With every passing day, you are moving closer to retirement. While leaving active employment comes with all manner of uncertainties, having adequate finances to last you through your after-work years is one thing you should never have to worry about.
The Challenges of Retirement Planning
As an ExxonMobil employee, working out your ExxonMobil retirement plan is challenging. You have to ensure that you maximize your retirement benefits to beat the higher taxes you are subject to. Secondly, you should plan better because depending on a maximum social security of $3113 will not cut it.
ExxonMobil Layoffs and Discontinuation of 401K
ExxonMobil is on a rough mission to cut costs, and employees are on the receiving end. In October 2020, XOM oil and gas added to the job cut statistics by announcing that it would reduce its global workforce by 15%.
So, what happens if you get laid off abruptly? First, optional life insurance coverage for your spouse, partner, or children gets terminated. You can, however, turn it into an individual policy.
Secondly, you should take action on your existing retirement accounts. One of the options you have is channeling money from your retirement account to an Individual Retirement Account (IRA). If you do not know where to start, a financial advisor can guide you through the best course of action.
Continuing to Maximize Your 401K Benefits
Beginning October, Exxon Mobil also suspended 401K retirement savings plans contributions for its US employees, citing company losses due to COVID-19. What then happens to your 401K?
First, we recommend not withdrawing your money from the 401K as it could still benefit from potential market gains. Keep topping up your 401K. You can match up to what your employer was contributing or save more to make up for lost months.
Secondly, an investment professional can help you reinvest your funds to meet your retirement goals. An IRA, for example, can give you greater investment and withdrawal flexibility.
ExxonMobil Pension Plan
Now that the 401K is out, there is uncertainty about the future of XOM oil and gas pensions. Furthermore, companies such as DuPont and IBM have already frozen employee pensions.
> What to do if XOM Oil and Gas Freezes Your Pension
First, note that you can access past income, but there will be no future benefits.
ExxonMobil offers a defined benefit (DB) plan, giving you a specific amount of money every year after retirement. Your final pay benefit will depend on several factors like your years of service, your pay, the amount of social security offset, and age penalty (AP) deductions. To access and maximize your pension benefits:
> Confirm Your Social Security Offset
Ensure that XOM does not over-estimate social security offset, which can lower your benefits. In case of an overestimation, present your social security statement for correction. Always consult an advisor before submitting any document to your employer for altering.
> Creating a New XOM Retirement Plan to Reach Your Retirement Goals
Ask HR for an estimate of the monthly and yearly pension benefit you’ll get after retirement. Factor in income from social security, savings, and spousal benefits to determine how much you need to save to reach your retirement goals.
Another factor to consider is whether you should accept monthly payments or a lump sum payment. You can discuss this with a qualified financial advisor. When a company is performing poorly, taking the lump sum amount is usually best. You can then channel your pension into an IRA.
When rolling out your money into an IRA, you might be liable for taxes if your pension amount exceeds the lump sum limits stated in IRS rule 415, as shown below:
> Beware of AP Deductions
When you roll out money into an IRA prematurely, the IRS will cut a slice of your pension pie through AP deductions. If you retire at 60 or terminate your employment at 65, you can withdraw your pension without AP deductions.
Optimizing Your Social Security Benefits
How do you maximize your social security funds? First, find out if you are eligible for social security from the U.S. Social Security Administration. They can help enroll you as well as your eligible dependents.
There are optimal ways to claim social security as part of your retirement plan. For example, you must enroll in Medicare parts A and B to cover expenses eligible under Medicare. Medicare, however, only covers 60% of medical costs. You still need to save more to pay your entire bill. That is why having alternative retirement options is a good idea. When possible, wait until full retirement to get maximum social security benefits.
Secondly, there are instances where you can apply for divorced spouses’ benefits. Some of these are; if you are 62 years or older, if have been married for over a decade, if your ex-spouse has insurance for social security benefits, among other factors.
Should You Work After XOM Oil and Gas Retirement?
If retirement has caught you unprepared, it might be a good idea to keep working after retirement. In some instances, you can continue to receive low-cost health insurance.
The ExxonMobil Retirement Plan
Coming up with the ideal ExxonMobil retirement plan is a long and delicate process. You have to rummage through paperwork to understand the different company benefits and retirement plans. These include pension plans; social security and Medicare; benefits after termination from work, disability or death; benefits with relation to divorce; and many more issues that can help you get the most out of your retirement benefits.
It is even worse if you are inexperienced and striving to find out how much you need to live well after retirement. Chipping in a qualified advisor to guide you can make the process much more bearable.
At RG Wealth Management, we are ready to put our 30+ years of experience with XOM Tax and Retirement Planning to work for YOU. To speak with one of our Financial Advisors today, call us at (832) 789-1100. You can also email us at email@example.com or send us a quick message by clicking HERE.
Disclaimer: Rhame & Gorrell Wealth Management, LLC is not affiliated with or endorsed by ExxonMobil
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own CPA or tax professional before engaging in any transaction. The effectiveness of any of the strategies described will depend on your individual situation and should not be construed as personalized investment advice.