2024 Tax Changes and Inflation

It is imperative for individuals to be aware of new changes made by the IRS. The following will be the primary elements affecting employees:

The standard deduction for 2024 will rise to $21,900 for heads of household, $29,200 for joint filers, and $14,600 for single taxpayers and married filers filing separately.

Individuals who are blind or over 65 can increase their standard deduction by an extra $1,550. If you are not a surviving spouse or are not married, that amount increases to $1,950.

Contributions to retirement accounts: You can lower your tax liability by making contributions to your employer's 401(k) plan, and the maximum amount you can save has been raised for 2024. In 2024, the maximum contribution amount that people can make to their 401(k) plans will rise to $23,000, from $22,500 in 2023. For workers who are 50 years of age or older, the maximum catch-up contribution will rise to $7,500.

You should be aware of the following significant changes to the Earned Income Tax Credit (EITC) if you are a taxpayer who works for a corporation:

For qualifying taxpayers with three or more qualifying children, the maximum Earned Income Tax Credit amount for tax year 2024 is $7,830, up from $7,430 for tax year 2023.
Those who are married and file separately may be eligible: If you fulfill certain requirements, you may be eligible to claim the EITC as a married filing separately. This was not accessible the year before.

Cash charitable contribution deduction: The special deduction that let individuals who are not itemizers to claim a deduction of up to $300 (or $600 for married couples filing jointly) for cash gifts to approved charities has ended.

Changes to the Child Tax Credit

For children aged five and under, the maximum tax credit is $2,000; for children aged six to seventeen, it is $3,000 per qualified child. Furthermore, unlike in 2023, you are not eligible to get a portion of the credit in advance.
If your adjusted gross income is less than $200,000 if you're filing singly or less than $400,000 if you're filing a joint return with a spouse, you qualify for the Child Tax Credit as a parent or guardian.
A partial refundability of 70% that applies to people whose tax liability is less than the credit amount.

2024 Tax Brackets

Inflation reduces purchasing power over time as the same basket of goods will cost more as prices rise. In order to maintain the same standard of living throughout your retirement after leaving your company, you will have to factor rising costs into your plan. While the Federal Reserve strives to achieve a 2% inflation rate each year, in 2023 that rate shot up to 4.9% which was a drastic increase from 2020’s 1.4%. While prices as a whole have risen dramatically, there are specific areas to pay attention to if you are nearing or in retirement from your company, like healthcare. 

 It is crucial to take all of these factors into consideration when constructing your holistic plan for retirement from your company.

*Source: IRS.gov, Yahoo, Bankrate, Forbes

Planning Your Merck Retirement

Retirement planning is a verb. And consistent action must be taken whether you’re 20 or 60.

The truth is that most Americans don’t know how much to save or the amount of income they’ll need.

No matter where you stand in the planning process, or your current age, we hope this guide gives you a good overview of the steps to take, and provides some resources that can help you simplify your transition into retirement and get the most from your benefits.

You know you need to be saving and investing, but you don’t have the time or expertise to know if you’re building retirement savings that can last.

A separate study by Russell Investments, a large money management firm, came to a similar conclusion . Russell estimates a good financial advisor can increase investor returns by 3.75 percent.""

Source: Is it Worth the Money to Hire a Financial Advisor?, the balance, 202

Starting to save as early as possible matters. Time on your side means compounding can have significant impacts on your future savings. And, once you’ve started, continuing to increase and maximize your 401(k) contributions is key, and can lead to huge windfalls later on in your life.

As decades go by, you’re likely full swing into your career, and your income probably reflects that. However, the challenges to saving for retirement start adding up: a mortgage, raising children and saving for their college.

One of the classic planning conflicts is saving for retirement, versus saving for college. Most financial planners will tell you that retirement should be your top priority, because your child can usually find support from financial aid while you’ll be on your own to fund your retirement.

Our recommendations for retirement savings always take into account your particular financial status and aspirations. Nonetheless, during your 30s and 40s, think about setting aside at least 10% of your income for retirement funds.

When you reach your 50s and 60s, you should be at the height of your earning potential and have some of your biggest expenses—like a mortgage or raising children—behind you or shortly in the rearview mirror. Now could be a good time to see whether you can increase your retirement savings target to 20% or higher of your income. This may be the last chance that many individuals have to put money down.

