Why is pension higher at an earlier exit date?

I am 55 and blessed to work for a company where I have a pension. My company has a site where you can calculate what your pension will be based on 1) age you plan to leave the company, and 2) age when you want to start drawing your pension. If I enter that I will leave at 65, and start drawing pension at 65, it is a LOWER pension than if I leave at 60 and start drawing pension at 65. That does not make sense to me - it seems that would encourage people to work shorter (until 60) rather than stay longer. What am I missing? (Note: I have been at my company for almost 33 years.)

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Answered by Pamela J. Horack, , CFP®PRO+ in Lake Wylie, SC
You have posed an interesting question. There are multiple ways of calculating pension benefits depending on the structure of the actual plan. It sounds like there are some additional mathematical calculations that are taking place behind the scenes as it relates to your years of service, or target investment rates for the pension.

Your best bet is to directly contact the company managing your pension and show them what you are experiencing. They should have the formula details to be able to explain this phenomenon.

| 02.02.15 @ 20:39
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$commenter.renderDisplayableName() — {comment} | 12.08.16 @ 20:39
Answered by Christopher Nesbitt, Insurance Agent in San Clemente, CA
This is fairly common. Some companies change pension math intentionally to encourage earlier retirement. It also happens when a company anticipates raising the exit charges in the future. To be certain, schedule a meeting with your HR dept to get to the bottom of the issue. BTW, congratulations on staying with your company for 33 years -- that's no small accomplishment! | 02.03.15 @ 06:08
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$commenter.renderDisplayableName() — {comment} | 12.08.16 @ 20:39
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