The purpose of this page is to provide general information on the Federal Express 401K Vanguard Group, Inc. funds. The information provided is compiled from various sources by me and not by Federal Express or Vanguard. It is for general use and not to be construed as investment advice. As indicated by the url address, this is a personal web page, and not a FedEx page, nor an investment advisor page. If you see any errors or have suggestions, please let me know so I may make changes. Thanks.

In the opinion of all investment advisors, books, and magazines, everyone should contribute to a 401K. It is one of the best retirement savings devices an individual can use. If you invest as little as $1000 in the FedEx 401K, you get the company's $500 matching contribution. That is a return of 50% if you just invest the money in the Admiral Money Market account (and that doesn't include any tax deferral advantage)! You can't beat that kind of return. If you need the money later for hardship reasons, you can always borrow against your account. So invest now--the longer you invest, the more time will work to your advantage by compounding your return. [NOTE: For more information, visit one of the financial links by clicking "Links" above, look at the bottom of this page for two links, or visit the Vanguard Group, Inc. site.

USAA said in Winter 2006: Americans are living the dream--literally. They're dreaming. 51% want to save $1 million, but 74% have saved less than $50,000 and 30% have saving nothing. Start saving early. Make time your greatest ally. Saving $20 a week at age 22 wiill get you $44,720 by the age of 65. Contribute to your employer's retirement savings plan. If you're lucky enough to have one, use it. Don't miss out on any matching funds offered. [emphasis is mine--Monty]

Pension Plan Limits

Section 415 of the IRS Code provides dollar limitations on benefits and contributions under qualified retirement plans. These limits can be confusing, especially those affecting defined contributions. The annual contribution limits a person can make to a 401k and/or an IRA are listed below.

For 2007, the maximum contribution an employee can make to a 401k is $15,500. If the person is aged 50 or older, he can contribute an additional $5,000, making the total contribution of $20,500. The annual defined contribution is $45,000 (up from $44,000 in 2006). This is the maximum total contribution from all sources (company match, sick bank, OSP, et al). The annual compensation limit is $225,000. [This is the stuff that's sometimes difficult to understand. FedEx keeps track of all this. OSP and sick bank are big factors here, in addition to the B-Plan. The point is that you need to maximize your 401k contributions. Then fully fund your IRAs (Roth or regular). If you still want to save after that, then consider the OSP. You are putting all your eggs in one basket (Vanguard's funds), but with more fund choices you can diversify somewhat.

How Much Do I Need To Save?

Here is what The Motley Fool said in September 2002:

Motley Fool: Take note of tax breaks and sock away for retirement

Write The Motley Fool at Fool@fool.com or c/o The Truth, P.O. Box 487, Elkhart, Ind. 46515, Attn: The Motley Fool. Sorry, we can't provide individual financial advice.

Finally, Money Magazine in May 2007 said "Saving a tenth of your annual income is fine--if you can predict the future. The rest of us need a little more." It goes on to say:

The 10% solution has simplicity going for it. ...like most rules of thumb, this one can work in some circumstances. If you start stashing away 10% of your income in retirement accounts at the beginning of your career and do so without fail year after year, you could well end up with enough money to support a comfortable retirement. But not the italics. In real life, as opposed to formulas, things don't always go smoothly. A recent study in the Journal of Financial Planning gives you [a simple] answer that quickly lets you know if you're on track.

[From the article] -

The bottom line is to start saving early. For example, investing $2,000 at age 19 for only eight years will yield more money at age 65 retirement than investing $2,000 at age 27 until retirement (39 years!), and investing one-fifth the money. [Based upon a 10% compound rate.]

Retirement Investing

The maximum 401k investment this year (2008) is $15,500 (except for those over age 50).

Tax Reform for Retirement
401k IRA
normal over 50 normal over 50
2001 $10,500 $10,500 $2000 $2000
2002 $11,000 $12,000 $3000 $3500
2003 $12,000 $14,000 $3000 $3500
2004 $13,000 $16,000 $3000 $3500
2005 $14,000 $18,000 $4000 $4500
2006 $15,000 $20,000 $4000 $5000
2007 $15,000 + $500* $20,500 $4000 $5000
2008 $15,500 + $500* $20,500 $5000 $6000
*401k cost-of-living adjustments become effective after 2006, indexed to inflation in increments of $500.
Please note: Call Vanguard to request continuing contributions for the over 50 limits.

*For more information, visit the Fool site on the tax reform or the IRA and 401k Limits Page.

New employees: You are eligible after you complete 1,000 hours of service during the first employment year or any plan year. Eligibility dates are on June 1st or December 1st. [Information from the FedEx Benefits Book. Check the book for current information.]

Vanguard is now in charge of our 401K monies (not Savings Express). To find out more information, call Vanguard at 1-800-523-1188. For general fund information (prospectus, etc.), call Vanguard at 1-800-662-5171.

Here are some highlights of recent 401k regulations.

