After working several years at NIPSCO, you find yourself considering if retirement is in the near future. The primary question on your mind is: How early can I retire? Depending on a few factors you may be able to retire sooner than you think. Let's take a look at how your early retirement would look.
Early Retirement Under Final Average Payout Pension
If you were hired before June 1st, 2004 chances are you have the NIPSCO Final Average Payout Pension. If you have reached the age of 55 and accumulated a minimum of 10 years of Credited Service at NIPSCO, you meet the criteria for early retirement.
The early retirement benefit is your FAP Benefit minus a reduction due to a longer duration than if you were to claim benefits at your normal retirement date which is age 65. The specific reduction applied depends on the amount of Credited Service you have accumulated.
Credited Service:
Is the amount of years worked at NIPSCO used to determine the amount of an employee's FAP Benefit. Credited Service is also used to determine whether an employee is entitled to begin distribution of his FAP benefit before his normal retirement date.
Less Than 25 Years Of Service:
If your accumulated Credited Service at the time of your retirement is less than 25 years, your early retirement benefit will be determined by reducing your FAP benefit. The reduction is 6% for each of the first 5 years and 4% for each of the next 5 years that your benefit precedes your normal retirement date. Additionally, any partial year will be proportionately adjusted.
25 Years Of Service Or More:
If you have accumulated 25 or more years of Credited Service at the time of your retirement, you have the option to retire at age 60 or later without any reduction to your FAP benefit. However, if you choose to begin your benefits before reaching age 60, your early retirement benefit will be calculated by reducing your FAP benefit by 6% for the initial year and 4% for each year following until age 60.
Here is an example of what those percentages would look like for each:
Rule Of 85
One thing to consider is if you retire at or after reaching the age of 55 and the combination of both your age and Credited Service is 85 or more, you are eligible to receive an early retirement benefit from the Plan without any reduction.
Example Of Early Retirement:
Assume that you retire at age 60 with 20 years of Credited Service (you reached your Early Retirement Age at age 55 but waited to retire). You have an annual Final Average Pay is $60,000 ($5,000 per month).
Supplemental Benefit
NIPSCO offers a Supplemental Benefit only eligible to employees who are in the FAP Pension Plan. To qualify for the Supplemental Benefit, you must meet the following criteria:
1. Be a FAP Participant in the Plan at the time of your retirement.
2. Have completed 25 years of Credited Service.
3. Retire from active service at or after reaching the age of 60.
Employees who receive the Supplemental benefit in addition to their early retirement benefit. This additional benefit continues to be paid until you reach the age of 65 or, the time you become entitled to receive a Social Security disability benefit. The Supplemental Benefit amount is a fixed monthly payment determined by your Benefit Class as of your retirement date.
If you qualify for the Rule of 85, you will still be eligible for the Supplemental benefit even if you haven't reached the age of 60 at the time of your retirement, as long as you have accumulated a minimum of 25 years of Credited Service. The Supplemental benefit will continue to be paid until you reach the age of 65.
Example:
Assume you retire in 2018 at age 62 with 25 years of Credited Service and an annual Final Average Pay of $60,000 (or $5,000 per month). Here is what your monthly early retirement benefit, factoring in the Supplemental Benefit, would look like:
Retiring Before Normal or Early Retirement:
If you are no longer working at NIPSCO before reaching normal or early retirement age, you will qualify to receive your vested FAP Benefit. This benefit becomes available on the first day of any month following the attainment of Early Retirement Age. In the event that you decide not to take it at early retirement age, the benefit will be accessible on the first day of any month following the attainment of normal retirement age.
If you have completed a minimum of 10 years of Credited Service, you have the option to start receiving your FAP Benefit at a reduced amount as early as age 55. The reduction applied in this case is the same as that for the early retirement benefit if you have fewer than 25 years of Credited Service and more than 25 years of Credited Service at the time of termination.
Specifically, if you are eligible to begin receiving your benefit before reaching your normal retirement age and choose to do so, your benefit will be subject to a reduction. The reduction is 6% for each of the first 5 years and 4% for each of the next 5 years by which payments begin before your normal retirement date. This reduction is adjusted proportionately for any partial year.
To ensure a minimum benefit, your monthly benefit will not be lower than $25 multiplied by your years of Credited Service, up to a maximum of 10 years. This provision guarantees a minimum level of benefit for eligible NIPSCO employees.
In the end, making the decision to retire early is a choice that requires careful planning. Because your pension is only one piece of your financial picture it's essential to take into account any other retirement accounts like IRAs, 401ks, and brokerage accounts. Proper allocation and management of these accounts are key to ensuring your financial success for retirement. If you're looking for help to determine whether you’re ready to retire from NIPSCO, Wisely Advised is here to help assist you every step of the way. Whether you have questions about financial planning, investments, or your pension, we have the expertise to provide the support and guidance you need to ensure a successful retirement.
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