Planning for retirement
Why should I plan?
Planning is the foundation you lay for reaching your retirement goals. It’s not always easy to know if you’re saving enough for your retirement when you first get started.
Who is considered a FedEx retiree?
In order to retire from FedEx, you need to meet the following requirements:
Team member is at least age 55 on the retirement termination date.
Team member has at least five years of permanent continuous service at FedEx.
Team member must be eligible for rehire.
FedEx retirees are eligible for a retiree badge, retiree shipping discounts, and certain other discounts depending on operating company. Eligibility for retirement and retiree health plan benefits are separately determined as discussed in the relevant sections of retirement.fedex.com.
You are eligible to retire from FedEx as early as age 55, and your retirement could last for more than 30 years. Just remember that there may be penalties if you choose to draw certain benefits at age 55. You can check the Your Retirement Benefits book for your operating company to learn more about when to start taking advantage of your retirement benefits.
Thanks to improvements in health care, many retirees live healthy, active lives – making outliving your retirement income a real concern. How long your retirement savings will last depends on how much you save, how you invest and how fast you withdraw your money during retirement.
Here’s how you can get a general idea of whether your savings are on track to last throughout your retirement.
Set a savings goal
To figure out how much money you’ll need to have for retirement, take a look at your current expenses. Many may be nonexistent when you retire, such as your mortgage, commuting costs, etc., meaning you might need only 80% or so of your preretirement income on which to live. However, also look at what you’re planning to do during retirement. Do you want to travel? Buy a vacation home? If so, you may need more income.
When it comes to estimating retirement expenses, nobody’s perfect. Chances are, there will always be some expense on which you didn’t plan. But you can beat the odds by knowing some commonly underestimated retirement expenses and factor them into your planning.
Health care expenses
Rising health care costs can make planning a real challenge. Once you retire, you may have medical and prescription drug expenses you didn’t have in the past. Your primary insurance may be through Medicare, even if you have retiree health insurance through FedEx, so it’s important to understand Medicare coverage options and the premiums, copays, and deductibles that are your responsibility. Medicare coverage is limited, so you may want to consider buying a supplemental insurance policy to fill in the gaps.
Review the Estimating Healthcare Costs in Retirement infographic to understand the factors that may affect your healthcare spending in retirement and make smarter decisions for your future.
Income taxes
You have avoided paying income taxes on your tax-deferred retirement accounts for many years. But once you start making withdrawals, your income will be taxed. You’ll generally be required to take annual required minimum distributions (RMDs) from employer plans and traditional individual retirement accounts (IRAs) once you reach age 72. Once you subtract income taxes, you may have less money for retirement than you think!
Repairs and maintenance
Whether it’s your roof, your car, or your furnace, as things age, you’ll probably need to repair or replace them. Home and car maintenance can take a chunk out of your retirement budget. If possible, consider repairing or replacing aging appliances, heating and air conditioning systems, and vehicles, etc., while you’re still working.
Services and fees
If you’re a homeowner, keep in mind that property taxes and homeowners association fees tend to rise every year, and the same goes for services like trash collection. Renters don’t escape these escalating costs either, since rents may rise in tandem with the property owner’s costs.
Make your retirement years as stress-free as possible by estimating your expenses carefully.
Once you figure out approximately how much annual retirement income you’ll need, be sure to factor in inflation. Even a relatively low inflation rate will significantly increase the amount you need to save. To see examples of how inflation may impact your purchasing power, use the inflation estimator. For example, $1.00 in 1990 has about the same buying power as $1.98 in 2020.
Multiplying the amount of annual retirement income you think you’ll need by the number of years you expect your retirement to last will give you a very rough idea of how much you’ll need to save. Of course, this quick estimate won’t take into account potential investment earnings during your retirement years.
Reaching your goal
Now estimate how much your current savings will be worth when you retire.
Vanguard Digital Advisor®* can help you forecast your chances of reaching your retirement goals and determine if you have a savings gap. Vanguard Digital Advisor® is offered through most FedEx 401(k) plans and provides a retirement forecast based on all of your assets – not just your 401(k) plan. It’s also done completely online.
To access Vanguard Digital Advisor®, log in to vanguard.com/retirementplans. Click on "Access my money," then "Advice." You will see "Advice" under Quick Links. Once in that section you will see the link to Vanguard Digital Advisor® on the left hand side of the page.
Note: If you have multiple accounts at Vanguard, after logging in you may have to click on "Employer Plans" before clicking on "Get Advice."
If you think you’re going to fall short of your retirement goal, you have several options:
- Start saving more.