Employees who are 50 years of age or older in 2024 have the option to contribute up to $23,000 to their 401(k) or retirement plan. After they reach this cap, they can make additional $7,500 in catch-up payments, for a total annual contribution cap of $30,500. Every year, these caps are revised to account for inflation.

Over 50? You can invest up to $19,500 into your retirement plan / 401(k).

As you enter your 50s and 60s, you’re ideally at peak earning years with some of your major expenses, such as a mortgage or child-rearing, behind you or soon to be in the rearview mirror. This can be a good time to consider whether you have the ability to boost your retirement savings goal to 20% or more of your income. For many people, this could potentially be the last opportunity to stash away funds.

In 2022, workers aged 50 or older can invest up to $27,000 into their retirement plan / 401(k). Once they meet this limit, they can add an additional $6,500 in catch-up contributions. These limits are adjusted annually for inflation.

If you’re over 50, you may be eligible to use a catch-up contribution within your IRA.

Why are 401(k)s and matching contributions so popular?

These retirement savings vehicles give you the chance to take advantage of three main benefits:

1. Compound growth opportunities (as seen above)
2. Tax saving opportunities
3. Matching contributions

Matching contributions are just what they sound like: your employer (in this case, Merck) matches your own 401(k) contributions with money that comes from the company. If Merck matches, the company money typically matches up to a certain percent of the amount you put in.

Unfortunately, many people don’t take full advantage of the employer match because they’re not putting in enough themselves.

$1,336 - A 2020 study from Financial Engines titled “Missing Out: How Much Employer 401(k) Matching Contributions Do Employees Leave on the Table?”, revealed that employees who don’t maximize the company match typically leave $1,336 of potential extra retirement money on the table each year.

- If Merck will match up to 3% of your plan contributions and you only contribute 2% of your salary, you aren’t getting the full amount of Merck's potential match.

- By bumping up your contribution by just 1%, Merck is now matching 3% (the max) of your contributions for a total contribution of 6% of your salary. You aren’t leaving money on the table.

Whether you live in the U.S. or Puerto Rico, you'll receive quite a bit of useful information from this article! Speak with a Merck-focused advisor by clicking the button below.

Retirement Income

Merck offers beneficial perks to assist you in making plans for a financially stable and healthy retirement.

The Pension Plan is a cash balance formula defined benefit pension plan that determines benefits. Your pension is calculated as a benefit based on your account, which increases with:

• Annual pay credits from the employer determined by adding your age and cash balance as of December 31 (see table on the right), and

• Interest credits for the year that are calculated as the annual percentage change in the Urban Consumer Price Index (CPI) + three percent (minimum 3.3%).

With effect from December 31 of each year, your pension account will receive both pay credits and interest credits.

When your benefit is paid, you can choose to receive it as a lump sum or as an annuity. Generally, you can elect to receive your pension benefit at any time after you terminate employment.1

You are 100% vested in your pension benefit after three years of service.

Lump-Sum vs. Annuity

Pension-eligible retirees are frequently given the option of receiving a lump sum payment all at once or pension payments for the rest of their lives. With the idea that you could take the money (rolling it over to an IRA), invest it, and create your own cash flow by taking systematic withdrawals throughout your retirement years, the lump sum is the equivalent present value of the monthly pension income stream.

Selecting the monthly pension option has the benefit of guaranteed lifetime payments (well, as long as the pension plan remains solvent and continues to operate). Whether you live 10 years, 20 years, 30 years, or even longer after quitting your job, you will not have to worry about the possibility of outliving the monthly pension.

The primary drawback of the monthly pension is the premature and early death of the joint annuitant and retiree. This often translates into a reduction in the benefit or the pension ending altogether upon the passing. The other downside, it that, unlike Social Security, company pensions rarely contain a COLA (Cost of Living Allowance).  As a result, with the dollar amount of monthly pension remaining the same throughout retirement, it will lose purchasing power when the rate of inflation increases. 

In contrast, selecting the lump-sum gives you the potential to invest, earn more growth, and potentially generate even greater retirement cash flow. Additionally, if something happens to you, any unused account balance will be available to a surviving spouse or heirs. However, if you fail to invest the funds for sufficient growth, there’s a danger that the money could run out altogether and you may regret not having held onto the pension’s “income for life” guarantee. 

