There are just a couple of things almost all KLA 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 KLA 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 KLA retiree about 30 years of retirement income.
As the economy constantly changes, a number of factors may force prospective KLA retirees to revisit the 4% rule. It may be worth considering annuities as an alternative.
As life expectancies increase, KLA 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 KLA.
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 KLA?
KLA offers a 401(k) plan that allows employees to save for retirement through pre-tax contributions, which can help reduce their taxable income.
Does KLA provide a matching contribution for its 401(k) plan?
Yes, KLA provides a matching contribution to the 401(k) plan, which helps employees maximize their retirement savings.
How can employees enroll in KLA's 401(k) plan?
Employees can enroll in KLA's 401(k) plan through the company's benefits portal or by contacting the HR department for assistance.
What types of investment options are available in KLA's 401(k) plan?
KLA's 401(k) plan offers a variety of investment options, including mutual funds, target-date funds, and other investment vehicles to suit different risk tolerances.
Is there a vesting schedule for KLA's 401(k) matching contributions?
Yes, KLA has a vesting schedule for its matching contributions, which means employees must work for the company for a certain period before they fully own those contributions.
Can employees take loans against their 401(k) balance at KLA?
Yes, KLA allows employees to take loans against their 401(k) balance, subject to specific terms and conditions outlined in the plan.
What is the maximum contribution limit for KLA's 401(k) plan?
The maximum contribution limit for KLA's 401(k) plan is determined by IRS guidelines, which may change annually. Employees should check the current limits for the specific year.
How often can employees change their contribution percentage in KLA's 401(k) plan?
Employees at KLA can change their contribution percentage at any time, allowing them to adjust their savings based on their financial situation.
Does KLA offer any educational resources for employees regarding the 401(k) plan?
Yes, KLA provides educational resources, including workshops and online tools, to help employees understand their 401(k) options and make informed investment decisions.
What happens to my 401(k) account if I leave KLA?
If you leave KLA, you have several options for your 401(k) account, including rolling it over into an IRA or a new employer's plan, or cashing it out, though the latter may have tax implications.
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