- Invest more aggressively. Aiming for higher potential returns may help you reach your goal. But be sure your investments are adequately diversified.
- Adjust your planned withdrawal rate. If you can make do with less during retirement, your assets may last a bit longer.
*Includes service fees based on your account balance. The following groups are not eligible for Vanguard Digital Advisor®: Employees in the FedEx SCA Employees 401(k) Retirement Savings Plan [097572]. Employees in the FedEx Retirement Savings Plan for Puerto Rico and employees who have an address outside of the United States, or a mailing address in Guam or the U.S. Virgin Islands.
Get the big picture
One of the most important things you can do as you plan for retirement is to make sure you consider all of your available sources of retirement income—that is, make sure you have the big picture.
Here’s a quick introduction to three important pieces of retirement: pension, 401(k), and Social Security.
Pension plan
A pension is an employer-sponsored and funded retirement plan where employee benefits are computed using a formula that considers several factors, such as length of employment and salary history. It costs nothing for employees to participate, and the company is responsible for managing the plan's investments and risk.
Note: check the Your Retirement Benefits (YRB) book for your operating company to see if you are eligible for a FedEx pension plan.
Enrollment in a defined benefit pension plan is usually automatic after one year of employment if a minimum age and hours of service requirement is met. Vesting in a plan benefit can either be immediate after a certain number of years of service or spread out over several years. Vesting in a retirement plan means having a right to a benefit you have accrued under the plan. When you have a pension plan, you will vest, or have a right to, a certain percentage of your accrued benefit. Once you are 100% vested in your benefit, you will have a right to 100% of it, and your employer cannot forfeit the plan, or take it back, for any reason.
Participants who are vested in their pension plan benefits are entitled to receive payments at retirement or termination of employment.
Check the Your Retirement Benefits book for your operating company to see if you are eligible for the FedEx pension plan. If you have a pension plan with FedEx or with a past employer, it’s important to:
- Keep records of employment history, correspondence, and documents relating to your pension benefits
- Read the summary plan description (SPD) from FedEx (e.g., the SPD for FedEx is the Your Retirement Benefits book) so you understand the rules governing your pension plan
- Check the individual benefit statements you receive for accuracy
- Ask if there are restrictions on your ability to work after you start collecting your benefits
- Keep track of pension benefits available from each company where you have worked
- Make sure to read any notices provided about your retirement plans
- Choose your beneficiaries and keep your selections up to date
In some cases, you may need to name a beneficiary to receive pension plan benefits after your death. If you are eligible for a FedEx pension plan, you can designate your beneficiaries here.
If you have a pension benefit with FedEx and need assistance, call the FedEx Retirement Service Center at 1.855.604.6221 Monday through Friday, 8 a.m. to 6 p.m. Central time.
401(k) plan
A 401(k) plan is a retirement savings account that allows you to divert a portion of your salary into an account you can invest, up to an annual limit. Employers can also make contributions to 401(k) plans. Investment earnings on traditional contributions to a 401(k) plan are not taxed until you withdraw your money, typically after retirement.
Depending on your plan, the FedEx 401(k) plan allows you to make pre-tax and/or Roth contributions and, if eligible, catch-up and/or Roth catch-up contributions through convenient payroll deductions. You may also be able to make after-tax contributions. In addition, your FedEx Participating Employer may contribute an Employer Matching contribution (company match) on a portion of your eligible pay when you contribute pre-tax, Roth and/or, if eligible, catch-up and/or Roth catch-up contributions.
Do you have a 401(k) account from a previous employer? If you were a participant in a tax-qualified plan of a former employer, you can transfer (roll over) your former account balance to your FedEx 401(k) plan upon meeting certain criteria. However, if you were employed by one of the FedEx Controlled Group Members, you are not eligible to make a rollover contribution from your prior FedEx 401(k) plan. If you want to open a rollover account, call Vanguard Participant Services at 1.800.523.1188.
You can change the amount you contribute to your FedEx 401(k) plan at any time. Contact Vanguard Participant Services at 1.800.523.1188 or online at vanguard.com/retirementplans to:
- Increase or decrease your contribution percentage
- Stop your contributions
- Re-enroll if you have stopped your contributions
Your contribution change will begin as soon as administratively possible.
The total amount of 401(k) income you’ll have for retirement depends on when you save, how much you save, and your investment choices. Because you’re in control, the 401(k) provides an opportunity to take charge of your retirement savings.
It is important that you name the person or persons you wish to receive benefits upon your death. You can name your beneficiary(ies) online at vanguard.com/retirementplans. To choose a beneficiary or make a change to your current election for your FedEx 401(k) plan, select “Menu,” “My Profile,” and “Beneficiaries” once you have logged in to your account.
