A question about my pension statement...

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Lemonaid56
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A question about my pension statement...

Post by Lemonaid56 »

I have a pension through my employer. About 3 years ago in contract negotiations they decided not to keep using the pension and so "froze " it. It is still in place but they are not funding it anymore.
I have 17 years in it at time of freezing. I recently asked for statements based on three different retirement dates; 62 , 65, and 67.
I notice that delaying my retirement date has no effect on the estimate of money I will receive.
I would have thought that by delaying my dates the dollar amount would go up just like social security. Isn't this assumption true?
I was also curious if they offered a lump sum payout at some time how would I determine that info? What numbers would I need to gather to figure that out?
Thanks as always for any help or suggestions.
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oldcomputerguy
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Re: A question about my pension statement...

Post by oldcomputerguy »

Lemonaid56 wrote: Wed Nov 04, 2020 8:35 am I would have thought that by delaying my dates the dollar amount would go up just like social security. Isn't this assumption true?
Not necessarily. It depends on the individual plan.
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Stinky
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Re: A question about my pension statement...

Post by Stinky »

Lemonaid56 wrote: Wed Nov 04, 2020 8:35 am I was also curious if they offered a lump sum payout at some time how would I determine that info? What numbers would I need to gather to figure that out?
You would need to ask your employer. I don’t believe that a defined benefit pension plan is required to offer a lump sum option.
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David Jay
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Re: A question about my pension statement...

Post by David Jay »

Lemonaid56 wrote: Wed Nov 04, 2020 8:35 amI have 17 years in it at time of freezing. I recently asked for statements based on three different retirement dates; 62 , 65, and 67.
I notice that delaying my retirement date has no effect on the estimate of money I will receive.
To clarify - the monthly payment is unchanged? If this is the case and the pension is substantial then you need to start collecting at age 62. That may require that you find alternate employment in order to collect.
Lemonaid56 wrote: Wed Nov 04, 2020 8:35 amI was also curious if they offered a lump sum payout at some time how would I determine that info? What numbers would I need to gather to figure that out?
A common recommendation is to check the payment that the lump sum would purchase using a commercial SPIA annuity. You can go to immediateannuities.com and put projected numbers in pot the form (your age when the annuity would start, lump sum amount).
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Broken Man 1999
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Re: A question about my pension statement...

Post by Broken Man 1999 »

Your best bet would be to request a copy of your pension plan's SPD (Summary Plan Description), then you will be able to see how your pension amount is calculated, and the various ways it may be paid. Hopefully your employer participates in ERISA.

A Summary Plan Description (SPD) is a document that employers must give free to employees who participate in Employee Retirement Income Security Act -covered retirement plans or health benefit plans. The SPD is a detailed guide to the benefits the program provides and how the plan works.

You might very well find errors in your pension statement.

When my company's vendor calculated my lump sum, there was a mistake of almost $60,000 because of the way the company's vendor was doing a particular calculation. I had to get HR involved. Once HR reviewed it, they fixed it.

Make sure you can come up with the same figure as your company does.

Honest mistakes happen. Dishonest ones, also.

Broken Man 1999
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suemarkp
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Re: A question about my pension statement...

Post by suemarkp »

Freezing a pension means the monthly payout doesnt go up anymore. For mine, you get dinged a certain percent each year under age 60. After that, the value is the same. So take it early from this employer if you can afford to.
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IowaFarmBoy
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Re: A question about my pension statement...

Post by IowaFarmBoy »

My corporate pension offered no advantage to delaying past age 62 unless I was still employed and adding years so this is not uncommon.

You really need to get the specifics of your pension plan from HR. Rules about ages and payout will vary by the specifics of the company plan.
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Re: A question about my pension statement...

Post by jebmke »

IowaFarmBoy wrote: Wed Nov 04, 2020 9:36 am My corporate pension offered no advantage to delaying past age 62 unless I was still employed and adding years so this is not uncommon.