The "risk" assessment that has to be completed ultimately determines what kind of return has to be generated on that lump sum in order to replicate the annuity payments, and that will help you decide whether to take the lump sum or the guaranteed lifetime payments that your company pension offers. After all, if it would only take a return of 1% to 2% on that lump-sum to create the same monthly pension cash flow stream, there is less risk that you will outlive the lump-sum. However, if the pension payments can only be replaced with a higher and much riskier rate of return, there is, in turn, a greater risk those returns won’t manifest and you could run out of money.

 

Interest Rates and Life Expectancy

The amount that defined benefit pension plans pay out in lump sums depends on both your life expectancy at retirement and current interest rates.

Lump sum values for pensions are negatively correlated with rising interest rates. Pension lump sum values will rise in the opposite direction as well—that is, when interest rates fall. When choosing your lump sum option under the pension plan, interest rates play a significant role.

The Retirement Group feels that prior to selecting their pension, all employees ought to receive a comprehensive RetireKit Cash Flow Analysis that contrasts their lump sum value with the options for monthly annuity distribution.

As enticing as a lump sum may be, the monthly annuity for all or a portion of the pension, may still be an attractive option, especially in a high interest rate environment.

Each person’s situation is different, and a complimentary Cash Flow Analysis, from The Retirement Group, will show you how your pension choices stack up and play out over the course of your retirement years which may be two, three, four or more decades in retirement.

 

By knowing where you stand, you can make a more prudent decision regarding the optimal time to retire, and which pension distribution option meets your needs the best.

 

Your Merck 401(k) Plan

Plans for Savings in 401(k)

Workers are urged to sign up as soon as possible for their 401(k) savings plan.

Merck provides a qualified retirement savings plan, or 401(k) plan, to augment your pension income from the Pension Plan.

Depending on your needs, you can save with this plan on a before-tax, Roth, or after-tax basis.

Concerning the Savings Plan

• There is no waiting period; you can start taking advantage of the Merck Savings Plan as soon as you are hired.

• Complete, instant vesting – meaning your contributions and company-matching contributions are always yours.

• Easy payroll deductions through contributions made before taxes, Roth accounts, and after-tax amounts up to IRS maximums

• To encourage you to save and supplement your savings, your employer may match contributions up to the IRS contribution limitations, contributing 75 cents for every dollar you save (of the first 6% of your total earnings).

• A selection of investment options intended to assist you in creating a portfolio that is well-diversified.

• Investment of your (and employer-matched) contributions in a tax-deferred manner

• Emergency access to your account via the provisions for distribution, withdrawal, and loan

If you have funds in your 401(k) plan at retirement, you will get a Participant Distribution Notice through the mail. This notification will outline your distribution options and display the current value that each plan qualifies you for.

It will also specify the steps you must do in order to obtain your final distribution.

For additional information, please contact The Retirement Group at (800)-900-5867, and we will put you in contact with a retirement-focused advisor.

The next step is to keep an eye out for your Special Tax Notice Regarding Plan Payments and Participant Distribution Notice. These notifications will assist in outlining your options and any federal tax consequences for the balance in your vested account.

"What has Worked in Investing" & "8 Tenets when picking a Mutual Fund" .

Give The Retirement Group a call at (800)-900-5867 to find out your alternatives regarding distribution. Click our e-book "Rollover Strategies for 401(k)s" to learn more. If you need to update your beneficiary designations, use the Online Beneficiary Designation.

Over half of plan participants admit they don’t have the time, interest or knowledge needed to manage their 401(k) portfolio. But the benefits of getting help goes beyond convenience. Studies like this one, from Charles Schwab, show those plan participants who get help with their investments tend to have portfolios that perform better: The annual performance gap between those who get help and those who do not is 3.32% net of fees. This means a 45-year-old participant could see a 79% boost in wealth by age 65 simply by contacting an advisor. That’s a pretty big difference.

Getting help can be the key to better results across the 401(k) board.

A Charles Schwab study found several positive outcomes common to those using independent professional advice. They include:

• Improved savings rates – 70% of participants who used 401(k) advice increased their contributions.

