There are just a couple of things almost all CMS Energy retirees need when they hit retirement: predictable income and protection against a cluster of risks, which include longevity risk, performance risk and sequence-of-returns risk.
In the past we have seen retiring CMS Energy employees utilize the “4% rule,” where retirees take annual withdrawals start at 4% of the entire portfolio and increase with inflation. They then keep the remainder of the portfolio with at least 50% invested in equities. Based on historical data, this would give a CMS Energy retiree about 30 years of retirement income.
As the economy constantly changes, a number of factors may force prospective CMS Energy retirees to revisit the 4% rule. It may be worth considering annuities as an alternative.
As life expectancies increase, CMS Energy retirees need to prepare for expenses over a longer time frame. In the past we would plan for a 15 to 20 year retirement, but now we need to prepare for a 30 to 35 year retirement. What is available to assist meeting the 35-year time frame?
The annuity strategy can assist with a few of the pitfalls we see in the 4% rule. For example:
If you need $50,000 per year in retirement and need that for 30 years, you may need $1.2 million in fixed income at a 3% interest rate. BUT if you look to fund $50,000 for 30 years, you can cover that expense with $800,000 by choosing the annuity option.
The other pitfall with the 4% rule is that it may not reflect a client’s risk tolerance. When you are accumulating assets, you can afford more volatility and can take on more risk than when in the retirement and withdrawal phase after leaving CMS Energy.
Also, should we see a drop in the market, you would be able to reduce your income using the 4% rule, which you cannot do if you choose an annuity option.
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What is the CMS Energy 401(k) Savings Plan?
The CMS Energy 401(k) Savings Plan is a retirement savings plan that allows employees to save a portion of their salary on a tax-deferred basis.
How can I enroll in the CMS Energy 401(k) Savings Plan?
Employees can enroll in the CMS Energy 401(k) Savings Plan by completing the enrollment process through the company’s HR portal or by contacting the HR department for assistance.
What are the contribution limits for the CMS Energy 401(k) Savings Plan?
The contribution limits for the CMS Energy 401(k) Savings Plan are determined by the IRS and may change annually. Employees should check the current limits for the specific year.
Does CMS Energy offer a company match for the 401(k) Savings Plan?
Yes, CMS Energy offers a company match for employee contributions to the 401(k) Savings Plan, helping to enhance the overall savings for retirement.
When is the best time to start contributing to the CMS Energy 401(k) Savings Plan?
The best time to start contributing to the CMS Energy 401(k) Savings Plan is as soon as you are eligible, as early contributions can significantly impact your retirement savings over time.
Can I change my contribution percentage in the CMS Energy 401(k) Savings Plan?
Yes, employees can change their contribution percentage at any time by accessing their account through the CMS Energy HR portal.
What investment options are available in the CMS Energy 401(k) Savings Plan?
The CMS Energy 401(k) Savings Plan offers a variety of investment options, including mutual funds, target-date funds, and other investment vehicles, allowing employees to choose based on their risk tolerance.
How often can I make changes to my investments in the CMS Energy 401(k) Savings Plan?
Employees can make changes to their investment allocations in the CMS Energy 401(k) Savings Plan on a regular basis, typically quarterly or as specified in the plan documents.
What happens to my CMS Energy 401(k) Savings Plan if I leave the company?
If you leave CMS Energy, you have several options for your 401(k) Savings Plan, including rolling it over to an IRA, transferring it to a new employer's plan, or cashing it out, though cashing out may have tax implications.
Is there a loan option available in the CMS Energy 401(k) Savings Plan?
Yes, the CMS Energy 401(k) Savings Plan may allow employees to take loans against their account balance, subject to specific terms and conditions outlined in the plan.
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