nearly Half of Retirees Worry They'll Outlive Their Savings, While 25% Are Burdened by Housing Costs.' DDAMortgage , 9 Jan. 2025, www.ddamortgage.com/nearly-half-of-retirees-worry-theyll-outlive-their-savings-while-25-are-burdened-by-housing-costs .
'Older Homeowners Are Financially Confident Aging in Place.' Fannie Mae , 29 Feb. 2024, www.fanniemae.com/research-and-insights/perspectives/older-homeowners-are-financially-confident-aging-place .
'How Housing Can Play An Important Role in Retirement Security.' Investopedia , Nov. 2024, www.investopedia.com/how-housing-can-play-an-important-role-in-retirement-security-8746025 .

How does Lockheed Martin determine the monthly pension benefit for employees nearing retirement, and what factors should employees consider when planning their retirement based on this calculation? Specifically, how do the concepts of "Final Average Pay" and "Credited Years of Service" interact in the pension calculation under Lockheed Martinâ€™s retirement plan?

Lockheed Martin Pension Calculation: Lockheed Martin calculates monthly pension benefits using the "Final Average Pay" (FAP) and "Credited Years of Service" (CYS). The FAP is determined by averaging the three highest annual compensations prior to 2016, while CYS counts the years from employment start to December 31, 2019, when the pension was frozen. The benefit per year of service is calculated based on whether the FAP is less than or exceeds the Social Security Covered Compensation, with specific formulas applied for each scenario. These calculations directly affect the monthly pension benefit, which may also be reduced if retirement commences before a certain age due to early retirement penalties.

Given the recent changes in Lockheed Martin's pension policy, what implications could this have for employees who are planning to retire in the near future? How should these employees navigate their expectations regarding retirement income given that the pension has been frozen since 2020?

Implications of Pension Freeze: Since Lockheed Martin froze its pension plan in 2020, no future earnings or years of service will increase pension benefits. This freeze shifts the emphasis towards maximizing contributions to 401(k) plans, where Lockheed Martin increased its maximum contribution to 10% for non-represented employees. Employees planning for imminent retirement should recalibrate their financial planning to account for this change, prioritizing 401(k) growth and other retirement savings vehicles to compensate for the pension freeze.

What options does Lockheed Martin provide for employees regarding healthcare insurance as they approach retirement age? How do these options compare in terms of coverage and cost, particularly for those who will transition to Medicare upon reaching age 65?

Healthcare Options Near Retirement: As Lockheed Martin employees approach retirement, they can choose from several health insurance options. Before Medicare eligibility, they may use COBRA, a Lockheed Martin retiree plan, or the ACA's private marketplace. Post-65, they transition to Medicare, with the possibility of additional coverage through Medicare Advantage or Medigap plans. Lockheed Martin supports this transition with a Health Reimbursement Arrangement, providing an annual credit to help cover medical expenses.

Understanding the complex nature of Lockheed Martin's pension and retirement benefits, what resources are available to employees to help them navigate their choices regarding pension claiming options? In what ways can the insights from these resources aid employees in making informed decisions about their financial future?

Resources for Navigating Retirement Benefits: Lockheed Martin employees have access to resources like the LM Employee Service Center intranet, which includes robust tools such as a pension estimator. This tool allows for modeling different retirement scenarios and understanding the impacts of various pension claiming options. Additional support is provided through HR consultations and detailed plan descriptions to ensure employees make informed decisions about their retirement strategies.

For employees with varying years of service at Lockheed Martin, how can their employment history impact their pension benefits? What strategies should individuals explore to maximize their benefits given the different legacy systems that might influence their retirement payout?

Impact of Employment History on Pension Benefits: The length and nature of an employee’s service at Lockheed Martin significantly influence pension calculations. Historical changes in pension policies, particularly the transition points of the pension freeze, play critical roles in determining the final pension benefits. Employees must consider their entire career timeline, including any represented or non-represented periods, to understand and maximize their eligible pension benefits fully.

How does the Lockheed Martin retirement plan ensure that benefits are preserved for spouses or dependents after an employee's passing? How do different claiming options affect the long-term financial security of the employee's family post-retirement?

Benefit Preservation for Dependents: Lockheed Martin's pension plan includes options that consider the welfare of spouses or dependents after an employee's passing. Options like "Joint and Survivor" ensure ongoing benefits for surviving spouses, while choices like "Life with X-Year guarantee" provide continued payments for a defined period after the employee’s death. Understanding these options helps secure long-term financial stability for beneficiaries.

