At the end of a career at Abbott Laboratories, most employees will have amassed significant savings from their employer-sponsored benefits. However, nothing should be taken for granted. How you allocate those funds in retirement will have a substantial impact on your quality of life and your success once you stop working.
So, where do you start?
Speaking with a qualified financial advisor is always a good idea. Ideally, it should be someone with experience in the pharma industry, as they will be able to help you understand the implications of your decisions.
And yes, if you’re receiving a pension, you will have choices to make.
For example, if you have a defined benefit plan from Abbott Laboratories, the company is responsible for administering your pension. You will have to choose whether to take a lump sum or a monthly payment, and each option has pros and cons.
This is where a financial advisor’s help comes in handy as they will consider all aspects of your financial picture—social security, property, 401(k)s, survivor benefits (if you are married), and other variables—and help you make the best decisions based on your circumstances and vision for life in retirement.
Dispelling the Myths Around Retirement from Abbott Laboratories
Another myth is that since you’ll be receiving a pension, Social Security is less important. This statement is patently untrue. While you are eligible to start collecting Social Security benefits at age 62, delaying payments until you are 70 will increase your benefit by about 76%.
You may also need to consider when to retire. At Abbott Laboratories, your years of service are the most crucial factors in your pension calculation. The longer you’ve worked there, the higher your pension will be.
Before you make any decisions, it’s wise to review your benefits and investment package to see if there have been any changes. Your pension calculation or health insurance may change, and both should be considered before making any decisions.
Abbott’s Stock Retirement Plan
Many Abbott employees have much of their 401(k) tied up in company stock. Abbott makes this qualified plan attractive via a significant employer match. Employees who contribute 2% of their pre-tax earnings receive a 5% match, up to the annual cap. The same also applies if the employee contributes 2% of their pre-tax earnings toward repaying a student loan.
So, while this scheme is attractive, you must consider that leaving your savings in the company means your finances hinge on its success. Allocating too much of your portfolio to Abbott stock can be risky, as the sector is highly volatile and may cause your returns to fluctuate wildly. This might not be a concern during your working years, but as you approach retirement, you should consider the bigger picture.
The current political climate, which may impact regulatory frameworks, approvals, and other factors, is highly unpredictable. Therefore, it is essential to stay on top of current events affecting the industry and to ensure you understand how your benefits may change under the circumstances.
Tax Implications
If you are an executive holding performance-based RSUs, tax planning is essential to minimize liability and mitigate changes to your income and tax bracket. We recommend integrating RSUs into your overall plan to maximize the benefits.
Interest rates will also impact your payments. Lower interest rates result in higher lump-sum payments, while higher rates reduce them.
Your advisor can go over the options and implications with you to ensure you’re making the best decision based on your risk tolerance and financial expectations.
Survivor Annuities
The Abbott Laboratories’ Annuity Retirement Plan (ARP)[i] offers single and joint survivor annuities, payable on retirement. This option ensures your spouse will continue to receive benefits after your death.
While the ARP provides a predictable income for you and your spouse for life, it also has implications for liquidity and less flexibility compared to other plans. Inflation is a significant risk as payments might not keep pace with cost-of-living increases.
A single life annuity provides a higher initial payment, but it ends when you die. Joint and survivor annuities have lower payments but will continue to pay your surviving beneficiary for the extent of their natural life.
Abbott employees must also keep in mind that federal regulations can impact ARP eligibility requirements. These changes primarily revolve around years of service and age, among other factors. A legislative change could affect when the employee is eligible to start collecting benefit payments and may impact continued eligibility.
Though these variables may seem troubling, working with a pharma knowledgeable and qualified financial advisor helps you stay abreast of issues that may concern you.
Prioritizing Healthcare
Last, but certainly not least, healthcare and health benefits continuity should be a primary concern.
As you age, healthcare costs rise, and a stint in long-term care may completely transform your life in retirement—and not for the better. Medicare doesn’t cover everything, so it’s critical to consider how you will pay for supplemental costs.
Abbott’s Retiree Health Care Plan[ii] covers eligible employees with a shared premium that varies by years of service. For example, for an employee with less than 10 years of service, the contribution is 60%. That amount reduces with successive years, capping at 20% for 35+ years of service.
Employees under age 65 can choose non-Medicare eligible coverage with various plan options, including traditional PPO or a high-deductible PPO.
Your HSA follows you into retirement and can be used to pay deductibles and other out-of-pocket expenses as needed.
Options under the plan include dental, long-term care, life insurance, and prescription benefits. Typically, the plan is secondary to Medicare.
Are You an Abbott Laboratories Employee Nearing Retirement?
Abbott Labs’ retirement benefits can be complex, but sound advice will help you make the most of your legacy.
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[i] https://cache.hacontent.com/ybr/R515/00472_ybr_ybrfndt/downloads/ARPSPD.pdf
[ii] https://cache.hacontent.com/ybr/R516/00472_ybr_ybrfndt/downloads/GreenRetirementGuide.pdf