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52 and ready --Pension Handcuffs
Old 07-19-2015, 09:31 PM   #1
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52 and ready --Pension Handcuffs

52 and Ready ---
I am 52 and employed by one of those Mega Corps discussed in other threads. On one hand, I am fortunate to have a defined pension benefit plan which allows "early retirement" at age 55. On the other hand, the job has become quite difficult to show up with a smiling face every morning and I would like to explore leaving earlier than 55. Based on the retirement plan documents however, leaving earlier than 55 would reduce my benefit to slightly less than 50%.
My question to the forum is - Does anyone have any experience negotiating through this type of situation? I am concerned that if I go to HR first, I will put myself in a poor negotiating position.
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Old 07-19-2015, 10:20 PM   #2
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I am so jealous, to have a DBP pension , actually to just have a pension.... wow must be nice.

Honestly, a 50% haircut to your pension because you feel anxious to leave 3 years early That is horrible to consider.

Unless of course you have 3.5 Million already saved up, in which case its ok, go ahead and shoot yourself in the feet.

I could suggest you talk to your doctor, perhaps there is some surgery you need done, which will allow you to take a couple of months sick leave ?
Naturally take ALL your vacation time in 2 week blocks so you feel like you get a break and don't bring your phone, seriously leave it behind so you don't get any work emails.
Perhaps your contract allows unpaid time off, if so, arrange 3 months and go to Europe, come back refreshed (and older).
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Old 07-20-2015, 12:17 AM   #3
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A common (well, used to be common!) MegaCorp pension plan allowed an unreduced pension to be taken at 55 YOA, if you also met a YOA + years of service = X Rule, where X would be 80, or 85, etc.

I personally never heard of any employee-initatiated negotiation on this. Early-Out campaigns driven by a RIF would add some sweetener, such as n years of service (valuable in the final $ formula!), or adding n years of age (which may allow one to be magically transported to say 55 YOA, but no additional years-of-service $).

But there were some campaigns that added n years of service plus added n years of age, those were real sweet deals! Alas, I didn't get a sweet deal like that! Just years of age added, allowing the "unreduced" pension...

But there can be a gotcha, where the employee may be magically transported to say age 55, and eligible for the "unreduced" pension... but since the person is starting the pension payments n years early, or taking it as a Lump Sum n years early, either option is backed down from the future at 55 YOA to the present using an interest rate per-year that is specified in the pension plan. It may be an outside rate, in my case it was the GATT rate, and it was brutal as interest rates were higher then, thus my "unreduced" Lump Sum was reduced by much!

I guess what I'm saying is be very sure how your plan actually works. These details are beyond many HR people.

If I were in your shoes, I think I'd try to exist there for the three more years, just keeping the eye on the prize. On the other hand, if you are pretty sure it will be the death of you, well...
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Old 07-20-2015, 02:06 AM   #4
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Get the pension plan document , read it stem to stern. I would be surprised to see a private pension plan paying a "Full" pension at 55. Of my 2 pensions, the private DB one had a reduction factor of 56% at 55, rampping up to 100% at 65.

Are retiree medical benefits in play ?.....The kicker of my private "Megacorp" pension, was no retiree medical if not at least 55 when separating from employment.......My Public sector pension subsidizes retiree medical at 4% subsidy per year of service, 25 years service to get 100% subsidy.

Never seen a severance package to a non executive , except during a lay-off or when an employee was subject to an egregious actionable act by another employee.
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Old 07-20-2015, 06:20 AM   #5
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Any chance of a layoff? A friend worked at an Insanely Big Megacorp (I won't say which one) and saw layoffs coming, so he started being "difficult". He complained a lot, expressed his opinion unreservedly at meetings, and stopped being a team player. Sure enough, when downsizing came, he was selected and got a great package.

I have a similar DB plan, but would have to wait 9 years for an unreduced pension, which I won't do. Leaving next year, taking the hit, and going to enjoy life instead.

You have a harder decision to make since it's only three years. I haven't heard of anyone negotiating a really generous DB to be even more generous. Any chance of moving to a different jo in the company for your last three years?
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Old 07-20-2015, 06:32 AM   #6
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Get the pension plan document , read it stem to stern. I would be surprised to see a private pension plan paying a "Full" pension at 55. Of my 2 pensions, the private DB one had a reduction factor of 56% at 55, rampping up to 100% at 65.
+1

I retired at age 46. My pension has a 50% reduction if I collect at 55 instead of 65, not if I had stayed until 55.
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Old 07-20-2015, 07:14 AM   #7
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It would behoove you to doublecheck on this. I was surprised that there would be a 50% reduction in age 55 benefits if you leave at age 53 and start collecting at age 55. Unless the 50% is age 55 benefit compared to age 60 benefit... that i could see.