What steps can Lockheed Martin employees take to prepare financially for retirement, especially if they have outstanding loans or financial obligations? How crucial is it for employees to understand the conditions under which these loans must be settled before retirement?

Financial Preparation for Retirement: Employees approaching retirement should focus on clearing any outstanding loans and maximizing their contributions to tax-advantaged accounts like 401(k)s and Health Savings Accounts (HSAs). These steps are crucial for ensuring a smooth financial transition to retirement, minimizing potential tax impacts, and maximizing available retirement income streams.

With the evolution of Lockheed Martin's retirement initiatives, particularly the shift toward higher 401(k) contributions, how should employees balance contributions to their 401(k) with their overall retirement savings strategy? What factors should they consider in optimizing their investment choices post-retirement?

Balancing 401(k) Contributions: With the pension freeze, Lockheed Martin employees should increasingly rely on 401(k) plans, where the company has increased its contribution cap. Employees must balance these contributions with other savings strategies and consider their investment choices carefully to ensure a robust retirement fund that can support their post-retirement life.

How does Lockheed Martin's approach to retirement planning include the management of health savings accounts (HSAs) for retirees? What are the tax advantages of HSAs, and how can employees effectively utilize this resource when planning for healthcare expenses in retirement?

Management of HSAs for Retirees: Lockheed Martin encourages maximizing contributions to Health Savings Accounts (HSAs), which offer significant tax advantages. These accounts not only provide funds for current medical expenses but can also be used tax-free for healthcare costs in retirement, making them a critical component of retirement health expense planning.

What is the best way for employees to contact Lockheed Martin regarding specifics or questions about their retirement benefits? What channels of communication are available, and how can they access the most current and relevant information regarding their retirement planning? These questions aim to encourage thoughtful consideration and discussion about retirement planning within Lockheed Martin, addressing various aspects of the company's benefits while promoting engagement with internal resources.

Contacting Lockheed Martin for Retirement Benefit Queries: Employees should direct specific inquiries about their retirement benefits to Lockheed Martin's HR department or consult the benefits Summary Plan Descriptions available through company resources. These channels ensure employees receive accurate and comprehensive information tailored to their individual circumstances.

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

Lockheed Martin offers both a traditional defined benefit pension plan and a defined contribution 401(k) plan. The defined benefit plan includes a cash balance component, where benefits grow based on years of service and compensation, with interest credits added annually. The 401(k) plan features company matching contributions and various investment options such as target-date funds and mutual funds. Lockheed Martin provides financial planning resources and tools to help employees manage their retirement savings.

Operational Efficiency: Lockheed Martin is restructuring its operations to improve efficiency and reduce costs, including layoffs affecting around 1,000 employees (Source: Reuters). Strategic Focus: The company is focusing on its core defense and aerospace segments. Financial Performance: Despite these changes, Lockheed Martin reported a 5% increase in net sales for Q3 2023, driven by strong demand for its defense products (Source: Lockheed Martin).

Lockheed Martin grants RSUs that vest over several years, giving employees shares of the company. Additionally, stock options are provided, allowing employees to purchase shares at a set price and potentially benefit from stock price increases.

Lockheed Martin has been proactive in enhancing its employee healthcare benefits to align with the evolving economic, investment, tax, and political environment. In 2022, the company expanded its health and wellness programs, which included on-site health centers and comprehensive medical, dental, and vision coverage. These initiatives were part of Lockheed Martin's broader strategy to support the physical and emotional well-being of its employees, recognizing that a healthy workforce is crucial for maintaining productivity and engagement. The company also focused on increasing transparency in healthcare costs, ensuring employees have access to detailed information about their medical expenses. In 2023, Lockheed Martin continued to build on these efforts by offering enhanced mental health support and flexible work schedules to better accommodate employees' personal and professional lives. The company's benefits package includes competitive compensation, on-site health and wellness centers, and financial tools to help employees manage their finances effectively. These comprehensive benefits are designed to create a supportive and inclusive work environment, essential for attracting and retaining top talent in today's competitive job market. By investing in robust healthcare benefits, Lockheed Martin aims to foster a resilient workforce capable of navigating the complexities of the current economic landscape.