Election options to get the biggest benefit from your AbbVie pension

Election options to get the biggest benefit from your AbbVie pension

September 11, 2023

If you enter retirement as a married individual and either you or your spouse possesses an AbbVie pension, you will encounter various decisions to make when you retire and request your benefits. How you choose to select your pension benefits will determine if you receive them without penalty, the monthly benefit amount, and the survivor benefits to your spouse.


Understanding Survivor Benefits

Upon your or your spouse's retirement, you will be required to select the desired type of benefit. The AbbVie pension can be disbursed in different formats.


While there are many variations, there are two primary benefit forms:


Single Life Benefit: This entails monthly payments established solely on the anticipated lifespan of the pension recipient. Payments cease upon the demise of the recipient.


Joint and Survivor Benefit: This involves monthly payments based on the combined lifespan of you and your spouse. If the pension recipient passes away first, the surviving spouse will continue to receive survivor benefits from the pension. While monthly payments under this option are usually lower than a single life benefit, they are guaranteed to persist for the surviving spouse. This election can come in various forms – with the surviving benefit being 50% of the initial amount, or the same amount from inception (albeit being a lower amount each month).


Opting for the survivor's benefit translates to receiving lower monthly benefits compared to benefits based solely on the pension recipient's lifetime. However, this choice guarantees a steady income stream for two lifetimes – your own and your spouse's.


People often lean towards the single-life benefit since it offers the highest monthly payment. Nonetheless, it is crucial to recognize that this payment ceases upon the pension-earning spouse's demise, even if they pass away shortly after retiring without collecting any pension payments. In such cases, retiree health benefits may also cease.


To gauge the benefits under each available option or benefit type, consider consulting the pension plan administrator.


A (Hypothetical) Case in Point

Suppose your spouse holds the pension, and both of you opt for a single-life benefit. While your spouse is alive, you could receive $5,000 per month in pension benefits. This payment would cease upon your spouse's demise.


Alternatively, with a 50% joint and survivor annuity, you might receive $3,750 per month while your spouse is alive. However, if your spouse passes away, your benefit would be reduced to $1,875 per month for the duration of your life.


Which benefit should you choose?

This decision depends on several factors:


Other investments outside the pension, and tax categorization of these investments

If you have a number of other investments outside of your AbbVie pension, you may not need to stretch these benefits across both of your lifetime, so could opt for a single annuity. If you die prematurely, there will still be enough savings for your surviving spouse to live the lifestyle they desire.


The health of you and your spouse, and family history of catastrophic disease

If your family has a history of illness but your spouse and their family are healthy and have lived long lives, then a Joint annuity is likely the best solution. In the reverse, it may be worthwhile taking the single annuity if you plan on outliving your spouse.


The perceived strength of AbbVie’s pension plan

If, based on reports and facts (and not feelings and intuition), the pension plan is unable to fund its long-time liabilities, then taking a single-life pension and extracting as much value quickly could be an option. If the pension is likely to fail and then only pay out partial benefits, it would be wise to receive as much money upfront as you can.


Your age at which you elect to receive the pension

If you were hired after 20004, electing to receive the pension earlier than age 62 will cause a permanent reduction in benefits. If you were hired before 2004, then the options become even more complicated. It’s important to work with HR and the benefits team to understand your election options and what timeline makes sense for your situation.


Your legacy goals with your portfolio

If you want to leave the most money to charity or heirs, stretching the pension payout as long as possible is helpful. The Joint & Survivor election will allow you and your spouse to have a lifetime stream of income that may allow you to not withdraw as much from your portfolio. This leaves you more money to pass on to heirs or charities.