With the economic downturn and recession looming, companies across various industries are facing an uncertain future. We have been planning with ExxonMobil client's retirement for decades, and when an offer comes along, you typically don’t much time to act on it. Many give only 2 weeks to 30 days to make a decision. Many organizations are being forced to cut expenses to stay afloat, and unfortunately, that means workforce cuts in the form of furloughs, payroll reductions and forced layoffs.
You have spent decades planning for retirement. Just when you think you have everything figured out and a concrete retirement plan in place, you’re thrown a curveball. ExxonMobil has offered you an early retirement or voluntary separation package.
You were planning on retiring in a few years. Now what?
If you’ve received an early retirement offer, accepting it doesn’t mean you must retire from the workforce altogether. It just means that you can no longer work for ExxonMobil. If you think you may be getting an early retirement package, here are questions to consider as you review your offer.
What is an early retirement offer?
Does it include health benefits?
How does it affect my retirement assets?
How does it impact social security benefits?
What if I don’t want to retire, or can’t afford to?
Can I negotiate my offer?
What if I don’t accept my early retirement offer?
What is An Early Retirement Offer?
Early retirement packages, also known as retirement buyouts, are generally offered to employees who may be approaching retirement age, usually in a company’s efforts to reduce its overall costs.
These packages may include perks in addition to standard severance benefits. For example, an employer may offer an extended salary continuation, a lump sum, payment of healthcare benefits or additional years of service to help employees reach the required time needed to collect a pension.
Some employers may even pay for career counseling or placement services to help you find your next job (if you want or need to keep working), but that benefit may be limited in the current environment.
Does my retirement offer include health benefits?
Health care has become one of the largest expenses for a retiree, even with good insurance. For many, a company’s contribution to your family’s health insurance premium is critical to keeping medical insurance and care affordable.
If you are lucky, your voluntary severance package will extend your health benefits. Companies may include health insurance benefits for a period of time in an early retirement package, but this varies by employer. If your offer from ExxonMobil includes medical coverage, make sure you understand how long you’re covered for and to what extent. If health benefits aren’t part of your initial offer, consider negotiating for any crucial coverage and premium benefits. Health insurance will be needed until you are age 65 and become eligible for Medicare. However, not all those offered an early retirement package are so lucky.
If you will be on your own paying for health insurance after accepting an early retirement offer from ExxonMobil, COBRA insurance is always available. COBRA may extend your family’s coverage for up to 18 months. But this coverage is expensive. You might be able to get added to your spouse's health plan if they are still working.
If you still want to work, look into a company that offers health benefits to get you to age 65 You also have the option of entering the open market for an insurance policy. If you don’t have healthcare benefits or don’t yet qualify for Medicare, you may want to consider purchasing a health insurance policy from the Health Insurance Marketplace.
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For example, a 60-year-old on a Silver-level plan may pay an average monthly premium of $1,216 in 2022, but this also does not include out-of-pocket expenses, such as deductibles, copays, or coinsurance.
Before making a decision about an early retirement offer from ExxonMobil, determine if your severance package includes any health care benefits. If not, price out other health care options, such as those available on Heathcare.gov . Can the added expenses be supported with your retirement savings?
How does an early retirement package affect my retirement assets?
Retirement accounts
If you have a ExxonMobil-sponsored 401(k) plan and are 100% vested, then that money is yours to keep. After leaving ExxonMobil, you can consider rolling your 401(k) over to a new or existing IRA.
Workers who are 55 or older that take an early retirement package may be eligible to withdraw money from their ExxonMobil-sponsored retirement plan, such as a 401(k) , without paying the 10% IRS penalty. This only applies if withdrawing from a current employer’s retirement plan, not any past employer. Just keep in mind that while you won’t have to pay the 10% penalty, you will have to pay income taxes on withdrawals from your 401(k).
Note: Rule of 55 works only if you leave money in your 401(K)
Another method to avoid the 10% penalty is to utilize 72t if you rolled you money into an IRA. You will need to take Substantially equal payments for 5 year or at age 59 1/2, whichever is later.
