Essential Insights for Nationwide Employees: Navigating Retirement with a Pension and Social Security

Those planning retirement with a pension and Social Security supplemented by savings may want to consider how much spending money they have to work with, and whether or not it will cover necessary expenses.

When planning your retirement budget with unanswered questions about income streams, you may be left wondering how much Social Security you can expect, if your pension affects Social Security, or how taxes are going to work. Here's what you should know about retiring on your pension and Social Security.

How your Social Security benefits are calculated

When considering whether you qualify for social security and the amount that's entitled to you, several factors come into play. The first requirement is earning enough income over your career to gain 40 Social Security credits , which render you eligible to receive benefits.

Upon meeting that requirement, the Social Security Administration calculates the value of your benefit. Your average monthly earnings for the 35 years when your income was highest is used in the formula, adjusting numbers to account for the change in average wages across the overall economy during that time. The result is your primary insurance amount (PIA).

Depending on your age when claiming Social Security , the amount received may fluctuate above or below the PIA. Benefits are reduced when taking Social Security before reaching full retirement age. Alternatively, waiting past your retirement date might net you a greater benefit.

Working while you take Social Security can also influence the benefit amount. When under full retirement age, earning income above a set yearly limit lowers the benefit. On the other hand, earning income while receiving Social Security can increase your benefit if pay is high compared to previous years.

Benefits may also increase over time as the cost of living rises.

Benefits for spouses, former spouses, widows and widowers

When married with fewer than 40 credits, you may be eligible for a spousal benefit of up to half your spouse's amount at full retirement age. In the event you have enough credits but your earnings record based benefit is less than the spousal benefit, you may be entitled to your benefit plus an additional amount that will match the spousal benefit when added.

If you're divorced and you meet some conditions, you may be eligible for a spousal benefit that's up to half your former spouse's benefit at their full retirement age.

If your spouse has died, you may be eligible for a survivor's benefit as large as the full amount of your spouse's benefit if you've reached full retirement age, or a smaller amount if you're taking the benefit early.

Does pension affect Social Security?

Receiving a pension doesn't change the Social Security benefits you're eligible for if your employer withheld FICA taxes.

In the event that your employer didn't take FICA taxes out of your paycheck, then the pension received from that employer is considered a noncovered pension. Income from a noncovered pension can reduce your Social Security benefits.

How noncovered pensions can lower your benefits

If you have a noncovered pension but you still qualify for Social Security, the Windfall Elimination Provision (WEP) may apply to you. For this provision, the Social Security Administration uses a smaller percentage of your earnings in its formula for calculating the PIA, resulting in a smaller benefit. The WEP can cut your benefit by as much as half of your pension amount.

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When qualifying for a spousal benefit or survivor's benefit, a noncovered pension can reduce that benefit under the Government Pension Offset (GPO) . This provision cuts your benefit by two-thirds of your pension amount, and you can end up with a $0 benefit if your pension is large enough.

Exceptions to the WEP and GPO

If any of these situations apply to you, then the WEP won't reduce your benefit:

You work for the federal government and were hired in 1984 or later.

You work for a nonprofit that was exempt from Social Security on December 31, 1983, and meets some other conditions.

You only have a railroad pension.

Your earnings that weren't covered by FICA taxes were from before 1957.

You have at least 30 years of substantial earnings on which FICA taxes were paid.

The GPO typically won't affect your benefit if any of these is true:

You get a government pension that isn't based on your earnings.

You're a government employee, you have a government pension from work that was covered by FICA taxes, and you meet one of a few other requirements.

You work for the federal government, you switched from the Civil Service Retirement System to the Federal Employees' Retirement System after December 31, 1987, and you meet one of a few other requirements.

You received or were eligible for a government pension before December 1982, and you qualified for spousal benefits under the rules in place in January 1977.

You received or were eligible for a government pension before July 1, 1983, and you had one-half support from a spouse.

Does a pension count as earned income for Social Security?

The Social Security Administration doesn't view a pension as earned income . So you don't pay FICA taxes on your pension, and it doesn't add to your earnings record. Essentially, a pension can't add to your Social Security credits, and it doesn't enter into the PIA formula or affect your benefit amount.

When taking Social Security before full retirement age, a pension won't count toward earned income limit.

Looking up your Social Security benefits

It may prove beneficial to open an online account with the Social Security Administration to view a statement of your earnings history. The statement relays how much of your income was subject to FICA taxes for each year you've worked, letting you know if you have enough credits to be eligible for Social Security. Your full retirement age and estimates of what your benefit amount could be under different Social Security age scenarios is also shown.

The Social Security Administration offers a WEP calculator that shows how a noncovered pension may affect your Social Security benefit amount. You can enter your monthly income from the noncovered pension, your earnings from each year of your Social Security record, and the income you expect to earn in the future to calculate an estimate of your monthly benefit. A GPO calculator is also available and can help you establish how much your spouse's or survivor's benefits may be cut.

A financial advisor can help you get ready for retirement

With Social Security regulations being so complex, you may benefit from reaching out to a knowledgeable expert.

What are the unique benefits provided by the Nationwide Retirement Plan that differentiate it from other retirement plans? How does Nationwide Mutual Insurance Company ensure the plan meets the regulatory requirements while still addressing the needs of its employees?