 

• Increased diversification – Participants who managed their own portfolios invested in an average of just under four asset classes, while participants in advice-based portfolios invested in a minimum of eight asset classes.

 

• Increased likelihood of staying the course – Getting advice increased the chances of participants staying true to their investment objectives, making them less reactive during volatile market conditions and more likely to remain in their original 401(k) investments during a downturn. Don’t try to do it alone. Get help with your company's 401(k) plan investments. Your nest egg will thank you.

Getting help can be the key to better results across the 401(k) board.

A Charles Schwab study found several positive outcomes common to those using independent professional advice. They include:

Improved savings rates – 70% of participants who used 401(k) advice increased their contributions.
Increased diversification – Participants who managed their own portfolios invested in an average of just under four asset classes, while participants in advice-based portfolios invested in a minimum of eight asset classes.
Increased likelihood of staying the course – Getting advice increased the chances of participants staying true to their investment objectives, making them less reactive during volatile market conditions and more likely to remain in their original 401(k) investments during a downturn. Don’t try to do it alone.
Get help with your 401(k) investments. Your nest egg will thank you.

In-Service Withdrawals

Generally speaking, you can withdraw amounts from your account while still employed under the circumstances described below.

It’s important to know that certain withdrawals are subject to regular federal income tax and, if you’re under age 59½, you may also be subject to an additional 10% penalty tax. You can determine if you’re eligible for a withdrawal, and request one, online or by calling the Merck Benefits Center.

Rolling Over Your 401(k)

As long as the plan participant is younger than age 72, an in-service distribution can be rolled over to an IRA. A direct rollover would avoid the 10% early withdrawal penalty as well as the mandatory 20% tax withholding. Your plan summary outlines more information and possible restrictions on rollovers and withdrawals.

Because a withdrawal permanently reduces your retirement savings and is subject to tax, you should always consider taking a loan from the plan instead of a withdrawal to meet your financial needs. Unlike withdrawals, loans must be repaid, and are not taxable (unless you fail to repay them). In some cases, as with hardship withdrawals, you are not allowed to make a withdrawal unless you have also taken out the maximum available plan loan.

You should also know that the plan administrator reserves the right to modify the rules regarding withdrawals at any time, and may further restrict or limit the availability of withdrawals for administrative or other reasons. All plan participants will be advised of any such restrictions, and they apply equally to all employees.

Borrowing from your 401(k)

Should you? Maybe you lose your job, have a serious health emergency, or face some other reason that you need a lot of cash. Banks make you jump through too many hoops for a personal loan, credit cards charge too much interest, and … suddenly, you start looking at your 401(k) account and doing some quick calculations about pushing your retirement off a few years to make up for taking some money out.

We understand how you feel: It’s your money, and you need it now. But, take a second to see how this could adversely affect your retirement plans.

Consider these facts when deciding if you should borrow from your 401(k). You could:

Lose growth potential on the money you borrowed.
Deal with repayment and tax issues if you leave your employer.
Repayment and tax issues, if you leave your employer.

Net Unrealized Appreciation (NUA)

When you qualify for a distribution, you have three options:

• Roll-over your qualified plan to an IRA and continue deferring taxes.
• Take a distribution and pay ordinary income tax on the full amount.
• Take advantage of NUA and reap the benefits of a more favorable tax structure on gains.

 

How does Net Unrealized Appreciation work?

An employee must first be qualified to receive benefits from a qualifying company-sponsored plan. The employee often accepts a "lump-sum" payout from the plan, disbursing all assets over the course of a year, upon retirement or reaching age 59 1⁄2. You can roll over the mutual fund and other investment portion of the plan into an IRA to further avoid taxes. After that, the highly valued firm stock is moved to an account that isn't for retirement.

When you move business shares from a tax-deferred account to a taxable account, you will receive a tax benefit. You currently apply NUA and are liable for ordinary income tax on the stock's cost base alone. The stock's increased value over its base is taxed at the lower long-term capital gains rate, which is now 15%, rather than the higher regular income tax. This could result in savings of more than 30%.

Would you be interested in speaking with a financial advisor from The Retirement Group one-on-one for a complimentary one-on-one session to learn more about NUA?

IRA Withdrawal

• If you satisfy the plan's age and service eligibility conditions upon leaving your job, you can enroll in group retiree medical coverage (which includes prescription medication coverage) until you turn 65 and are eligible for Medicare.