Accepting an early retirement offer or voluntary severance package from ExxonMobil may require you to begin withdrawals from your 401(k), IRA, or other retirement accounts sooner than you originally expected.
Extra years of retirement can take a toll on your retirement nest egg. In fact, retiring earlier than planned can result in hundreds of thousands of dollars in extra expenses that your retirement portfolio must now support. It may also limit the growth of your assets already invested since you have to spend instead of saving.
Can your retirement portfolio withstand fewer years of contributions and more years of withdrawals? This is the first question you need to answer when making your decision.
When we help ExxonMobil clients answer this question, we commonly use a cash flow analysis. This allows us to simulate different scenarios side-by-side, and quickly see the impact accepting – or declining – an early severance offer will have on your financial plan.
Pensions
ExxonMobil employees who have earned a pension may worry that taking early retirement will affect their monthly benefits. Many pension plans partly determine monthly benefits based on how long an employee has worked for the company, so leaving early could reduce that monthly figure.
To offset these concerns, ExxonMobil may increase the total number of years of service as part of the early retirement package. This can help bridge the gap for those who would receive a reduced pension as a result of retiring early.
Social Security benefits
An early retirement package from ExxonMobil can affect your Social Security benefits if you leave the workforce before working for a total of 35 years. The Social Security Administration averages your highest-earning 35 years of employment to decide your monthly benefits. For example, if you only worked for 32 years, then the government would add a $0 salary for three years to come up with your 35-year average. That means those three years of unemployment would technically count “against” you.
One potential consequence of accepting an early retirement offer is a reduction in Social Security benefits. Your future pension payments may also be reduced, depending on the language in your separation package.
If you accept an early retirement package, the benefits listed on your statement is not what you will receive. These estimated Social Security benefits assume that you continue to work for ExxonMobil and make your current salary. As a retiree who accepts an early voluntary severance package, your future income will likely be reduced. This means potentially lower future Social Security payments.
Likewise, your pension statement likely makes assumptions on years of service. If you accept an early retirement offer, your years of service may be less than what your pension statement assumes.
The first step is to determine what your Social Security or pension benefits will be if you accept the early retirement package. We use several different cash flow analyses to determine your future pension benefits and your optimal Social Security selection. Calculating your optimal Social Security and pension depends on the options you have available, your savings, and your spending needs.
Pensions, and particularly pension benefits for those who retire early, often have options for increased payments until the retiree reaches Social Security age. This is usually referred to as a ‘Social Security Offset’ option. This option adds more to your early benefits, but your lifetime benefits may be reduced.
You also will have to consider what portion of your pension would be left to your spouse if you were to pass away in retirement. For most, the peace of mind by ensuring their spouse will receive a sizeable pension, is best. However, this will leave you with lower monthly benefits.
You may know that your monthly Social Security benefit is increased the longer you delay beginning your benefit. But that requires you to likely draw down on your retirement savings more early on in retirement. Social Security increases its payouts by 6.7% to 8.3%, plus an additional increment for inflation, for every year a beneficiary between ages 62 and 70 refrains from collecting a check. Sometimes delaying collecting benefits for just one year could have a huge impact on a successful retirement for married couples. It may make sense for the lower-earning spouse to claim benefits early, while the higher-earning spouse delays.
Therefore, not only is it important to known which Social Security strategy gets you the most money in total, but also which options fits best with your retirement plan. If you are evaluating the early retirement offer on your own, you can start by using the Social Security Administration’s Benefits Estimator .
From there, you can enter estimated future income to arrive at an estimated correct Social Security benefit. Once you have this updated, compare your new estimate to your monthly expenses. What impact will this reduced benefit reduction will have on your retirement plan and anticipated retirement account withdrawals?
Accepting an early retirement offer may force you to tap into your retirement savings, such as your 401(k) or IRA earlier, or it may mean changing when you will need to begin receiving Social Security benefits.