  1. Recent regulation has changed the time limit eligibility waiting periods. More companies are allowing their workers to sign up for a 401k plan when they are hired or at the time they become eligible for health benefits. If you are a new hire, contact BENEFITS and tell them you want the rules changed for FedEx to allow earlier participation.
  2. For maximum benefits, try to max out your contributions.
  3. Rebalance your account annually, but don't try to time the market.

Managing Your 401k

Making the most of your 401k plan requires that you contribute regularly and allocate your assets wisely among the fund choices. Leading fund experts suggest structuring your 401k with the following in mind:

Consumer Reports says to keep it simple. "Studies we've conducted recently at Consumer Reports show that a portfolio of one-third U.S. large-cap stocks, one-third U.S. small- or mid-caps, and one-third foreign stocks proves to be a remarkably resilient mix."

Simple long-haul mix

"This is a set-it-and-forget-it portfolio, with 10 percent carved out for a money-market allocation for emergencies." For large-cap, you could choose Vanguard Windsor. For Small-/Mid-cap you could choose the respective Index fund.

Simple pre-retirement mix

Shift to 20% large-cap, 20% Small-/Mid-cap, 20% Foreign, 15% Asset allocation (LifeStrategy), 15% Bond, and 10% Money Market. "If you're nearing retirement and concerned about short-term losses, you can add a bit of stability to your portfolio by including asset-allocation and/or bond funds."

Withdrawal information

Some financial planners recommend you pull out no more than 4% of your assets during the first year of retirement, and then increase that amount by 3% a year to account for inflation. Do not include the equity in your home in the calculation of your assets. You consider only liquid assets (401k, IRA, savings) when you determing your withdrawal strategy.

These are suggestions of several money managers and magazines, and not my opinions. The italics are the respective funds we have that would meet the suggestion of the money manager. Each 401k participant must examine their own situation and make their own allocation decisions.

Work past retirement?

Work longer, die younger

A government study shows that the average employee retiring at 65 receives 18 monthly checks prior to death. For every one year you work beyond age 55, two years of life span are traded.

Vanguard Reporting

Vanguard provides fund information on the FedEx 401k. If you have a personal account with Vanguard, you will notice some differences. First, Vanguard does not always update the FedEx 401k information regarding end-of-month distributions (Admiral Money Market, Total Bond Index) until 3-5 business days later. Personal accounts are updated the next day. Also, Vanguard valuation may be incorrect after approximately 7 pm EST. That means if you access your account information, the number of shares will be correct, but the pricing will reflect the close for the day and the valuation as of yesterday. It seems that Vanguard doesn't update price and shares until the next business day (after the nightly processing cycle by Vanguard). There is nothing wrong with this, but the user just needs to be aware that there might be a discrepancy between fund value and the posted NAV.

QUESTIONS
If you have any questions, please call the Vanguard Group, Inc. Participant Services Department at 1-800-523-1188. Our Associates are available Monday through Friday from 8:30 a.m. to 9 p.m. Eastern time. We will be pleased to assist you.

New Vanguard Funds added - Vanguard

On January 3, 2007 Vanguard introduced new funds for the FedEx 401k. It is my understanding that these additions are currently only available to the pilot group, but may be added later for all employees. From the Vanguard brochure mailed out, here are the funds:

  1. LifeStrategy Funds - invest in a predetermined mix of stock and bond funds, providing you with an all-in-one investment that automatically rebalances according to each fund's investment strategy. [NOTE: It invests in other funds, not in stocks and bonds.] [Moderate.]
  2. Inflation-Protected Securities Fund - a bond fund, it seeks inflation protection and income consistent with investment in inflation-indexed securities. [Conservative.]
  3. Mid-Cap Index Fund - a stock fund, seeks to track the performance of a benchmark index that measures the investment return of mid-cap stocks. [Aggressive.]
  4. Small-Cap Index Fund - a stock fund, seeks to track the performance of a benchmark index that measures the investment rturn of small-cap stocks. [Aggressive.]
  5. Retirement Savings Trust - a stable value fund--a conservative, lower-risk fund designed to preserve a stable share price of $1 and current income consistent with bonds of two- to three-year maturity by investing in high-quality, fixed income securities. [Very Conservative.]

Some comments:

  1. The Retirement Savings Trust is very similar to the Admiral Money Market Fund that already exists. Vanguard says "You may not exchange money directly from Vanguard Retirement Savings Trust to Vanguard Admiral Treasury Money Market Fund. Exchanges are not permitted because these funds have similar objectives and are considered 'competing' funds. [Funds transferred] must remain outside the Retirement Savings Trust for at least 90 days before you can transfer to the Admiral Treasury Money Market Fund."
  2. [Conservative] - these risk ratings are a compilation of Morningstar and Vanguard's risk tolerance.
  3. Graphs and fund information can be found on the Performance page of this web site.
  4. Redemption fee policy - extra fees for shares sold within certain time periods after purchase
    1. PRIMECAP - 1 year - 1%
    2. International Value - 2 months - 2%
    3. Total International Stock Index - 2 months - 2%
  5. As before, if you have any questions contact Vanguard for a detailed prospectus and an explanation of any exchange and redemption fee policies. Contact them via the web or by calling 800-523-1188.

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