There are just a couple of things almost all Teradyne 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 Teradyne 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 Teradyne retiree about 30 years of retirement income.
As the economy constantly changes, a number of factors may force prospective Teradyne retirees to revisit the 4% rule. It may be worth considering annuities as an alternative.
As life expectancies increase, Teradyne 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 Teradyne.
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 Teradyne's 401(k) plan?
Teradyne's 401(k) plan is a retirement savings plan that allows employees to save a portion of their salary on a tax-deferred basis.
How does Teradyne match employee contributions to the 401(k) plan?
Teradyne offers a company match on employee contributions, typically matching a percentage of the employee's contributions up to a certain limit.
What are the eligibility requirements for Teradyne's 401(k) plan?
Employees of Teradyne are generally eligible to participate in the 401(k) plan after completing a specific period of service, usually within the first year of employment.
Can Teradyne employees change their contribution amounts to the 401(k) plan?
Yes, Teradyne employees can change their contribution amounts to the 401(k) plan at designated times throughout the year.
What investment options are available in Teradyne's 401(k) plan?
Teradyne's 401(k) plan typically offers a range of investment options, including mutual funds, target-date funds, and company stock.
When can Teradyne employees start withdrawing from their 401(k) plan?
Teradyne employees can generally start withdrawing from their 401(k) plan without penalties at age 59½, although specific rules apply.
Does Teradyne offer a loan option through its 401(k) plan?
Yes, Teradyne allows employees to take loans against their 401(k) balances under certain conditions.
How can Teradyne employees access their 401(k) account information?
Teradyne employees can access their 401(k) account information through the company’s benefits portal or by contacting the plan administrator.
What happens to my Teradyne 401(k) if I leave the company?
If you leave Teradyne, you have several options for your 401(k), including rolling it over to an IRA, transferring it to a new employer's plan, or cashing it out (subject to taxes and penalties).
Are there any fees associated with Teradyne's 401(k) plan?
Yes, there may be administrative fees and investment fees associated with Teradyne's 401(k) plan, which are disclosed in the plan documents.
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