Delayed Retirement Considerations for Target Employees

What Is Delayed Retirement From Target?

In General

According to a recent report by the National Institute on Retirement Security, nearly four out of five working Americans with retirement accounts have less than one times their annual salary saved for retirement by age 40, which can have a significant impact on their retirement lifestyle. This means that it's more important than ever for individuals to start planning and saving for retirement early on in their careers to ensure a comfortable retirement. With this in mind, it's crucial for individuals in their 60s, whether already retired or planning to retire soon, to take a close look at their retirement savings and make any necessary adjustments to secure their financial future.

If you cannot afford to retire from Target yet or if you still appreciate working, you may wish to delay your retirement. This could mean continuing to work full-time or part-time for Target or a different employer to supplement your retirement income. This could also involve starting your own enterprise. In any event, a delayed retirement entails continuing to earn at least some income through employment as an alternative to full-time retirement leisure mode.

Why Work After You Retire From Target?

Obviously, if you delay your retirement from Target or work part-time during retirement, you will earn money and rely less on your retirement savings, allowing more to grow for the future and extending your savings. You may have access to affordable health care if you continue to work, as an increasing number of employers offer this essential benefit to part-time employees. However, there are also noneconomic reasons to labor during retirement. Numerous retirees work for personal satisfaction — to remain mentally and physically active, to enjoy the social benefits of working, and to try their hand at something new — the reasons are as diverse as the number of retirees.

Social Security Benefits

You can delay receiving Social Security benefits beyond the age of complete retirement eligibility. If you do so, your Social Security benefits may increase for two reasons. The first is that each year you continue to work adds an additional year of earnings to your Social Security record, which could result in higher retirement benefits. Second, you will receive delayed retirement credits that increase your benefit by a specified percentage for each month you delay retirement (up to age 70). The percentage increase varies based on the year of birth. For our Target clients who were born after 1943, the annual growth rate is 8%.

Example(s): Hal works at the local nuclear power plant. He wants to work past the normal retirement age and delay his Social Security retirement benefits. Since Hal was born in 1944, he is eligible for a delayed retirement credit of 8% for each year that he works past the normal retirement age, up to age 70.

Caution: Although you can delay your Social Security retirement benefits, you still have to sign up for Medicare once you reach age 65.

If you continue to work after beginning to receive Social Security retirement benefits, your earnings may impact the quantity of your benefit check. Your monthly benefit is determined by your lifetime income. When you become eligible for retirement benefits at age 62, the Social Security Administration calculates your primary insurance amount (PIA), which will serve as the foundation for your retirement benefit. Annually, your PIA is recalculated if you have new earnings that could increase your benefit.

If you continue to work after you begin receiving Social Security retirement benefits, your earnings may increase your PIA and, consequently, your future benefit. However, our Target clients must be aware that employment may result in a reduction of their current benefits. If you've reached full retirement age (65 to 67 years old, depending on when you were born), you can earn as much as you want without affecting your Social Security retirement benefit.

If you have not yet reached your full retirement age, $1 in benefits will be withheld for every $2 over the annual earnings limit ($18,240 in 2020) that you earn. In the first year of your Social Security retirement, a special rule applies: you will receive your full benefit for any month in which you earn less than one-twelfth of the annual earnings limit, regardless of how much you earn for the entire year. In the year you attain full retirement age, a higher earnings cap applies.

If you earn more than this higher limit ($48,600 in 2020), $1 in benefits will be withheld for every $3 you earn over this amount until the month you reach full retirement age, at which point you will receive your full benefit regardless of your income. (If your current benefit is reduced due to excess earnings, you may be eligible for a benefit increase once you reach full retirement age.) Additionally, we would like to remind our Target clients that not all income reduces Social Security benefits. In general, Social Security only considers wages earned as an employee, net earnings from self-employment, and bonuses, commissions, and fees. Your benefit will not be reduced by pensions, annuities, IRA distributions, or investment income.