Unemployment benefits
If you decide to take an early retirement package, you may still be eligible for unemployment in certain circumstances. Your state may have its own qualifications, such as a specific period of service with a company before you can claim unemployment after leaving ExxonMobil.
What if I don’t want to retire early, or I can’t afford to?
If you're unsure about your financial future, you might consider working with a financial advisor to go over your finances and how an early exit package may impact your retirement plans.
If you can’t retire just yet, try to determine if a part-time job will be enough to fill the gaps. If not, can you at least afford to take a pay cut with your next job? If so, how much? Try to map out these answers while also thinking about ways you can cut back on expenses and adjust your budget to accommodate your new income.
If you end up landing another job, your early retirement package won’t be impacted. However, you may want to check for a non-compete disclosure that could prevent you from working with one of ExxonMobil's competitor for a specified time.
Can I negotiate my early retirement offer?
Just as you would negotiate a salary for a job offer, consider negotiating an early retirement package, too. Some employers may be willing to offer more money in the form of extended salary coverage or a lump-sum, better healthcare benefits or an addition to your years of service. Of course, they may decline, but you won’t know if you don’t ask.
If You Accept a Voluntary Separation Package – Consider Roth Conversions
Roth conversions can be an incredibly valuable tool for those who accept an early retirement offer. They can increase asset longevity and reduce total taxes paid during their retirement.
For those with retirement account assets in tax deferred retirement savings accounts (like 401(k)s and IRAs), an early retirement offer opens up the potential to save significantly on future taxes . Those who accept an early retirement buyout offer from ExxonMobil will likely be facing a year or two of reduced income before Social Security benefits kick in. These years of reduced income can be the perfect time to convert some assets within your 401(k) or traditional IRA into a Roth IRA.
What if I don’t accept my early retirement offer?
Rejecting an Early Severance Offer
Of course, you have the option to say no to any voluntary severance package offered by ExxonMobil.
If you want to continue working, or are unable to retire early, this may be your best option. Working additional years can lead to pay raises, promotions, increased Social Security and pension payments, and increased financial stability. However, rejecting an early retirement offer has potential drawbacks, too.
First, there is no guarantee that ExxonMobil will repeat the early retirement offer in the future. Assuming that another offer will come later is not always a wise move. Second, and more importantly, realize that companies offers an early severance package to its employees to cut costs. If the company’s finances do not improve, there may be much worse outcomes in the future. ExxonMobil may make layoffs, reduce employee pay, or eliminate other benefits.
How does the ExxonMobil Savings Plan compare against typical retirement savings plans, and what unique features does it offer that can benefit employees approaching retirement? Additionally, can you elaborate on the necessary steps ExxonMobil employees should take within the savings plan to ensure maximum contributions and employer match during their service years?
ExxonMobil Savings Plan: ExxonMobil's Savings Plan offers flexibility with pre-tax, after-tax, and Roth contributions, and features a 7% company match for the first 6% of employee contributions, a unique benefit compared to typical plans. Employees should contribute the maximum percentage to receive the full match and regularly review their investment allocations through the Voya platform(ExxonMobil_2024_ExxonMo…).
What are the eligibility criteria for employees to participate in the ExxonMobil Pension Plan, and how is the retirement benefit calculated? As employees consider their long-term savings strategy, how does the option of a lump-sum distribution versus an annuity influence their financial planning at ExxonMobil?
ExxonMobil Pension Plan: Employees are automatically enrolled and eligible for benefits after five years of service, with full retirement benefits offered at 55 with 15 years of service. The pension is calculated based on 1.6% of final average pay multiplied by years of service, minus a social security offset. Lump-sum and annuity options affect long-term financial planning, with lump sums offering immediate flexibility while annuities provide a steady income(ExxonMobil_2024_ExxonMo…).
In what ways does the ExxonMobil Employee Assistance Program (EAP) support employees during personal or family crises, and what confidentiality measures are in place to protect their privacy? Additionally, how can ExxonMobil employees access these services, and what are the key resources available through this program?
