There are just a couple of things almost all Illumina 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 Illumina 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 Illumina retiree about 30 years of retirement income.
As the economy constantly changes, a number of factors may force prospective Illumina retirees to revisit the 4% rule. It may be worth considering annuities as an alternative.
As life expectancies increase, Illumina 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 Illumina.
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 401(k) plan offered by Illumina?
The 401(k) plan at Illumina is a retirement savings plan that allows employees to save a portion of their paycheck before taxes are taken out, helping them prepare for retirement.
How does Illumina match employee contributions to the 401(k) plan?
Illumina offers a matching contribution to the 401(k) plan, where the company matches a percentage of employee contributions up to a certain limit, enhancing employees' savings potential.
When can employees at Illumina start contributing to the 401(k) plan?
Employees at Illumina can begin contributing to the 401(k) plan after completing their initial eligibility period, which is typically outlined in the employee handbook.
Does Illumina offer a Roth 401(k) option?
Yes, Illumina provides a Roth 401(k) option, allowing employees to contribute after-tax dollars, which can grow tax-free for retirement.
What investment options are available in Illumina's 401(k) plan?
Illumina's 401(k) plan includes a variety of investment options, such as mutual funds, target-date funds, and other investment vehicles to help employees diversify their portfolios.
Is there a vesting schedule for Illumina's 401(k) matching contributions?
Yes, Illumina has a vesting schedule for matching contributions, which means that employees must work for a certain period to fully own the matched funds.
Can employees at Illumina take loans against their 401(k) savings?
Yes, Illumina allows employees to take loans against their 401(k) savings, subject to certain terms and conditions outlined in the plan documents.
What happens to the 401(k) plan if an employee leaves Illumina?
If an employee leaves Illumina, they have several options for their 401(k) plan, including rolling it over to another retirement account, leaving it with Illumina, or cashing it out.
How often can employees at Illumina change their 401(k) contribution amounts?
Employees at Illumina can change their 401(k) contribution amounts during designated enrollment periods or as permitted by the plan, typically on a quarterly basis.
Does Illumina provide educational resources about the 401(k) plan?
Yes, Illumina offers educational resources and workshops to help employees understand their 401(k) plan options and make informed investment decisions.
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