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Deciding When to Retire: When Timing Becomes Critical Union Pacific

For Union Pacific employees planning on retiring, it is important to consider not only the financial fitness, but also the emotional and psychological fitness of leaving the workforce and entering the world of retirement,' advises Michael Corgiat of The Retirement Group, a division of Wealth Enhancement Group. 'Taking a proactive stance towards retirement planning can significantly increase the quality and duration of your retirement.'

'Brent Wolf of The Retirement Group, a division of Wealth Enhancement Group, stresses that it is crucial for Union Pacific employees to comprehend the dynamics of social security timing, pension benefits, and personal savings strategies. He recommends starting these assessments early to make decisions that lead to a better retirement income and longevity.'

In this article, we will discuss:

Workforce Trends: This paper will focus on the current trend of workers aged 60 and above who decide to remain in the labour market after the conventional retirement age for financial and personal reasons.
Retirement Planning: Some of the issues and strategies for people retiring from Union Pacific companies, including when to claim Social Security benefits, how to manage health care costs, and when to move from savings to investments.
Phased Retirement Options: The advantages of phased retirement programs that enable aging workers to work part-time and draw their pension benefits, thus easing the transition to retirement.

In a study done by the Transamerica Center for Retirement Studies in 2020, the Transamerica Center for Retirement Studies found that a large number of workers aged 60 or above have plans to work even after reaching their retirement ages. Some of the reasons included: the need for engagement and the need for more income. The study also established that 56% of workers aged 60 or higher had plans to work in retirement. This trend has implications for retirement planning and understanding how factors like healthcare costs and expected income determine the retirement age. Knowledge of the options and benefits that are available for people who remain employed during retirement can also help individuals make informed decisions regarding their retirement timing.

Retirement: A State of Mind

Do not underestimate the psychological factors that determine the age at which one should retire. Many people enjoy the opportunity to start anew. Some people delay retirement or go back to work to keep feeling useful. You will also have to change your attitude – from saving, to investing for income, and managing several income sources.

This is a multi-step process that will involve making decisions and calculations. You will also have to estimate your probable expenses, your retirement income, and how many years your retirement funds may have to last. It is also important that our Union Pacific customers take into consideration their life expectancy and health, when they would like to start receiving Social Security or pension benefits, and when they would like to start withdrawing from their retirement accounts.

These may be otherwise unrelated factors in a comprehensive plan for retirement income, and each of them may affect the others in some way.

Thinking About Early Retirement?

This means that early retirement from Union Pacific means fewer working years and more savings. Moreover, the earlier you retire from Union Pacific, the more years your retirement funds will have to support you. If you plan correctly, you may be retired for quite some time. According to the National Vital Statistics Report, the average lifespan today is more than 30 years longer than it was a century ago.

Your retirement savings will last longer and inflation will reduce your buying power. If the average inflation rate is 3% per year, as it has been since 1914, then a fixed annual income will be worth 50% of its purchasing power over about 23 years. You will probably require an annual rise in your retirement income to keep up with the cost of living when considering inflation. This should be taken into consideration when calculating how many years you believe you will be in retirement (or how many years you can afford to be in retirement).

Current Life Expectancy Estimates

Men	Women
At birth	76.2	81.2
At age 65	83.1	85.7

If you need it in another format or style, just let me know how you'd like it adjusted!

Source: NCHS Data Brief, Number 355, January 2020

There are some other things that Union Pacific clients should also know. For instance, if you expect to receive pension payments, early retirement may reduce them. Why? It is because the highest accumulation of benefits is usually in the last few years of your employment when you are likely to earn most. Early retirement may reduce the monthly benefits that you receive. It will also affect your Social Security benefits.

Also, you should note that if you plan to retire from Union Pacific before the age of 59 ½ and withdraw your 401(k) or IRA funds, then you are likely to incur a 10% early withdrawal penalty in addition to any ordinary income tax on the distribution (however, there are certain exemptions, including disability payments and 401(k) distributions after age 55 and termination of employment).

Finally, Medicare benefits are only available to those who are 65 years and above. If you are not eligible for retiree health benefits from Union Pacific or accept a job that offers health insurance, then you will need to find out how much you stand to pay for insurance or health care, at least until you are eligible for Medicare.

Postponing Retirement

Deferring your Union Pacific retirement allows you to keep on contributing to your retirement plans. This is especially good for you if you are contributing to tax deferred accounts and Union Pacific is contributing to your account as well. For instance, if you work for Union Pacific for 10 years longer, from age 65 instead of 55, and save $20,000 a year at an 8% rate of return, you could add $312,909 to your retirement fund. This example is hypothetical and does not represent the actual performance of any particular investment. Although you may no longer be adding to your retirement account, delaying retirement simply delays the time when you must begin taking distributions. This could enhance the ability of your nest egg to last throughout your lifetime.