• Merck retirees and eligible dependents who are 65 years of age or older and qualify for Medicare may purchase individual health insurance (including prescription drug coverage) through a private health exchange and may be eligible to receive financial support from Merck via a health reimbursement account, provided they meet the eligibility requirements.

Your Merck Benefits

HSAs

Health Savings Accounts (HSAs) are frequently praised for helping people with high-deductible health plans manage their medical costs. Beyond only controlling medical costs, HSAs offer advantages over more conventional retirement plans such as 401(k)s. This is especially true if employer matching contributions have been fully utilized.

Recognizing HSAs

Individuals with high-deductible health insurance policies can open tax-advantaged accounts called Health Savings Accounts (HSAs). High-deductible plans are those that have a minimum deductible of $1,600 for single people and $3,200 for families as of 2024, according to the IRS. Triple tax benefits are offered by HSAs, which permit pre-tax contributions, tax-free investment growth, and tax-free withdrawals for approved medical costs.

HSA yearly contribution caps for 2024 are $4,150 for singles and $8,300 for families, plus an extra $1,000 for those 55 years of age and above. HSA funds, in contrast to those in Flexible Spending Accounts (FSAs), accrue and are carried over for an unlimited period of time.

Evaluating HSAs and 401(k)s After Matching

Contributions beyond the employer's maximum match in a 401(k) result in less immediate financial rewards. HSAs can serve as a strategic supplement in this situation. 401(k)s provide tax-deductible contributions and tax-deferred growth, but withdrawals are subject to taxes. In contrast, health savings accounts (HSAs) offer tax-free withdrawals for medical costs, which account for a sizeable amount of retirement spending.

HSA as a Tool for Retirement

The HSA shows its strength as a powerful retirement tool after age 65. The money can be taken out for anything, with the exception of ordinary income tax if it is used for non-medical costs. This flexibility is comparable to that of typical retirement plans, plus it comes with the bonus of tax-free withdrawals for medical bills, which is quite helpful considering the rising cost of healthcare in retirement.

Moreover, unlike Traditional IRAs and 401(k)s, HSAs do not have Required Minimum Distributions (RMDs), giving investors greater flexibility when it comes to retirement tax planning. Because of this, HSAs are especially beneficial for people who wish to reduce their taxable income or who may not need to access their savings right away when they retire.

HSA Investment Strategy

First, you should invest in an HSA cautiously, making sure that there are enough liquid assets to pay for short-term deductibles and other out-of-pocket medical costs. But after a safety net is in place, investing in a diverse range of equities and bonds and managing the HSA like a retirement account can greatly increase the account's long-term growth potential.

Making Use of HSAs in Retirement

HSAs can pay for a variety of retirement-related expenses:

Healthcare Costs Before Medicare: HSAs Can Cover Medical Expenses to Help You Become Enrolled in Medicare Healthcare Costs After Medicare: Medicare premiums and out-of-pocket medical expenses, such as dental and vision care, which are frequently not covered by Medicare, can be paid with HSAs.
Long-term Care: The money can be used to pay insurance premiums and for appropriate long-term care services.
Non-Medical Expenses: HSA funds may be withdrawn for non-medical costs up to the age of 65 without penalty, although income tax is due on these withdrawals.

In summary

In conclusion, after the advantages of 401(k) matching are fully realized, HSAs can be a better option for retirement savings due to their special advantages. Because of their tax benefits and flexibility in using funds, health savings accounts (HSAs) are a crucial part of an all-encompassing retirement plan. People can optimize their retirement financial health and ensure their medical and financial security by carefully controlling their contributions and withdrawals.

Short-Term & Long-Term Disability

Short-Term: Depending on your plan, you may have access to short-term disability (STD) benefits.

Long-Term: Your plan's long-term disability (LTD) benefits are designed to provide you with income if you are absent from work for six consecutive months or longer due to an eligible illness or injury.

What Happens If Your Employment Ends

Your life insurance coverage and any optional coverage you purchase for your spouse/domestic partner and/or children ends on the date your employment ends, unless your employment ends due to disability. If you die within 31 days of your termination date, benefits are paid to your beneficiary for your basic life insurance, as well as any additional life insurance coverage you elected.

