There are just a couple of things almost all Deere 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 Deere 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 Deere retiree about 30 years of retirement income.
As the economy constantly changes, a number of factors may force prospective Deere retirees to revisit the 4% rule. It may be worth considering annuities as an alternative.
As life expectancies increase, Deere 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 Deere.
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 purpose of the 401(k) Savings Plan at Deere?
The purpose of the 401(k) Savings Plan at Deere is to help employees save for retirement by allowing them to contribute a portion of their salary on a pre-tax or Roth after-tax basis.
How can employees enroll in Deere's 401(k) Savings Plan?
Employees can enroll in Deere's 401(k) Savings Plan by accessing the plan's website or contacting the HR department for enrollment instructions.
What types of contributions can employees make to Deere's 401(k) Savings Plan?
Employees can make pre-tax contributions, Roth after-tax contributions, and, in some cases, catch-up contributions if they are age 50 or older.
Does Deere offer a company match for the 401(k) Savings Plan?
Yes, Deere offers a company match for the 401(k) Savings Plan, which helps employees boost their retirement savings.
What is the vesting schedule for Deere's company match in the 401(k) Savings Plan?
The vesting schedule for Deere's company match varies based on the employee's length of service, and employees should refer to the plan documents for specific details.
Can employees take loans against their 401(k) Savings Plan at Deere?
Yes, employees may have the option to take loans against their 401(k) Savings Plan at Deere, subject to the plan's rules and limits.
What investment options are available in Deere's 401(k) Savings Plan?
Deere's 401(k) Savings Plan offers a variety of investment options, including mutual funds, target-date funds, and company stock.
How often can employees change their contribution amounts to Deere's 401(k) Savings Plan?
Employees can change their contribution amounts to Deere's 401(k) Savings Plan at any time, subject to plan rules and limits.
What happens to my 401(k) Savings Plan at Deere if I leave the company?
If you leave Deere, you can choose to roll over your 401(k) Savings Plan balance to another retirement account, cash out, or leave it in the plan, depending on the plan's rules.
Are there penalties for withdrawing funds from Deere's 401(k) Savings Plan before retirement?
Yes, there may be penalties for early withdrawals from Deere's 401(k) Savings Plan before age 59½, along with potential tax implications.
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