By Mike Gibbons, RICP®
Abbott Laboratories and AbbVie offer generous pension plans with different payment options when you retire. A common subject that comes up for us when we meet with clients is how to select the best pension payment option. The answer is complicated because we have to look at different factors that come into play after retirement. Here we’ll lay out the options available to you as an Abbott or AbbVie employee.
Pension Calculation
Your pension provides you with income for life after you retire. The payment amount is based on years of service, earnings, and your age regardless of which option you select. Most forms of income are included in your benefit payment, such as base pay, overtime, shift differentials, some bonuses, and profit-sharing. Certain bonuses and awards are excluded as well as lump-sum payouts in lieu of vacation time.
Options for Single Participants
If you are single at the time of retirement, you can take the Single Life Annuity option or a Certain and Life Annuity option. Single Life Annuity is the simplest option and pays the largest monthly pension amount, but it pays no spousal benefits after your death. Abbott Laboratories and AbbVie offer a Certain and Life Annuity option, which pays a guaranteed benefit after your death for 10 or 15 years to any beneficiary you designate.
Joint and Survivor Options
The Joint and Survivor options pay benefits to you during your lifetime and provide monthly income for life to your spouse after your death in exchange for a permanent reduction of your benefit amount, calculated based on your age. You can elect for your spouse to receive 50%, 75%, or 100% of the benefit amount.
Note that only the spouse to whom you are married at the time you begin drawing pension benefits can receive any payments. If you divorce and remarry after retirement, your new spouse will not be eligible. Also, if your spouse dies before you do, no spousal benefits will be paid.
Married participants can elect the Single Life Annuity or Certain and Life Annuity option, but your spouse must sign a notarized waiver authorizing any option other than the Joint and Survivor option.
Pre-Retirement Surviving Spouse’s Pension Benefit (PRSSPB)
You can elect to provide additional protection for your spouse if you pass away before you begin drawing pension benefits. If you were hired before 2003, your spouse will receive this protection at no cost to you. If you were hired during or after 2004, the PRSSPB option will permanently reduce your benefits.
We Help You Put It All Together
While the basic benefit options available are fairly straightforward, the difficulty lies in determining which option will work best for you. That’s where we come in. Part of our role is analyzing how your pension plan fits with your overall goals, factoring in healthcare costs, tax liability, and family income needs. Bear in mind that sequence matters when drawing on income streams after you retire. Your pension plan is one of the three most common retirement income streams; you will also have income from Social Security and your investments.
We have worked with numerous Abbott Laboratories and AbbVie employees. If you would like to discuss how we can guide you through important decisions about your pension or other retirement benefits, call 224-419-5550 or email me at Mike@gibbonsfinancialgroup.com to schedule a complimentary consultation. Also, be sure to watch our free webinar, Retiring Early From Pharma.
About Mike
Michael J. Gibbons is founder and president of Gibbons Financial Group, an independent advisory firm providing custom-tailored financial planning and investment management services to pharmaceutical and healthcare professionals and their families. Mike has over 25 years of experience and spends a significant portion of his day working with pre-retirees and retirees, focusing on asset management, Social Security and pension planning, as well as retirement income preparation.
Mike has degrees in both business and psychology from Lake Forest College and currently holds his Retirement Income Certified Professional (RICP®) designation from the American College. Mike was named a Five Star Wealth Manager for 2016 and 2018* Mike is heavily involved in his community, having served on the Village of Gurnee Police Pension Board as a Community Volunteer and the St. Patrick’s Parish Financial Board. When he’s not working or volunteering, Mike loves playing golf and spending his time with his wife and children. To learn more about Mike and how he can help you, connect with him on LinkedIn, visit his website, and register for his free webinar, Retiring Early From Pharma, created specifically for professionals retiring from the pharmaceutical, biotechnology, and healthcare industries.
*Award based on 10 objective criteria associated with providing quality services to clients such as credentials, experience, and assets under management among other factors. Wealth managers do not pay a fee to be considered or placed on the final list of 2016/2018 Five Star Wealth Managers.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.