Note:

1. You may have the option to convert your life insurance to an individual policy or elect portability on any optional coverage.
2. If you stop paying supplementary contributions, your coverage will end.
3. If you are at least 65 and you pay for supplemental life insurance, you should receive information in the mail from the insurance company that explains your options.
4. Make sure to update your beneficiaries. See the Merck SPD for more details.

Beneficiary Designations
As part of your retirement and estate planning, it’s important to name someone to receive the proceeds of your benefits programs in the event of your death. That’s how Merck will know whom to send your final compensation and benefits. This can include life insurance payouts and any pension or savings balances you may have.

Next Step:

When you retire, make sure that you update your beneficiaries. Merck has an Online Beneficiary Designation form for life events such as death, marriage, divorce, child birth, adoptions, etc.

If you are unsure about Merck benefits, schedule a call to speak with one of our Merck-focused advisors

Schedule a Call

Social Security & Medicare

For many retirees, understanding and claiming Social Security can be difficult but identifying optimal ways to claim Social Security is essential to your retirement income planning. Social Security benefits are not designed to be the sole source of your retirement income, but a part of your overall withdrawal strategy.

Knowing the foundation of Social Security, and using this knowledge to your advantage, can help you claim your maximum benefit.

It’s your responsibility to enroll in Medicare parts A and B when you first become eligible — and you must stay enrolled to have coverage for Medicare-eligible expenses. This applies to your Medicare eligible dependents as well.

You should know how your retiree medical plan choices or Medicare eligibility impact your plan options. Before you retire, contact the U.S. Social Security Administration directly at 800-772-1213, call your local Social Security Office or visit ssa.gov .

They can help determine your eligibility, get you and/or your eligible dependents enrolled in Medicare or provide you with other government program information. For more in-depth information on Social Security, please call us.

Check the status of your Social Security benefits before you retire. Contact the U.S. Social Security Administration, your local Social Security office, or visit ssa.gov.

Are you eligible for Medicare, or will be soon?

If you or your dependents are eligible after you leave Merck, Medicare generally becomes the primary coverage for you or any of your dependents as soon as they are eligible for Medicare. This will affect your company-provided medical benefits.

You and your Medicare-eligible dependents must enroll in Medicare Parts A and B when you first become eligible. Medical and MH/SA benefits payable under the Merck-sponsored plan will be reduced by the amounts Medicare Parts A and B would have paid whether you actually enroll in them or not.

For details on coordination of benefits, refer to your summary plan description.

If you or your eligible dependent don’t enroll in Medicare Parts A and B, your provider can bill you for the amounts that are not paid by Medicare or your Merck-specific medical plan … making your out-of-pocket expenses significantly higher.

According to the Employee Benefit Research Institute (EBRI), Medicare will only cover about 60% of an individual’s medical expenses. This means a 65-year-old couple, with average prescription-drug expenses for their age, will need $259,000 in savings to have a 90% chance of covering their healthcare expenses. A single male will need $124,000 and a single female, thanks to her longer life expectancy, will need $140,000.

Check your plan summary to see if you’re eligible to enroll in Medicare Parts A and B.

If you become Medicare-eligible for reasons other than age, you must contact the Merck benefit center about your status. *Source: Merck Summary Plan Description

Divorce

 

The ideas of 'happily ever after" and 'til' death do us part' simply won’t materialize for 28% of couples over the age of 50. Most couples have saved together for decades, assuming all along that they would retire together. After a divorce, they face the expenses of a pre-or post-retirement life, but with half their savings (or even less).

If you’re divorced or in the process of divorcing, your former spouse(s) may have an interest in a portion of your retirement benefits. Before you can start your pension — and for each former spouse who may have an interest — you’ll need to provide Merck with the following documentation:

1. A copy of the court-filed Judgment of Dissolution or Judgment of Divorce along with any Marital Settlement Agreement (MSA)
2. A copy of the court-filed Qualified Domestic Relations Order (QDRO)

Provide Merck with any requested documentation to avoid having your pension benefit delayed or suspended. To find out more information on strategies if divorce is affecting your retirement benefits, please give us a call.