Additionally, we would like our Target clients to keep in mind that working may allow delaying Social Security benefits. In general, the longer you wait to start receiving benefits, the higher your benefit will be. Whether delaying the start of your Social Security benefits is the best decision for you depends on your individual circumstances. The final consideration we would like our Target clients to make is that, in general, Social Security benefits are not subject to federal income tax if they are the only income received during the year. However, if you work during retirement or receive other taxable or tax-exempt income or interest, a portion of your benefit may become taxable. Publication 915 of the IRS contains a worksheet that can help you determine if any portion of your Social Security benefit is taxable.

IRAs

The longer you delay your retirement from Target, the longer you can continue to make contributions to your IRAs. If you have a traditional IRA, you are required to begin drawing RMDs once you reach age 7012 (or 72 if you reach age 7012 after 2019). The Internal Revenue Service will assess a 50% penalty on the amount that should have been distributed if you fail to accept the minimum distribution. As long as you do not own more than 5% of Target's retirement plan, the required minimum distribution rules do not apply until you reach age 70 1/2 (age 72 if you reach age 7012 after 2019) or retire from Target, whichever comes first. If you have a Roth IRA, you are never required to accept withdrawals.

Note: Required minimum distributions for defined contribution plans (other than Section 457 plans for nongovernmental tax-exempt organizations) and IRAs have generally been suspended for 2020.

Employer-Sponsored Pension Plans

If you continue to work for Target after your normal retirement date (or if you retire and then return to work for Target), and you participate in a traditional (defined benefit) pension plan, you must understand how your pension benefit will be affected by your delayed Target retirement.

Tip: If you retire, and go to work for a new employer, your pension benefit won't be impacted at all — you can work, receive a salary from your new employer, and also receive your pension benefit from your original employer.

In general, you will continue to accrue benefits during your delayed retirement from Target. Nonetheless, some pension plans limit the number of years that can be counted toward your pension. If you have reached this limit, continuing to work will typically not increase your pension benefit unless your plan calculates benefits based on your final average pay and your pay continues to rise.

Featured Video

Articles you may find interesting:

Caution: If your pension plan calculates benefits using final average pay, be sure to discuss with your plan administrator how your particular benefit might be affected if you decide to continue to work on a part-time basis. In some cases, reducing your hours at the end of your career could reduce your final average pay, resulting in a smaller benefit than you might otherwise have received. Also, note that some plans require that you work at least 1,000 hours in order to get credit for a year of service.

Some plans permit you to begin receiving your pension benefit at the normal retirement age, even if you are still employed. Other plans will suspend your pension benefits if you continue to work past your normal retirement date, but they will actuarially increase your payment when benefits are reinstated to account for the period of time benefits were suspended. Other plans will suspend your benefit if you work more than 40 hours per month and will not provide any actuarial increase; in effect, you will lose your benefit if you work more than 40 hours per month.

Some plans offer an additional option called 'phased retirement.' This type of program permits you to continue working part-time while accessing all or a portion of your pension. Federal law encourages phased retirement programs by permitting pension plans to begin paying benefits at age 62, even if you are still employed and have not yet attained the plan's normal retirement age.

401(K) and Other Employer-Sponsored Retirement Plans

If you continue to work beyond your plan's normal retirement age and participate in a 401(k), profit-sharing, ESOP, 403(b), 457(b), or similar plan sponsored by Target, you can continue to contribute to the plan and receive any applicable Target contribution.

Depending on the plan's terms, you may be able to access your funds while still employed by Target. Some plans permit distributions at age 59 12, at the normal retirement age, or in the event of financial hardship. Other plans require you to leave your employer before you can receive a distribution. If you believe you may need to access your funds while you're still employed, check with the administrator of your Target plan to learn about your plan's distribution options. Your distribution options will also be outlined in the summary plan description (SPD) of your plan.

If you continue to work past age 7012 (age 72 if you reach age 7012 after 2019), you will not be required to begin taking required minimum distributions (RMDs) from your plan until April 1 of the calendar year following the calendar year in which you retire (if the retirement plan permits this and you own less than 5% of the company).