When making decisions about your 401(k) plan, don’t go it alone. Your situation is unique. Talk to the retirement experts at Vanguard, and seek tax advice or the help of a professional financial advisor about the strategy that’s right for you.
There are several advice services options for participants of the FedEx 401(k) plans. For more information, log in to your account at Vanguard, or call Vanguard Participant Services at 1.800.523.1188 (Monday through Friday, 7:30 a.m. to 8 p.m. Central time).
Social Security
Social Security replaces only about 40% of retirement income for a typical retiree, and, in some cases, replaces much less.
That’s why some retirement experts advise you to meet your retirement needs with income from a pension plan (if applicable), a 401(k), and other investments – and view your Social Security benefits as an added bonus.
How are Social Security credits earned?
You can earn a maximum of
Amount is based on average of
Your work history directly impacts your future Social Security benefits. For every year you work, you earn work credits, and your earnings are recorded. Social Security uses this information to calculate your benefit.
You need at least 40 credits (10 years of work for most Americans) to qualify for retirement benefits. The 35 years with your highest earnings count toward your benefit calculation.
If you have income recorded for fewer than 35 years, the benefit calculation assigns a zero value for each year short of 35. For example, if you have income recorded for only 30 years, the benefit calculation averages that income with 5 years of zero income.
It’s important to check your credits and recorded earnings. Make sure they are accurate. If they are not accurate, inquire immediately.
You have three years, three months, and 15 days after the year in which the wages were paid or the self-employment income was derived to correct earnings. After that, generally, your earnings record cannot be changed. Check your Social Security account earnings records and get an estimate of benefits here.
Getting started
Every retirement journey is different. But there is one important step to take before you start tackling debt or increasing your contributions to your retirement savings accounts. You need an emergency fund.
An emergency fund is savings that you put aside just for life’s unexpected events that qualify as true emergencies, like covering your expenses after a sudden layoff or when your HVAC breaks during the coldest January on record.
If you are considering using money from your emergency fund, you need to ask yourself whether the expense is unexpected, necessary, and urgent. Ideally, the expense would qualify for all three.
Starting your emergency fund
Many financial experts recommend that you have an emergency fund that can cover anywhere from 3 to 12 months of expenses. Still, saving that much money can feel daunting. That’s why starting with a smaller goal, such as $1,000, and working your way up to a larger amount can be helpful. Here’s how you can get started:
Live by your budget.
Take stock of your monthly income streams and expenses. If you spend the time taking inventory of where you are spending your money, you can see opportunities to save on unnecessary expenses. Plus, having a monthly savings goal built into your budget will give you a consistent way to contribute to your emergency fund, even if it’s only a small amount each month.
Keep your emergency fund close.
But not too close. You want to make sure that your emergency fund is quickly and easily accessible in the event of an emergency. A separate bank account is a good option. However, you should also ensure that the account isn’t too easy to access, or you may be tempted to dip into the funds for non-emergencies.
Adjust how much you save regularly.
Keep an eye out for opportunities where you may be able to save more. A new job or promotion could divert more income toward your savings goal. Eliminating a debt or expense from your budget also frees up more money to put toward savings. Be sure to review your budget regularly to look for opportunities to adjust your savings strategy.
Once you have a solid plan for retirement and have started to build your emergency fund, you can focus on tackling debt and building up your retirement savings.
Dealing with debt
Credit card debt can creep up on you. Paying for purchases with a credit card is easy and convenient—but carrying your consumer debt into retirement can eat into your savings and reduce your standard of living. It gives you less money to spend on priorities like health care, travel, and leisure activities and puts a strain on your retirement accounts, which could mean that you run out of money or face significant lifestyle changes during your retirement years.
Paying off high interest credit card debt is an ideal place to start tackling your debt so you can prepare for retirement. Here are some strategies that may help you deal with your credit card debt.
Pay off your balance each month to avoid paying interest.
Don’t make just the minimum payment because that will extend your payments or significantly increase the amount you ultimately pay out.
Pay your bills on time to avoid late fees.
Don’t carry credit cards. Pay for things with cash or debit cards, so you are more aware of what you are spending.
Develop a plan to keep track of where you’re spending your money, and look for places to cut back.
The FedEx benefits described on this website are based on a formal plan document or contract. While this information is intended to be accurate, retirement benefits are subject to the detailed provisions of the applicable plan documents. If there is a conflict between this website and the official plan documents, the plan documents always govern. You are not entitled to retirement plan benefits due to a misstatement on or an omission from this website. FedEx reserves the right to amend or terminate any benefit plan at any time and for any reason.