You’ll need to submit this documentation to your company’s online pension center regardless of how old the divorce or how short the marriage. *Source: The Retirement Group, “Retirement Plans - Benefits and Savings,” U.S. Department of Labor, 2019; “Generating Income That Will Last Throughout Retirement,” Fidelity, 2019

Social Security and Divorce You can apply for a divorced spouse’s benefit if the following criteria are met:

You’re at least 62 years of age.
You were married for at least 10 years prior to the divorce.
You are currently unmarried.
Your ex-spouse is entitled to Social Security benefits.
Your own Social Security benefit amount is less than your spousal benefit amount, which is equal to one-half of what your ex’s full benefit amount would be if claimed at Full Retirement Age (FRA). Unlike with a married couple, your ex-spouse doesn’t have to have filed for Social Security before you can apply for your divorced spouse’s benefit, but this only applies if you’ve been divorced for at least two years and your ex is at least 62 years of age. If the divorce was less than two years ago, your ex must already be receiving benefits before you can file as a divorced spouse.

Unlike with a married couple, your ex-spouse doesn’t have to have filed for Social Security before you can apply for your divorced spouse’s benefit.

Divorce doesn’t even disqualify you from survivor benefits. You can claim a divorced spouse’s survivor benefit if the following are true:

Your ex-spouse is deceased
You are at least 60 years of age
You were married for at least 10 years prior to the divorce
You are single (or you remarried after age 60)

In the process of divorcing?

If your divorce isn’t final before your retirement date, you’re still considered married. You have two options:

1. Retire before your divorce is final and elect a joint pension of at least 50% with your spouse — or get your spouse’s signed, notarized consent to a different election or lump sum.
2. Delay your retirement until after your divorce is final and you can provide the required divorce documentation.*

Source: The Retirement Group, “Retirement Plans - Benefits and Savings,” U.S. Department of Labor, 2019; “Generating Income That Will Last Throughout Retirement,” Fidelity, 2019

Survivor Checklist

 

In the unfortunate event that you aren’t able to collect your benefits, your survivor will be responsible for taking action.

What your survivor needs to do:

1. Report your death. Your spouse, a family member, or even a friend should call your company’s benefits service center as soon as possible to report your death.
2. Collect life insurance benefits. Your spouse, or other named beneficiary, will need to call Merck's benefits service center to collect life insurance benefits.

If you have a joint pension:

1. Start the joint pension payments. The joint pension is not automatic. Your joint pensioner will need to complete and return the paperwork from Merck's pension center to start receiving joint pension payments.
2. Be prepared financially to cover living expenses. Your spouse will need to be prepared with enough savings to bridge at least one month between the end of your pension payments and the beginning of his or her own pension payments.

If your survivor has medical coverage through Merck:

1. Decide whether to keep medical coverage.
2. If your survivor is enrolled as a dependent in your Merck-sponsored retiree medical coverage when you die, he or she needs to decide whether to keep it. Survivors have to pay the full monthly premium.

Life After Merck

 

While you may be ready for some rest and relaxation, without the stress and schedule of your full-time career, it may make sense to you financially, and emotionally, to continue to work.

Financial benefits of working

Make up for decreased value of savings or investments . Low interest rates make it great for lump sums but harder for generating portfolio income. Some people continue to work to make up for poor performance of their savings and investments.

Maybe you took a company offer and left earlier than you wanted and with less retirement savings than you needed. Instead of drawing down savings, you may decide to work a little longer to pay for extras you’ve always denied yourself in the past.

Meet financial requirements of day-to-day living . Expenses can increase during retirement and working can be a logical and effective solution. You might choose to continue working in order to keep your insurance or other benefits — many employers offer free to low cost health insurance for part-time workers.

Emotional benefits of working

You might find yourself with very tempting job opportunities at a time when you thought you’d be withdrawing from the workforce.

Staying active and involved. Retaining employment, even if it’s just part-time, can be a great way to use the skills you’ve worked so hard to build over the years and keep up with friends and colleagues.

Enjoying yourself at work . Just because the government has set a retirement age with its Social Security program doesn’t mean you have to schedule your own life that way. Many people genuinely enjoy their employment and continue working because their jobs enrich their lives.

Fortune 500 employees interested in planning their retirement may be interested in live webinars hosted by experienced financial advisors. Click here to register for our upcoming webinars for Fortune 500 employees.

Sources