You are given more time to transition by delaying your retirement from Union Pacific. If you anticipate transitioning from your full-time job to a small business or a new career once you “retire,” you might be able to get ready for a new life by taking nights classes or trying out your new role on a part-time basis. You can get a taste of what your post retirement work life will be like by phasing into your plans while you are still with Union Pacific. This is particularly important before relying on a new venture for retirement income, which can help you determine how much you can expect to earn from it. In addition, you will learn if it is something that you really want to do before investing what could be a large portion of your retirement funds into it.

Phased Retirement: The Best of Both Worlds

Some employers have started to offer phased retirement programs that allow you to collect all or part of your pension while still working part-time for the same employer.

As the baby boomers age, more people are interested in phased retirement programs. In the past, private sector pension law put pressure on employees to retire early. Classic pension plans usually did not permit payment of benefits before the employee ceased employment or reached the plan’s normal retirement age, which was usually 65. This often led employees who wanted to reduce their working hours but were not yet old enough to retire normally to accept early retirement and find another job (often at a competitor) and collect both a pension and a salary from their first employer.

Pension plans are now permitted to provide benefits to employees at age 62 if the employee is still employed and has not met the plan’s normal retirement age. Both the employee and the employer can benefit from a phased retirement strategy: The employee can work fewer hours and ease into retirement more gradually, while the employer can keep a seasoned employee. Phased retirement is not a required option for employers, but if Union Pacific does offer it, you should consider how it might affect your plans.

Key Decision Points	Age	Don’t forget...
Eligible to tap tax-deferred savings without penalty for early withdrawal	59 ½	Federal income taxes will be due on contributions and earnings made prior to taxation.
Eligible for early Social Security benefits	62	Taking retirement benefits before age 65 reduces monthly payments.
Eligible for Medicare	65	-

Check Your Assumptions

The sooner you start to think about the timing of your retirement from Union Pacific, the more opportunities you will have to make changes that will help to make those years be all that you want them to be. You may need to rethink some of your assumptions or decisions you have made so far if you are contemplating a phased retirement. As you move from Union Pacific into retirement, you will need to keep an eye on your retirement income plan to make sure that your initial assumptions are still good, that no new laws or regulations have affected your situation, and that your savings and investments are performing as they should.

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Conclusion

Investing in retirement can be compared to planting a tree. Just like a tree, a retirement investment needs time, patience, and care to grow and provide benefits in the future. It takes the right kind of environment – a diversified portfolio, for instance, and the advice of a financial adviser to thrive and weather the inevitable storms. However, like a tree, it can provide shade, shelter and beauty, and a well-planned retirement investment can provide security, comfort and a sense of fulfillment in later years.

Sources:

1. Collinson, Catherine. 'Workers Are Saving for Retirement Despite Challenges Amid the Pandemic.' Transamerica Center for Retirement Studies, 2021. Transamerica Institute. www.transamericainstitute.org .

2. Collinson, Catherine. 'The Road Ahead: Addressing Pandemic-Related Setbacks and Strengthening the U.S. Retirement System.' 22nd Annual Retirement Survey, 2021. Transamerica Institute. www.transamericainstitute.org .

3. Collinson, Catherine. '20th Annual Retirement Survey.' Transamerica Center for Retirement Studies, 2020. Transamerica Center. www.transamericacenter.net .

4. Collinson, Catherine. 'Four Generations of Workers Are Preparing for Retirement Amid an Uncertain Future.' Transamerica Institute, 2020. Transamerica Institute. www.transamericainstitute.org .

5. Collinson, Catherine. 'Employed Workers Are Saving for Retirement, but Many Are Not Saving Enough.' Transamerica Institute, 2021. Transamerica Institute. www.transamericainstitute.org .

What are the specific eligibility requirements for employees of Union Pacific Corporation to participate in the pension plan, and how might these requirements evolve as IRS regulations change? Understanding how Union Pacific Corporation aligns its eligibility criteria with broader IRS regulations can help employees assess their own eligibility for the pension plan, particularly in light of any new IRS guidelines issued for 2024.

Eligibility Requirements for Pension Plan Participation: Eligibility to participate in the Union Pacific Corporation pension plan is governed by specific criteria set forth in the plan documents. As of January 1, 2018, the plan was closed to new participants, meaning individuals hired on or after this date are not eligible. For existing employees, eligibility to accrue benefits continued provided they were active participants as of December 31, 2017, and remained in covered employment. Changes in IRS regulations could potentially alter these eligibility criteria by requiring adjustments to maintain compliance with legal standards, potentially affecting who can accrue benefits in the future.

How does Union Pacific Corporation calculate an employee's final average compensation for pension benefits? Given the potential for changes in compensation structures, it is essential for employees at Union Pacific Corporation to comprehend how their average compensation is determined and how this figure might impact their retirement planning.