You really need to get the specifics of your pension plan from HR. Rules about ages and payout will vary by the specifics of the company plan.
One common structure of corporate DB plans is to have a non-inflation adjusted value "at retirement." say 65 and then discount back for early retirement. I could have taken a deeply discounted payment as early as 55. The discount was more than the actuarial adjustment.
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Tracker968
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Re: A question about my pension statement...

Post by Tracker968 »

My pension from a Fortune 500 company also had no increase after I reached full eligibility.
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TexasPE
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Re: A question about my pension statement...

Post by TexasPE »

Broken Man 1999 wrote: Wed Nov 04, 2020 9:28 am see how your pension amount is calculated, and the various ways it may be paid.

You might very well find errors in your pension statement.

When my company's vendor calculated my lump sum, there was a mistake of almost $60,000

Make sure you can come up with the same figure as your company does.

Honest mistakes happen. Dishonest ones, also.

Broken Man 1999
+1

My initial estimate from HR was over $1,000 per month lower than the final number - they neglected to include the fact that I was retiring after 65 (actuarial tables).
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backpacker61
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Re: A question about my pension statement...

Post by backpacker61 »

Tracker968 wrote: Wed Nov 04, 2020 7:06 pm My pension from a Fortune 500 company also had no increase after I reached full eligibility.
This seems very odd to me.

My DB pension (also "frozen" and was from a Fortune 500 co) continues going up until April 1 of the year following the year I turn 72. That is the date at which the IRS requires beginning to receive the DB pension. I can't request beginning dates later than that. I could have claimed as early as 55; or as late as April 1 of the year following the year I turn 72.

There is an online tool I can log into to get model different pension claiming scenarios; without submitting any formal request to the pension provider (alight.com).
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RetiredAL
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Re: A question about my pension statement...

Post by RetiredAL »

When my DB got frozen 15 years before I retired, the company started contributing $ into our 401K that was additional to the usual match. When I retired, I took the DB as a Lump Sum roll-over into a IRA.
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Wiggums
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Re: A question about my pension statement...

Post by Wiggums »

As you can see, the answer to your question is determined by the plan rules that were defined by your company.
humblecoder
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Re: A question about my pension statement...

Post by humblecoder »

Lemonaid56 wrote: Wed Nov 04, 2020 8:35 am I have a pension through my employer. About 3 years ago in contract negotiations they decided not to keep using the pension and so "froze " it. It is still in place but they are not funding it anymore.
I have 17 years in it at time of freezing. I recently asked for statements based on three different retirement dates; 62 , 65, and 67.
I notice that delaying my retirement date has no effect on the estimate of money I will receive.
I would have thought that by delaying my dates the dollar amount would go up just like social security. Isn't this assumption true?
I was also curious if they offered a lump sum payout at some time how would I determine that info? What numbers would I need to gather to figure that out?
Thanks as always for any help or suggestions.
My pension is similar to yours. There is an early retirement penalty if you retire before age 65 (or age 60 if you have 25 years of service). The penalty varies depending upon your years of service but it is generally around 3% per year. However, there are no corresponding bonuses if you defer your retirement beyond age 60 or 65.

It all comes down to how your plan is defined. Every plan can set its own rules for how they calculate your benefit.

Regarding a lump sum payout, does your plan offer that option? Not all plans do (my doesn't). If they do offer that option, I'm sure they would provide you that information when you decide to retire.
suemarkp
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Re: A question about my pension statement...

Post by suemarkp »

The mechanics of how they freeze the pension can also matter. My megacopr has multiple pension plans and some worker covered under different unions. Some pensions have had just the persons company service years frozen. Others have both the service years and average final earnings frozen.

Pensions go up when average final earnings go up and company service years go up. My pension goes down as my estimated Social Security payment increases or the Social Security Wage base increases. I don't think the company froze those since those numbers reduce their payout. So it is certainly possible if earnings and service years are frozen that each year your pension will go down in value. That gives you incentive to retire from there now and find another job if possible. But you would be old if retiring, and it may be difficult to find work elsewhere. Makes retirement planning a challenge.
Mark | Somewhere in WA State
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