Leaving Shell – 80-Point Pension Part 2
Leaving Shell – 80-Point Pension Part 2
There are three benefits of reaching the 80-point cliff (immediate pension eligibility).
1) Early Pension. You can start as early as age 50, and will receive 100% of your full benefit if you start at age 60.
2) The Social Security Offset Supplement.
3) The Free 50 survivor benefit.
Please keep in mind: You may be able to reach immediate pension eligibility with 70 points if you have 20 years under the 80-point pension, are at least 50 years old, and leave with a special severance.
Full Transcript:
I’m leaving Shell with 80 points. When can I start my pension?
In my last video, we looked at a hypothetical scenario, John. John left Shell before reaching 80 points. Let’s look at another hypothetical example, but this time, let’s look at Jane. Jane is also 55 years old. Jane’s average final compensation is also $250,000 per year. Jane has 30 years of service on the 80-point plan. Remember, John only had 15. So, if we look at Jane’s points, her age, plus years of service under the 80-point plan, Jane has 85 points. She has exceeded the 80-point threshold and has immediate pension eligibility when she leaves Shell.
So, let’s calculate out Jane’s pension. We look at 30 years of service. We multiply that by 1.6% per year, and multiply that by her average final compensation, or $250,000. Now, we’re going to assume Jane’s Social Security offset is $1,000 a month, or $12,000 a year. So we’ll subtract that out. However, one benefit of reaching 80 points is that Shell supplements the Social Security offset until reaching Social Security normal retirement age, or in this case, for Jane, it’s age 67. So, she will receive an additional $12,000 to offset the Social Security offset for the first seven plus years of her pension. So, that means that Jane’s pension benefit is $120,000 per year, or $10,000 per month, if she starts it at age 60.
Now, if Jane wants to start her pension early, say immediately when she retires at age 55, it will be reduced. If you have immediate pension eligibility, i.e., 80 points, your pension is reduced by 5% per year for every year you take it before age 60. So, if she starts at age 55, it’ll be 75% of her full pension benefit. And so multiply that by $120,000 per year, which means Jane’s reduced pension or pension benefit if she starts at age 55, is $90,000 per year, or $7,500 per month.
Now, this Social Security offset suppland starting at age 60 with your full benefit and set of age 65 are two huge benefits for reaching the 80-point cliff. Additionally, there is a third benefit that Jane will receive since Jane has immediate pension eligibility. She will also receive the Free 50 supplement, a free survivor benefit that her spouse will get. So, what this means is that if Jane passes away before her spouse, her spouse will still receive 50% of Jane’s pension for the remainder of their life. As you can see, the difference in reaching 80 points is material. So I highly encourage you to consider that if you have the option.
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