I agree with others that I don't see much to negotiate... the plan is the plan.. the company would have little leeway or incentive to do anything beyond the plan... their most likely attitude would be if you don't like it, then quit.

You could ask the pension plan administrator for numbers for benefits at different benefit start ages if you leave at age 55 and numbers for benefits at different benefit start ages if you leave now... just tell them you are doing some retirement planning and need the information.
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Old 07-20-2015, 07:37 AM   #8
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My guess is that your Megacorp will NOT negotiate with you. Their plans have been approved by ERISA and are more or less set in concrete - requiring major headaches for them to change them.

My pension had a "points" system as Telly mentioned. Years plus service required to get "early" (reduced) pension was 80 and to get unreduced pension was 90 - though the pension was figured on years of service, so it could increase until age 65. Now, had someone left before 80 points, they would be eligible for a (very) reduced pension to be received later (upon reaching age 65). You might check on that possibility. But, probably no need to talk to HR. Just get a copy of the pension documents and read it. As others have suggested, you could get lucky and have some sort of "buy-out" package which lets you leave early with your pension in tact. I wouldn't count on it though. Other than that YOU have to decide if you can tough it out for 3 more years to get your pension.

I must say, if someone suddenly offered you the amount of money equivalent to your pension and told you "all you have to do is w*rk 3 years to get it - at a lousy j*b." you might well take it. Maybe you could think of it that way. If not, and you have a goodly stash of money, check the tool on this forum (FIRECalc). It may help you decide if you have enough money saved to leave now. YMMV
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Old 07-20-2015, 08:29 AM   #9
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If I remember correctly, at my mega corp, you could start drawing a pension as early as 50, if you had enough service, but it was reduced by 50%. Each year you worked past 50 another 5% was added so by the time you were 60 you'd get 100%. At age 55, other benefits kicked-in like retiree medial insurance. Very few would leave (voluntarily ) before 55.

I can remember wanting to leave in my early 50's but I realized I'd be leaving far to much on the table.
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Old 07-20-2015, 08:47 AM   #10
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Originally Posted by SCGamecock View Post
+1

I retired at age 46. My pension has a 50% reduction if I collect at 55 instead of 65, not if I had stayed until 55.
+2.

Consider looking for a deferred service retirement clause in your plan documents.
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Old 07-20-2015, 09:14 AM   #11
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It's worth mentioning the possibility of a layoff again. I know that in my case my Defined Benefit Megacorp pension that I would receive at age 55 would have been almost cut in half if I left the company voluntarily before 55. However, if I were laid off any time after age 49 I could officially retire (from laid off status) at 55 with my unreduced early retirement pension benefit.

If you're really sick of working it's very much worth your while to find out the impact on your pension of voluntary vs. involuntary separation (as our Megacorp-speak would have it).
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Old 07-20-2015, 10:48 AM   #12
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At my megacorp, the earliest start pension age is 55 and that comes with a 4% reduction per year from age 62. If I stop work before age 55, the formula changes to a 6% reduction per year starting from 65. The net effect is to trim my age 55 pension amount by almost 50% if I can't hang on until I'm 55. Retiree health care is tied to starting the pension, so age 55 at the earliest for that too.

In 1999 or 2000 my megacorp offered a company wide 2+2 deal. Two years of service and two years of age added to one's pension eligibility. That offer was of use and targeted at only employees who were close to retirement age. In 2009 they offered a straight up cash grab to everyone. The amount of cash was calculated using salary and years of service, but it included a base amount, so they lost some new hires with that deal. I've not heard of anyone negotiating on the eligibility dates in the plan. Further more, they seem to favor division ESP plans now, or simply laying people off. Not sure if we'll see another company wide offer again.

My situation is similar to yours, and my current plan is to hang on until age 55 to maximize my DB pension and because I'll gain easier access to my tax deferred accounts. I'm a pretty good saver, but my investments aren't necessarily structured for me to start living on them unless I'm at "retirement age."
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Old 07-20-2015, 11:04 AM   #13
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I was in a similar position at 52. The DB plan is the plan, no changing that, and at 55 I would get a reduced pension starting immediately plus retiree health insurance, so I felt that I had to just stick it out. I could leave before 55 and get an even more reduced pension starting at 62 but no HI.

I was in IT at the time but my qualifications was as a EE, and I noticed on the internal job postings around the country that they were looking for EE's. I applied for one at a site in a neighboring State that I knew well, and did a career change from IT to project engineering at age 53 (never done that before and it was a steep learning curve). That was January 2008 and later that year nearly all capital projects except mandatory EH&S were put on hold so the last couple of years before retiring were far from frantic. (There were no recession lay-offs of employees as the company expected a turnaround eventually and were keen to hang onto all their experienced staff).
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Old 07-20-2015, 11:16 AM   #14
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Get the pension plan document , read it stem to stern. I would be surprised to see a private pension plan paying a "Full" pension at 55. Of my 2 pensions, the private DB one had a reduction factor of 56% at 55, rampping up to 100% at 65.
I'm not sure this is all that unusual. Pension payout is often (usually? always?) based on years of service (actually earnings during those years of service), so the "full" pension value increases as one works longer and earns more. (At least until my Megacorp froze the pension a few years ago).