Unique Benefits of Nationwide Retirement Plan: Nationwide’s Retirement Plan provides both a Final Average Pay (FAP) Benefit and an Account Balance Benefit, which allows flexibility for employees hired at different times. The plan is qualified under Section 401(a) of the Internal Revenue Code, ensuring compliance with federal tax laws. Nationwide ensures regulatory compliance while addressing employee needs through ongoing contributions, actuarial evaluations, and options like lifetime income for retirees and survivors.

How can employee participation in the Nationwide Retirement Plan impact their overall retirement savings strategy? What role does the defined benefit pension plan play in conjunction with Social Security and personal savings for employees of Nationwide Mutual Insurance Company?

Employee Participation Impact: Participation in the Nationwide Retirement Plan enhances employees' overall retirement savings strategy by integrating Social Security, personal savings, and the defined benefit plan. The FAP benefit, based on final average compensation, works alongside Social Security to offer a stable income, while the Account Balance Benefit adds flexibility in retirement income options.

What options do employees of Nationwide Mutual Insurance Company have when they retire before the age of 55, and how do these options compare to those available for employees who retire after reaching that age? What factors influence the choices employees make regarding timing and type of benefit commencement?

Retirement Options Before and After Age 55: Employees retiring before age 55 can start receiving their benefits immediately, but they face early retirement reductions. Those retiring after age 55 may choose from more benefit options like annuities and receive higher, less-reduced payments. The choice to retire before or after age 55 depends on factors like financial need and health, and affects the timing and size of the benefit commencement(Nationwide Mutual Insur…).

In what ways does the structure of the benefit formulasâ€”Final Average Pay (FAP) Benefit and Account Balance Benefitâ€”affect the retirement income of employees at Nationwide Mutual Insurance Company? What are the implications for employees considering different retirement timings?

Effect of Benefit Formulas on Income: The FAP Benefit is based on Final Average Pay and Social Security coordination, offering a larger benefit for those with higher incomes, while the Account Balance Benefit is based on accumulated contributions and interest. The timing of retirement plays a crucial role in determining income, as early retirement results in reduced benefits, while late retirement allows for continued service accrual and potentially higher payouts.

How does the Nationwide Mutual Insurance Company address spousal benefits under the retirement plan, particularly regarding the Qualified Preretirement Survivor Annuity (QPSA)? What are the actions that employees need to take to ensure their spouses receive these benefits?

Spousal Benefits and QPSA: Nationwide offers a Qualified Preretirement Survivor Annuity (QPSA) to ensure that a spouse receives benefits if the participant dies before retirement. Employees must name their spouse as a beneficiary or obtain notarized consent if they wish to designate someone else. To ensure the spouse receives the QPSA, employees must take the appropriate legal steps outlined in the plan.

What steps must employees of Nationwide Mutual Insurance Company take to successfully file a claim for retirement benefits, and what is the timeframe for processing these claims? How does the company ensure that employees understand their rights under the Employee Retirement Income Security Act (ERISA)?

Steps to File a Claim for Retirement Benefits: To file a claim, employees must notify the Nationwide Retirement Center at Fidelity and submit the required paperwork. Claims are typically processed within 60 days, and Nationwide ensures that employees understand their rights under ERISA through detailed communications and support from Fidelity Investments.

What are the situations that might cause delays or loss of benefits for employees retiring from Nationwide Mutual Insurance Company? How can employees proactively manage these risks to ensure they receive their entitled benefits?

Situations Leading to Delays or Loss of Benefits: Delays can occur if employees fail to submit necessary paperwork, keep their contact information updated, or if they are not vested at the time of severance. Employees should proactively manage these risks by completing forms timely and maintaining communication with the Plan Administrator to avoid disruptions in benefits.

Can employees at Nationwide Mutual Insurance Company alter their distribution choices after commencing their retirement benefits? What regulatory frameworks influence their ability to change benefit elections, and under what circumstances might these changes be permitted?

Changing Distribution Choices After Retirement: Once retirement benefits commence, changes to distribution elections are limited. For example, lump-sum payments and annuity selections are typically irrevocable after commencement, and spousal consent is required for certain changes. Federal regulations, such as IRS rules, further restrict post-retirement changes in benefit elections(Nationwide Mutual Insur…).

How does the Nationwide Mutual Insurance Company plan for automatic post-retirement benefit increases, and what factors determine the percentage increase? How do these increases impact the long-term financial security of retirees?

Post-Retirement Benefit Increases: Nationwide offers automatic post-retirement benefit increases for participants with service before 1996, with annual increases between 0% and 3% based on fund performance. These increases help to protect retirees’ long-term financial security by adjusting their pension income for inflation.

How can employees contact NDPERS for more information regarding their retirement options, and what specific resources are available for personalized assistance? Clear communication channels and support services are essential for helping employees navigate their retirement planning effectively with NDPERS.

Contacting the Nationwide Retirement Center: Employees can reach the Nationwide Retirement Center at Fidelity by calling 1-800-238-4015 for inquiries about their retirement plan. Fidelity provides detailed support, including benefit estimates, plan information, and assistance with filing claims and selecting benefit distribution options(Nationwide Mutual Insur…).