Health Benefits

Many retirees continue to labor to maintain their medical coverage. If working during your Target retirement necessitates a shift from full-time to part-time employment, it is crucial that you comprehend how this decision will affect your medical benefits. Some employers, particularly those with phased retirement programs, provide health insurance to part-time workers.

Other employers, however, do not require a minimum number of hours worked in order to qualify for benefits. If your employer does not provide health insurance for part-time workers, you will need to find coverage elsewhere. If your spouse works and has available coverage, coverage under your spouse's health plan is the apparent option for married individuals. If not, COBRA coverage may be available.

COBRA is a federal law that enables you to continue receiving medical benefits under your employer's plan for a period of time, typically 18 months, following a qualifying event (such as a reduction in hours). However, we would like to remind our Target clients that this is an expensive option, as you must typically pay the full premium plus a 2% administrative fee. (COBRA is not applicable to employers with less than 20 employees.) Private health insurance is another option, but it is also likely to be expensive.

You may also seek for and acquire an individual health insurance policy via a state-based or federal health insurance Exchange Marketplace. Upon reaching age 65, you will be eligible for Medicare. Approximately three months before your 65th birthday, you should contact the Social Security Administration to discuss your options. Before enrolling in Medicare, if you have private or employer-sponsored health insurance, speak with your benefits administrator or insurance representative to determine how your current health insurance aligns with Medicare.

Conclusion

Retirement planning can be like a game of chess. Just like in chess, in retirement planning, it's important to think ahead, plan strategically, and make calculated moves to ensure a successful outcome. Retirement is not a one-size-fits-all game, and just like in chess, there are different strategies to approach it. Whether you are a Target worker looking to retire or an already existing retiree, the key is to make sure you have a strong plan in place that takes into account your unique circumstances, financial goals, and risk tolerance. Just like in chess, retirement planning requires patience, discipline, and a willingness to adapt to changing circumstances. But with the right approach, retirement can be a rewarding and fulfilling game that you can win.

What are the key benefits provided by Target Corporation's Personal Pension Account and Traditional Plan for employees approaching retirement, and how do these plans ensure financial security during retirement years? Understanding the synergy between these two plans is essential for retirees, as they work together alongside Social Security and personal savings to replace a portion of an employee's paycheck after retirement.

Key Benefits of the Personal Pension Account and Traditional Plan: Target Corporation's pension plan includes two components: the Personal Pension Account and the Traditional Plan. These plans work in tandem to replace a portion of an employee's paycheck during retirement. The Personal Pension Account provides pay credits and interest that accumulate over time, while the Traditional Plan uses a final average pay formula. Together with Social Security and personal savings, these plans help ensure financial security in retirement(Target Corporation_Dece…).

How can employees elect different payment options, such as the Single Life Annuity or the Joint and Survivor Annuities, within Target Corporation's pension plans? It is crucial for employees to grasp not only the financial implications of these choices but also the necessary spousal consent required when designating a joint annuitant, particularly if the chosen joint annuitant is not the employee's spouse.

Payment Options and Spousal Consent: Employees can elect different payment options, including the Single Life Annuity, which provides the highest monthly benefit and ceases at the retiree’s death, or the Joint and Survivor Annuity, which continues payments to a surviving spouse. To elect a non-spouse as a joint annuitant, spousal consent is required, and this must be notarized to ensure compliance with plan rules(Target Corporation_Dece…).

In what circumstances might benefits not be paid under the Traditional Plan, and what steps can employees take to ensure they remain eligible for their pension benefits upon termination of employment? Target Corporation's policy outlines several scenarios where benefits could be denied, making it necessary for employees to be proactive in understanding their rights and responsibilities concerning plan participation.

Circumstances for Denial of Benefits under the Traditional Plan: Benefits under the Traditional Plan may not be paid if an employee leaves before becoming vested (less than three years of service). Employees should ensure they meet the vesting requirements and maintain eligibility by avoiding termination before they reach the minimum service period(Target Corporation_Dece…).

