The majority of adults in the U.S. have under $5,000 saved for their retirement. Fifteen percent have zero in retirement savings. Forty-five percent of those same people believe they will outlive their retirement savings.
To maintain your current lifestyle, you may need up to 80% of your preretirement income. If you make $90,000 per year, you will need $72,000 a year in income from investments, pensions, and Social Security to maintain your current lifestyle.
When you started working you were young and didn’t give much thought to retirement. Now retirement is approaching like a speeding bullet and you are wondering what your ExxonMobil Savings Plan and/or Pension Plan covers.
No matter how many years you have in the work environment, all ExxonMobil employees need answers to their retirement planning questions, including “What is a pension plan?” Keep reading to learn everything you need to know about your ExxonMobil pension plans.
ExxonMobil 401K Suspension
In October 2020 ExxonMobil suspended contributions to their 401k retirement savings plan. This was because the company was experiencing losses because of COVID-19.
If you left that money sitting in your 401k account, you have the option of topping the account off by matching up to the amount ExxonMobil was contributing.
If the funds in that account are not gaining, you need to speak with a wealth management advisor about rolling it over into an IRA or other investment option. The loss of this retirement savings program makes pension plans even more valuable for retirement.
The Evolution of Pension Plans
A traditional defined benefit (DB) pension paying an annuity for the lifetime of the retiree is becoming obsolete. As of 2008, only 20% of employees in the United States have DB retirement pensions available to them.
The modern trend is defined contribution (DC) accounts, which are a type of pension. They are investment accounts employers establish and subsidize, but employees own and control.
Many employers are freezing their DB plans, and that benefit may eventually terminate. Under a freeze, participants receive their benefits based on their accruals up to the date of the freeze. There are no additional benefit accumulations.
If those undergoing a freeze or other change in their pension and retirement savings plans assume they will be okay with their Social Security benefits, they may be making a huge mistake.
ExxonMobil Savings Plan (EMSP)
The ExxonMobil Savings Plan and Pension Plan were created to work in conjunction with Social Security and other savings and investment plans. The goal is to provide you with the income you need in retirement.
The ExxonMobil Savings Plan is for active employees. When participating, make sure your investments are properly diversified. You need to consider your risk tolerance, time until retirement, and other assets you have.
As you get closer to retirement, your financial advisor can assist you in determining if ExxonMobilStock and net unrealized appreciation (NUA) are good choices for you. Net unrealized appreciation is a term dealing with the special tax treatment of stocks an employer has in their tax-qualified retirement plans, such as a 401k.
Upon retirement, most of what is in an employee’s 401k is rolled into an IRA. There it continues to grow tax-deferred. Distributions are taxed at the recipient’s tax rate at the time they receive the funds.
With ExxonMobil, you have the option of transferring stock into a taxable brokerage account when you retire. You will pay taxes on the cost basis of the stock.
You do not pay tax on the difference in the market value at distribution and cost basis until the stock is sold. Then you only pay capital gains, not income tax. There are times when this may be a financially sound decision.
ExxonMobil Pension Plan (EMPP)
One of the key benefits of employment with the Exxon Mobil Corporation is that eligible employees begin earning benefits in their pension plan on their first day of work. The majority of U.S. dollar payroll workers of the corporation and its affiliates are eligible. You become fully vested in the program after five years of work or at age 65, whichever comes first.
Employees who are “non-regular” qualify for a pension under different terms. A non-regular employee only receives a pension for years they were working a minimum of 1,000 hours. If you work less than 1,800 hours a year, you will receive credit for a portion of the year.
Those who are not eligible for participation in the pension program are employees who are leased, barred, special agreement persons, and those working at company-operated retail stores.
Your pension benefits become available when you end your employment. You may be eligible to collect benefits at age 50 or later. Adjustments may be made to your benefit amount depending on how young you are when you begin collecting.
The official retirement age at ExxonMobil is 55 years or older, and working 15 or more years as a regular employee. Alternatively, you may be someone receiving long-term disability benefits after 15 or more years as an employee and retire regardless of your age.
ExxonMobil retirees need to decide whether to take a lump-sum payment or annuity. The way you take your benefit and the income you have in the year of retirement impacts your taxable income. This is especially true if part of your benefit is a Social Security Offset.
You also need to consider that the decision to take an annuity is irrevocable. All options must be carefully weighed when deciding how to take your pension upon retirement
Pre-Social Security Offset
You can begin collecting your pension at age 50 but cannot collect Social Security until at least age 62. ExxonMobil pays a Social Security offset if you retire before 62.
The offset is equal to 1.5% of what your estimated Social Security benefit will be for each year of pension service. This tops out at 33-1/3 years of work. The maximum offset you can receive is 50% of your social security benefit, or 1.5% x 33-1/2 years.
If you begin collecting your pension at age 60 with a pension benefit of $2,698 per month and have a Social Security offset calculation of $662, you will receive $3,360 per month from your ExxonMobil pension.
The offset will stop upon your 62nd birthday, and you will receive only the $2,698 monthly pension. This reduction happens even if you do not begin collecting Social Security until you are older.
Maximum Social Security Benefit
The amount of Social Security you receive depends on the age you began collecting an earnings history, the amount of money you earn each year, and the age you retire. ExxonMobile retirees likely meet the requirement of 40 work credits or 10 years of employment.
The maximum benefit you can collect in 2022 is $4,194 per month. You are only eligible to receive that amount if you have a high income for 35 years and wait until you are 70 years old to begin collecting. Many like to retire at age 62, and the maximum benefit anyone can receive at that age in 2022 is $2,364 per year.
What Is the ExxonMobil Savings Plan?
An ExxonMobil Savings Plan and ExxonMobil Pension Plan are excellent ways to plan for your retirement. It is important to not rely totally on an employer to oversee your retirement needs. You need someone who will consider your current assets, income, plans for retirement, other investment options, and Social Security benefits.
To get the best custom retirement plan contact Bogart Wealth to schedule a wealth management appointment.