Say good bye to those high pensions folks. https://www.irs.gov/retirement-plans/minimum-present-value-segment-rates
28 replies (most recent on top)
Disclosure: @6oms is a small shop bookkeeper. 😆
It’s evident from his tone that @6fya is not one who is faring better than most. Got envy.
@5twj, yea, I hear you man, some people will fare better - when they retire they will have a happy life to share with family, friends and traveling. They surely won't be trolling layoffs boards posting BS stories and pretending to be better than others at things when they actually failed miserably or they wouldn't be here trolling at all.
Even with double annuity payments, the lump is still a better deal. The stock market has nearly tripled since 2016 so a $1 million lump would be $3 million. Your fictional double annuity would be worth 25% less today due to inflation so a $50k/yr annuity times two would be $100k/yr minus 25% = $75k/year. A 6% annuity today on $3 million would be $180k/yr.
Yes, it’s a cool story and not too off topic either. But, as for the so-called “pointed post” below by @4ser, that’s his opinion is all. Indeed I sometimes peruse this layoff site just to read, learn what’s new and gave a few laughs. After all, Chevron is where I spent 31 years of my career. It’s only natural to hang on to things you enjoyed or found rewarding. Best to all of you (although some will fare better than others).
@2yll, Apparently you misunderstood me. I didn’t get double the lump sum when I retired back in 2016. I opted for the 100% Joint and Survivor annuity instead. It’s the annuity amount I receive every month which is DOUBLE the amount it was originally calculated to be. The company or its proxy bank is erroneously (and to favor) depositing twice the prescribed amount. I contacted my attorney after the third month of this happening. I was advised to open a separate bank account and deposit the redundant surplus amount into it each month and simply not make withdrawals, just let it grow. Here in Texas, there are laws on the books which state that monies received in error (Unjust Enrichment) must be returned if claimed by the rightful entity. But at the same time, there is a statute of limitations in the same law that allow an Unjust Enrichment claim to go back only 12 months in arrears. Therefore the legal advise I received is to keep the monies separate from my own and do nothing until a claim is made. When and if that time comes, I will only be liable to return 12 months of the erroneous amounts received. I retired in mid 2016, so you can factor the extent of my windfall to date.
So retirement is so great for some that they have nothing better to do than troll the company layoff site many years afterward and boast about how great they are and what great decisions they made? Doesn't sound like someone I would want to take after or look up to for guidance and advice.
The annuity made no sense at all when interest rates were low. When I retired it would have taken 18 years in annuity payments just to get the value of the lump returned and 36 for that amount to double (assuming I even live 36 years post retirement). With inflation (typically averaging at least 3%), that year 36 annuity payment would be worth about 40% the value of the first payment. With the lump, invested in the market while I live off my IRAs, compound interest is likely to raise that sum by over 10 times (a 4 times increase in real value). It is true that higher interest rates make the lump smaller relative to the annuity payments, but I don’t have access to chevron’s retirement payment calculator anymore. Run you own numbers. Most annuities available in the market are not good bets, because payments are not adjusted for inflation and periods like now with even moderately high inflation will eat you lunch forever.
How about taking the lump sum and spending it, which is what most (>95%) people do?
Annuity makes a lot of sense if you have no family or anyone you care about since the money dies with you as opposed to taking the lump sum and leaving an inheritance.
Get your financial advice elsewhere. Give your financial advice if you are licensed. This is a layoff board.
I think he means that his investments have doubled. Stock market up bigly since DJT came into office.
@2hzm, there is no way you got double your lump sum back from the annuity in 8 years. You have not even received the value of your entire lump sum yet (you are lucky if you received half in 8 years). I track my lump sum and annuity every month. It takes roughly 17 years to get your lump sum value with a 0 discount rate.
I opted for the 100% J&S annuity back in 2016. Unexpectedly but thrilled to have been getting double my amount since back then and still rolling in like clockwork. Am I suffering because of high inflation? No, not at all. I’ll be getting this income stream and social security for the rest of my life. The original $1.2 million in my 401k, since retirement put into two IRAs are still untapped and earning great returns. The annuity is not for everyone, but for me has been a great choice.
Yes, in the short run, interest rates have a (dramatic?) effect on your lump sum.
But I learned that the impact of the stock market on your IRA (with rolled over lump sum) investments in those first few years of retirement are significantly greater.
I still don't understand "betting" on the annuity (Can't you just purchase an annuity once you receive your lump sum and end up with the potential upside ?)
@2ebt, yea, I remember that guy, we call him the Popcorn Troll. He refers to people on this site periodically as "Popcorn" thinking it's always the same person that he's addressing, like he has an inner demon? He lost all of his savings back then and is extremely triggered and irate when employees discuss all of their options, particularly the annuity. It's as if he is envious of those who made better choices in life and he often resorts to personal attacks. It's very sad, actually. I feel bad for the guy.
Whatever you do just don't end up like this guy: https://helpfromhr.com/blog/withdrawing-my-chevron-401k-ruined-my-familys-finances
You can get the lump sum and continue working, you just need to work somewhere besides Chevron. Like at one of the 1000s of other places to work, haha. Investing the lump in a fast rising market, like the last 25 years or so, can make you more money than working.
Maybe now those remaining can understand why the lines were so deep to "express interest" (such a cute phrase!) in 2020. Be given a (pension) gold-lined lifeboat, with oars made of a year of salary and COBRA, to escape the SS Chevron-Titanic and Captain MW and First Mate RM.
Honestly its a weird discussion. When interest rates are low you get a bigger lump sum but interest rates are low so theoretically you get less. The hockey stick of interest rates the past 2 years is a once in 40 year phenomenon so lkkely markets wont switch on a dime.
If you think you can outsmart the bond market you can do so with your own money and make $. But lets be honest most people will lose.
What does this mean for those of us still working? You don’t have access to the $ until you depart correct?
Rates were low from 2011 to 2021, so a decade of lump sum lottery winnings. The fed plans to cut rates, so within a couple years the massive lump sums could be back again.
The low rates in 20 and 21 were a once in a career opportunity to cash out the lump sum. The lump sum value today is about half of that value. The annuity is only a good choice for those who cannot manage their investments.
The best time ever for the lump was when rates bottomed in Dec 2020 around 2% for the middle segment. Those peaked in March at nearly 6% and are now coming down. You can go in the pension calculator and see what impact rates have on your lump.
I feel sorry for folks that took the annuity in 2020. Inflation has taken away nearly half of their purchase power. Had they invested the lump sum in a dividend growth ETF, they would have more dividend income and some capital appreciation too. The annuity is always a loser over the long term.
The corporate segment rates have gone up just as the federal treasury rates have. It’s all done to tame the high inflation created by the terrible monetary policy seen since the Covid pandemic. But as we slowly get beyond the blunders caused by the inconsistency of the Washington politicians in the majority, there will be an eventual drop in inflation. The Fed will ultimately start lowering interest rates again. Once this happens, the corporate bond segment rates will also come down. So whereas near-term retirees will lose a part of their lump sum pension value, future retirees will see a compensating rise to their lump sums. It’s the economic pendulum of good and bad times, for a lack of better words. Unfortunately it is mostly about timing which is beyond our convenience or control.
now time to take the annuity.