Employee Assistance Program (EAP): ExxonMobil's EAP provides confidential counseling services for personal and family issues like anxiety, addiction, and family conflict. Services are accessible by phone, video chat, or text, with privacy strictly protected. Employees can contact ComPsych for guidance and support through the GuidanceNow app or website(ExxonMobil_2024_ExxonMo…).
With the introduction of Flexible Spending Accounts (FSAs) at ExxonMobil, how do these accounts help employees manage their health care and dependent care expenses more effectively? What guidelines should employees follow to ensure they maximize their tax advantages while complying with IRS regulations during the enrollment process?
Flexible Spending Accounts (FSAs): FSAs at ExxonMobil allow employees to reduce taxable income by contributing pre-tax dollars to healthcare or dependent care expenses. Employees should estimate their expenses carefully during the enrollment period and comply with IRS rules, ensuring they submit claims by April 15th of the following year(ExxonMobil_2024_ExxonMo…).
How does ExxonMobil define "work-life balance," and what specific benefits and programs are in place to support this philosophy for employees? Can you discuss how employees can utilize these options, such as flexible schedules and leave of absence policies, without negatively impacting their career progression within the company?
Work-Life Balance: ExxonMobil promotes work-life balance with programs like “Flex Your Day,” allowing flexibility in work hours, and up to 20 days of back-up dependent care. Employees are encouraged to use these options strategically to maintain career progression while balancing personal obligations(ExxonMobil_2024_ExxonMo…).
In light of the various medical plan options offered at ExxonMobil, how should employees approach selecting the right plan to best meet their healthcare needs? What factors should they consider, including family health history and financial implications, when making their decisions?
Medical Plan Selection: ExxonMobil offers Aetna POS II and network-only options, allowing employees to choose between plans based on cost, coverage, and provider access. Employees should assess their family's healthcare needs, financial situation, and preferred providers when selecting the most appropriate plan(ExxonMobil_2024_ExxonMo…).
For ExxonMobil employees nearing retirement, what resources are available to help them understand the nuances of health benefits coordination through Medicare and their ExxonMobil coverage? How can they best navigate this transition, and what checkpoints should they be aware of to ensure they remain compliant with company policies during retirement?
Retirement Health Benefits and Medicare: ExxonMobil offers resources to help employees coordinate health benefits with Medicare upon retirement. Employees nearing retirement should explore their options through the Your Total Rewards portal and ensure compliance with company policies during the transition(ExxonMobil_2024_ExxonMo…).
What financial education resources does ExxonMobil provide to employees to promote informed decision-making about their retirement savings and benefits? Can you detail how programs like the Financial Fitness Program enable employees to strategically manage their finances and plan for retirement?
Financial Education Resources: ExxonMobil's Financial Fitness Program, provided in collaboration with Ernst & Young, helps employees manage their finances with resources such as EY Navigate and personalized financial planning. This program supports informed decision-making about retirement and savings strategies(ExxonMobil_2024_ExxonMo…).
As part of the benefits provided by ExxonMobil, how does the company facilitate employee participation in volunteer programs and charitable activities through the ExxonMobil Foundation? How can employees engage with these initiatives while also balancing their work commitments?
Volunteer Programs: Through the ExxonMobil Foundation, employees can engage in charitable activities via the Volunteer Involvement Program (VIP), which offers grants to nonprofits based on time spent volunteering. Participation in these programs is flexible, enabling employees to balance work commitments with volunteer efforts(ExxonMobil_2024_ExxonMo…).
How can ExxonMobil employees get in touch with benefits representatives to address specific questions about their retirement and savings plans? What are the recommended channels and best times to reach out for assistance to ensure they receive timely and relevant information about their options?
Contacting Benefits Representatives: Employees can reach out to the ExxonMobil Benefits Service Center at 833-776-9966 during business hours (8 a.m. to 4 p.m. CST) for assistance with retirement and savings plan questions. The Your Total Rewards portal also offers 24/7 access for reviewing and managing benefits(ExxonMobil_2024_ExxonMo…).
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