My megacorp gave an unreduced payout if age + service was >= 75. It was reduced 3% for every year less than that, and minimum age was 50.
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Old 07-20-2015, 12:00 PM   #15
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I also wanted to leave at 52, but had government pension handcuffs that made it important to stay until at least age 55. Because I paid into the Civil Service Retirement System instead of Social Security, I don't qualify for SS benefits, so the pension is everything. If I retired at 52 I would get 49% of my highest salary, and if I waited until 55 I would get 56%. Well, actually closer to 60%, since my saved-up sick leave added more than a year to my service time.

The way I handled it, was to decide that I wasn't going to worry about my career any more. I gave up all political striving for the next level, and took interesting, but lateral assignments. While working, I also pursued a second master's degree, paid for by my employer.

Far from coasting, I stayed quite busy and learned a ton. For anyone who thinks your brain ossifies during your 50's - well, I would have to say I laid down quite a few new neural pathways during those final years at work. In one job, I negotiated a schedule where by working an extra hour per day (which I would have done anyway) I earned a day off every 2 weeks, on top of vacation days.

So, those are some possible ideas, if your megacorp lets you do something similar. Good luck! Three years goes by faster than you think!

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Old 07-20-2015, 12:07 PM   #16
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Getting the " I need to get out of here before I loose my mind" feeling is not un-usual at your age. Think of it like a divorce from your employer, yes, you can chose to do it, but it's going to cost $$$$
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Old 07-20-2015, 12:30 PM   #17
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My DH is 52 and ready too!
Those pension handcuffs are tricky things.

We sat down this weekend and went over everything, something we hadn't done in while. We have been planning for his retirement 1/1/17 (marking off the days more like) but we're having a difficult time trying to discern if that is the best thing to do right now. We don't want to get caught up in OMY mentality but we'd be leaving a lot of money on the table if he left then and didn't wait another year and 9 months.

I am also in the process of starting up a business (I know, I know =D) so the security of having his income for the next 2 or 3 years is really compelling. On the other hand, he is so sick and tired of mega corp. We bought a small farm almost 8 years ago and he's itching to be able to spend some time on projects there and, as he says, "spend the first year just decompressing."

We decided we needed to do the logical thing and get back to tracking our expenses more diligently. At the suggestion of somebody here, I downloaded a trial version You Need A Budget and we'll use that to track our expense if it proves to be user friendly. I find Quicken cumbersome. We don't "need a budget" per se, but we definitely need a check up to see where we are on our expenses. Can't make any decisions without that.

Like many of you, we have been fairly frugal our whole married life (28 years) and can continue to do that and be happy. That said, an extra 2 years of work could make a difference financially. On the other hand, I attended the funeral of another dear friend last week. Death is always a good reminder to "be here now" b/c you can't take it with you.

For us the extra working would make the difference between continued frugality and perhaps maybe easing up a bit and feeling more comfortable to do some traveling and have the money to comfortably keep the house in town (as well as the farm) while we're trying to decide where we want to live.

Will keep you posted and plan to come back with numbers for advice.
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Old 07-20-2015, 12:43 PM   #18
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One option available at our Megacorp is an "early retirement LOA". This is NOT a medical LOA. The max is two years so it would still be a year out for you if you company allows it. I've known a few to do it at 53 to bridge the gap to 55.


I believe what you "lose" is two years of pension accrual without the 50% haircut! Not bad at all.


Our early out is 55 as well. They discount our pension by 10% for that (2% per year starting at 60 yrs old). Cheers.
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Old 07-20-2015, 12:44 PM   #19
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....I wasn't going to worry about my career any more. I gave up all political striving for the next level, and took interesting, but lateral assignments.

In one job, I negotiated a schedule where by working an extra hour per day (which I would have done anyway) I earned a day off every 2 weeks, on top of vacation days.
This applies to me as well. I work from home on Fridays thus avoiding the 80 mile round trip commute and once I get to about this point in the year, I start taking Friday afternoons off using my vacation time. A 4.5 day work week, with one of those being 4 hours in my PJs, helps a lot. Perhaps the OP can try something like that to help pass the next 36 months.
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Old 07-20-2015, 04:10 PM   #20
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Sometimes you just have to suck it up and carry on. My last 2-3 years were bad but I was able to negociate 4 days a week during my last year. Once retired you will be happy to have the extra pension.
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