This option may appear attractive, but you are encouraged to seriously consider using your SIS Pension Fund money to supplement your retirement income between when you retire early and when you receive Social Security instead of electing the Split-Level Option. By using the SIS Pension Fund instead, you will avoid the Pitfalls (see below) of the Split-Level Option.
If you wish to elect the Split-Level Option, first, you should find out about how much your Social Security benefit will be. Social Security may have sent you an estimate of your benefit in the last year or two. One thing to keep in mind is that the estimate they sent you assumes you will continue to make the same amount of money each year from now until you turn age 62. If you retire before that, your early retirement will cause your monthly Social Security income to be somewhat lower in amount. You can contact your local Social Security office for help in estimating your actual monthly income. You will also want to consider your spouse’s social security income. Typically, once your spouse reaches age 62, your spouse will receive an additional benefit that is 50% of your benefit for a total family income of 150% of your benefit.
The Split Level Option provides a higher monthly benefit payment under Early Retirement until your Social Security becomes effective at age 62 or 65. At age 62 or 65, depending upon which option you elect, the benefit is reduced. Typically, you would want to have your pension reduced by about the amount you expect to receive from Social Security. Your pension will be increased by an amount less than you will receive from Social Security during the years before age 62 (or 65) and then reduced by the estimated Social Security amount. You can see the amount that would be payable to you at age 62 by using the NASI Pension Fund’s Pension Estimator.
For example, a 55 year old person whose Early Retirement amount from the NASI Pension Fund totaled $3,000 per month and who expects to receive Social Security benefits of $1,000 per month at age 62 has the choice of
1) getting exactly that – $3,000 per month from the NASI Pension Fund until they reached age 62 and then adding $1,000 per month to the retirement income from Social Security at age 62 for a total monthly income at age 62 of $4,000 per month.
2) choosing the Split Level Option – this would increase the monthly payment from the NASI Pension Fund from age 55 until age 62 from $3,000 per month to $3,550 (in this example) and then at age 62, the NASI Pension Fund benefit would reduce to $2,550 and when the $1,000 from Social Security is added, a total monthly income of $3,550 is maintained. You “split” the NASI Pension Fund benefit to get a “level” income when considering Social Security.
Pitfall 1 This form of pension is payable only during your lifetime and will terminate at your death. However, this pitfall can be avoided by choosing the Split Level Option with 50% Husband and Wife Option.
Pitfall 2 Your pension will be reduced for the rest of your life after you reach age 62 (or 65, if that is the option you choose). If you live longer than the average Sprinkler Fitter, you will be paying too much for this option. A Sprinkler Fitter who believes his life expectancy is likely to be shorter than the average (perhaps you have recently received bad news or perhaps you just know you parents and grandparents died at relatively young ages of problems that are known to be passed down to children) can use this option to get as much money out of the NASI Pension Plan as they can as soon as possible.
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