Calculation of Final Average Compensation: The pension plan calculates an employee's final average compensation based on the average monthly compensation over the 36-consecutive month period out of the last 120 months of active participation that yields the highest average. This includes base pay, overtime, and certain incentive and bonus payments. Understanding this calculation is crucial for employees to appreciate how raises, bonuses, and other compensation changes might impact their pension benefits.

What forms of payment options are available to employees of Union Pacific Corporation when they choose to retire, and how do these options influence the total benefit received? Employees need detailed information on the different payment structures to make informed decisions that suit their financial needs in retirement.

Payment Options Available at Retirement: Union Pacific offers various payment options for pension benefits upon retirement. Employees can choose a lifetime annuity or opt for joint and survivor annuities, providing continued benefits to a designated beneficiary. Other options include certain annuities that guarantee payments for a set period, regardless of the employee's lifespan. These choices allow employees to tailor retirement benefits to their financial needs and family circumstances.

In what ways does Union Pacific Corporation integrate Social Security and Railroad Retirement benefits into the pension plan, and how does this integration affect the overall retirement income for employees? Employees should explore the implications of these benefits on their pensions to develop a comprehensive retirement income strategy.

Integration of Social Security and Railroad Retirement Benefits: The pension benefits are coordinated with Social Security or Railroad Retirement benefits through an offset formula in the pension plan. This integration reduces the pension benefit by a portion of the government retirement benefits projected at the time of retirement, reflecting that some of the funding for these benefits comes from Union Pacific. Employees need to understand how this interaction affects their total retirement income to plan effectively.

What strategies can employees of Union Pacific Corporation employ to maximize their pension benefits prior to retirement while adhering to IRS limits? Employees must be informed of practical steps they can take to enhance their benefits within the framework established by IRS guidelines.

Maximizing Pension Benefits: To maximize pension benefits under the IRS limits, Union Pacific employees can ensure they maximize their earnings during the final average compensation period, continue employment as long as possible to increase credited service, and make strategic decisions about retirement age and benefit commencement. Understanding the interplay of these factors with IRS contribution and benefit limits is essential for optimizing pension payouts.

How does the vesting schedule work within Union Pacific Corporation's pension plan, and what implications does this have for employees who leave the company before full vesting? An understanding of the vesting schedule is crucial for employees at Union Pacific Corporation to grasp the long-term benefits they might forfeit by leaving before they are fully vested.

Vesting Schedule: The vesting schedule is crucial as it determines an employee's entitlement to pension benefits upon leaving the company before retirement age. Union Pacific's plan requires employees to complete five years of vesting service to qualify for a vested benefit, which is payable as early as age 55. Employees considering leaving Union Pacific should be aware of how their vesting status might affect their pension entitlements.

What responsibilities do employees have to keep Union Pacific Corporation informed about their earnings records, particularly when claims for benefits arise, and what might happen if these records are not accurately reported? Employees should be aware of their duties to maintain their benefits and the potential consequences of noncompliance within the pension plan.

Responsibilities for Reporting Earnings: Employees are responsible for ensuring that Union Pacific has accurate records of their earnings to calculate pension benefits accurately. Failure to report or correct discrepancies in earnings records can lead to miscalculations in pension benefits, affecting retirement income. It's vital for employees to regularly review their earnings records and report any inaccuracies.

How does Union Pacific Corporation ensure compliance with ERISA regulations as they relate to employee retirement benefits, and what rights do employees have under these regulations? Employees of Union Pacific Corporation should familiarize themselves with their rights under ERISA to ensure they are adequately protected when claiming pension benefits.

Compliance with ERISA Regulations: Union Pacific ensures compliance with the Employee Retirement Income Security Act (ERISA) regulations, which protect employees' rights to their pension benefits. Employees have specific rights under these regulations, including the right to receive information about their pension plan, appeal denials of benefits, and sue for benefits or breaches of fiduciary duty. Awareness of these rights is important for employees to safeguard their benefits.

What happens to the pension benefits of employees of Union Pacific Corporation in the event of a company merger or acquisition, and how can employees prepare for these changes? Understanding the potential impacts of organizational changes on their pension benefits can enable employees to safeguard their retirement plans.

Impact of Company Mergers or Acquisitions: In the event of a merger or acquisition, employees' pension benefits could be affected. Union Pacific's pension plan provisions include terms for handling benefits under such circumstances. Employees should be proactive in understanding how these corporate changes might impact their pension benefits and seek clarity on their rights and options.

How can employees of Union Pacific Corporation contact the Benefits Group to inquire further about the pension plan and related questions? Clear guidance on contacting the Benefits Group will assist employees in accessing the information necessary to navigate their retirement options effectively.

Contacting the Benefits Group: Employees with questions or who need assistance regarding their pension plan can contact Union Pacific's Benefits Group. Having the contact information handy ensures that employees can promptly address concerns or seek guidance about their retirement benefits, aiding in effective retirement planning.