What Every Merck Employee Should Know About Your Pension
By Jim McGowan, CFP®
INTRODUCTION
As a Merck employee, your pension is a significant piece of your retirement picture. Yet with multiple formulas, transition rules, and payout options, it can feel complex to navigate, especially if you’re planning to retire within the next 5 to 10 years.
This guide breaks it down clearly so you can:
- Understand how your pension is calculated
- Make confident decisions about timing and payout options
- Integrate your pension with your broader financial planning
PART 1: UNDERSTANDING YOUR MERCK PENSION
Your Merck pension is a defined benefit plan, funded entirely by Merck. Your benefit is based on a combination of your service date, years worked, interest rates and compensation history.
There Are Three Pension Formulas:
- Final Average Pay Formula
Applies to service before Jan. 1, 2013
- Based on your average compensation over five consecutive high-earning years
- Includes an offset for your estimated Social Security benefit
- Maximum service cap: 35 years
- Minimum Formula
Applies to long-tenured employees
- Provides a flat $720 per year of service
- Designed as a baseline for retirees with lower average pay
- Cash Balance Formula
Applies to service from Jan. 1, 2013 onward
- Think of this as a virtual pension account
- Grows through “pay credits” (4.5% to 10% of pay, depending on your age and years of service)
- Also includes “interest credits” (minimum 3.3% annually)
PART 2: WHO QUALIFIES FOR WHAT?
If you were:
- Hired before Jan. 1, 2013: You’re covered by both the Final Average Pay or Minimum Formula and the Cash Balance Formula
- Hired on or after Jan. 1, 2013: You’re only covered by the Cash Balance Formula
Transition Rule: If you were hired before 2013, your benefit through 2019 is calculated using whichever formula produces the higher payout.
PART 3: WHEN AND HOW YOU CAN COLLECT
You’re eligible to begin collecting your pension:
- At Age 65 (Normal Retirement Age): Full benefit
- As early as Age 55 if you have 10+ years of service
- Your benefit will be reduced if started early, unless you qualify for an early retirement subsidy
- Reductions range from 3%–21% depending on your age
Payment Options:
- Lump Sum: One-time payout — offers flexibility but requires careful tax and investment planning
- Monthly Annuity: Predictable lifetime income — can be for your life, or joint life with a spouse
PART 4: INTEGRATING YOUR PENSION WITH YOUR FINANCIAL PLANNING
Many Merck professionals we work with ask:
“How does my pension fit into the rest of my financial life?”
That’s where we come in. At Apollon Financial, we help Merck employees:
- Evaluate lump sum vs annuity options in context of your retirement cash flow
- Coordinate pension timing with Social Security and 401(k) withdrawals
- Plan for tax efficiency when rolling over a lump sum
- Build long-term financial security with a comprehensive strategy
✅ QUICK CHECKLIST: ARE YOU ON TRACK?
✔ Do you know which pension formulas apply to you?
✔ Have you reviewed your pension benefit at netbenefits.com/merck?
✔ Have you considered how taxes will impact your pension income?
✔ Do you have a plan for coordinating pension with your other retirement assets?
✔ Have you run the numbers for lump sum vs monthly options?
TAKE THE NEXT STEP
You’ve worked hard for your Merck pension — now it’s time to make it work for you.
In the time it takes to finish your next cup of coffee, I can walk you through how other Merck professionals are making the most of their pensions and building lifelong financial security.
👉 Schedule your complimentary consultation today
📅 Book Time with Jim
🌐 https://apollonfinancial.com/jim-mcgowan/
Apollon Financial, LLC (“Apollon”) provides advice and makes recommendations based on the specific needs and circumstances of each client. For clients with managed accounts, Apollon Wealth has discretionary authority over investment decisions. Investing involves risk and clients should carefully consider their own investment objectives and never rely on any single chart, graph, or marketing price to make decisions. The information contained herein is intended for information purposes only, is not a recommendation to buy or sell any security and should not be considered investment advice. Please contact your financial advisor with questions about your specific needs and circumstances. When making any tax or legal decisions clients should always seek out specific professionals such as legal counsel or a CPA. This piece is provided for information only and is in no way tax advice. While every effort has been made to ensure accuracy, only the IRS tax code itself should be considered official. Apollon does not file taxes for any clients. We attempt to track ESG mandates, but it may not always be possible to adhere to the stated guidelines. ESG performance may not be in line with other asset classes of the same type due to the focus on corporate governance considerations. Please visit our website http://apollonwealthmanagement.com for other important disclosures.