What procedures should employees follow to report changes in marital status, address, or beneficiaries to ensure compliance with the requirements of Target Corporation's pension plan? Employees must understand the importance of timely reporting these changes to avoid potential issues with their retirement benefits and ensure that their pension plan information remains up-to-date.

Reporting Changes in Marital Status or Beneficiaries: Employees must promptly report changes in marital status, address, or beneficiaries to Target's Benefits Center to ensure their pension records remain up-to-date. Failing to do so can lead to delays or issues in processing pension benefits(Target Corporation_Dece…).

How does Target Corporation determine the final average pay used to calculate retirement benefits under its pension plans, and what factors may affect this calculation? Employees nearing retirement should be fully informed about how their compensation is considered in determining their pension benefits, including aspects such as bonuses and overtime that may influence their final average pay calculation.

Final Average Pay Calculation: Target Corporation calculates final average pay based on the five highest years of earnings out of the last 10 years of service. This includes regular pay, overtime, bonuses, and commissions but excludes items like workers' compensation or long-term disability payments(Target Corporation_Dece…).

How can employees begin the process of rolling over their Target 401(k) accounts into the Pension Plan, and what advantages does this Pension Purchase Program offer? Understanding this rollover option is vital for maximizing retirement benefits, as it can provide employees with a stable income stream while avoiding unnecessary fees typically associated with purchasing annuities outside the plan.

Rolling Over 401(k) into the Pension Plan: Employees can roll over their 401(k) accounts into the Pension Plan using the Pension Purchase Program. This option offers several advantages, including avoiding fees associated with purchasing annuities outside the plan and receiving a stable income stream during retirement(Target Corporation_Dece…).

What are the implications of a participant's age and joint annuitant's age on the payment amounts under the various Joint and Survivor Annuity options at Target Corporation? Employees should be aware of how age differences can impact their pension payouts, as the specific percentages payable under these options may vary based on the ages of both the participant and their designated joint annuitant.

Effect of Participant and Joint Annuitant’s Age on Payments: The Joint and Survivor Annuity options are influenced by the ages of both the participant and the joint annuitant. The younger the joint annuitant, the lower the monthly payout due to actuarial adjustments. Employees should consider these factors when selecting an annuity option(Target Corporation_Dece…).

How are retirement benefits managed during potential plan terminations or amendments at Target Corporation, and what protections are in place for employees in these scenarios? Employees should be well-informed regarding their rights in the event of changes to the pension plan, including how benefits would be distributed and under what circumstances they may remain fully vested.

Plan Terminations or Amendments: In case of plan terminations or amendments, vested benefits are protected, and employees will receive their earned pension. If the plan is amended or terminated, Target ensures that vested benefits are distributed according to the plan's terms(Target Corporation_Dece…).

For employees retiring or leaving Target Corporation, what options are available with respect to unused vacation time and how might this be factored into pension calculations? Understanding how accrued time off translates into benefits could have a significant impact on an employee's financial positioning upon retirement.

Unused Vacation Time and Pension Calculations: Unused vacation time does not directly affect pension benefits but can be included in eligible earnings calculations that determine final average pay. Employees nearing retirement should consult with Target’s Benefits Center to understand how unused time may impact their overall benefits(Target Corporation_Dece…).

How can employees contact Target Corporation for assistance with their retirement benefits to address any questions or concerns they may have about their pension plans? Accessing the right resources and support is essential for employees to navigate their retirement benefits effectively. They can reach out to the Target Benefits Center at 800-828-5850 for more specific inquiries related to their personal circumstances. These questions aim to enhance employees' understanding of their retirement benefits, ensuring they are well-prepared for their transition into retirement.

Contacting Target for Pension Assistance: Employees can contact the Target Benefits Center at 800-828-5850 for assistance with their retirement and pension plans. This center provides support with any questions related to pension options, payments, and administrative requirements(Target Corporation_Dece…).