Thread regarding Chevron Corp. layoffs

@uUluz, and I agree with your logic as you have accumulated more than enough to satisfy your budget and had many options as I'm sure you still do today. In fact, you have demonstrably more financial expertise than your average lumpster. It is more likely that they blow it either on toys or poor investments. Don't drink all of the rare scotch and smoke all of the fine cigars, save some for the rest of us! And ignore the hapless troll who calls everyone "Ppcon".

@uUcxp, I agree with your logic favoring the lump sum. As you said, the annuity is certainly not for everyone and there are lots of variables that would make one retiree choose one pension type over the other. I chose the 100% J&S Annuity for me, not because I’m risk averse. Certainly, at age 64 when I EOI’ed from Chevron in 2016, I had plenty coin already accumulated in my 401k and other personal retirement accounts invested in the stock market. By choosing the guaranteed annuity cash stream along with social security, one year later, I live quite comfortably on those income sources without having to touch any part of $2MM in retirement savings until RMD kicks in when I’m 70.5 years old. House is paid, no debts of any kind and the kids long flown the nest and doing well for themselves. I subscribe to keeping a diversified and conservative portfolio. My annuity, for whatever flaws some people say is inherent, is a big plus for me. It boils down to peace of mind and sticking to a well thought out plan. I gave enough money. Having any more of it will not make me any happier. To each their own.

@hittt+GEjhx1M: I agree "There are many variables that go into the decision of whether to take the pension as an annuity or conversion to the lump sum payoff", but your statement indicates an unreasonable apprehension to investment risk relative to inflation risk. You are correct that if you put the lump sum under your mattress and used the moneys at the same rate as that which you would be paid by an annuity it would last only about 17.5 years (then again if you were to die before the 17 years, you would get less than the lump you could have had all at once). However if the lump moneys were invested in a very conservative way to generate on average 3% interest on funds as you make withdraws the moneys a would last about 24 years, at 4% average returns 28 years, at 5% average returns 35 years ... at 8% returns (the long term market average) the lump would not only last forever but by 30 years you would also have %250 the value of the original lump. The annuity only make sense if you really can't sleep at night with any investment risk: but then you also need to consider that at current projected long term interest rates (2%) at year 30 your annuity payments will only have a value of 40% what they are worth today. I hope you like beans and rice.

It doesn't seem fair that one can not change their mind. I wish Chevron would allow me to change from the annuity to a lump sum now it has been 5 years. Just subtract my annuity payments and give me the rest?

You should have known this was coming at some stage! Better start some belt-tightening on the budget.

The worst has come to past and inflation is raging. Currently 5% in the US and rising. Food, transportation, supplies, housing, etc. Anyone on the annuity will see the value chopped in half by end of the decade. Disastrous. I should have lumped it!!

Look, Dude. Talk about things you know about. I posed the same question to the HRSC Retirement Dept representatives who were handling my retirement papers when I retired. None one them wanted to comment even on the most elementary questions. They process retirement papers. They are not advisors or informers. Understand?

The lady at the Benefits line told me it is pretty rare anyone would ask her about taking the annuity. I reckon less than 10 percent.

Stupid or condescending (separately) are forgivable, but together they are too much to bear.

If you think 100% money market is fully invested you are in worse shape than we thought.

If you had put $100 under a rock in 1990, the buying power would be equal to $50 today, but in an low fee S&P500 fund it would be worth nearly $400 (it went up and down, but averaged 7.3% returns). Assuming you need to withdrawal funds to live on, which is the greater long term risk, the rock of the market?

@hjmkr, I invite you to gamble with your money, but not with mine. I’m retired, comfortable and have a sufficient income stream. I prefer to keep my retirement accounts invested conservatively. I’m not working anymore so loosing money is not in my equation. Believe me, $2MM invested very conservatively is earning a pretty penny every month with minimal risk— not to mention my steady annuity income and social security. Thanks for the advise, not no thanks.

Yes, -hiusz, and that house that you bought in the 90's for presumably $150-$250k and paid off fully is most likely worth $500k - $750k today. At least mine is , YMMV. Job well done, paw-paw!

But, by all means, don't hesitate for one minute to take the advice from the "laid-offs" on this thread and go back to "REFINANCE" the house that you fully paid off ~15 years ago (and likely refinanced at least once) at 2.5%, since, after all, they just learned a new word and would like you to know that! ha ha ha!

The CAGR (including dividends) of the S&P500 since 1998 has exceeded 6.75%. Furthermore your mortgage interest was tax deductible meaning the after tax rate was closer to 4.5%. You lost a fortune tying your money up in a house, where it presumably sits today, earning you essentially nothing. Why not refinance and put your dollars to work for you?

-hiusz: You carried a mortgage at 6.75% for the last 25 years...what were you thinking? You could have refinanced at rates as low as 2.5% over those years! The conversation would have paid for itself in under 6 mo!

-httt: you took the annuity and are still investing your 401k “very conservatively”? You should rethink this. With the base income, invest the rest to protect against inflation!

Get a financial advisor...even just a paid for service CFC once in a blue moon... it would save you both a lot of money!

There are many variables that go into the decision of whether to take the pension as an annuity or conversion to the lump sum payoff. It’s different for every retiree’s present situation and expectations for the future. When I retired 3 years ago, I curiously decided to divide the lump sum amount by the joint survivor monthly annuity I would receive. I wanted to compare how long the lump sum would last if I took the most conservative approach— to not invest it and only take distribution amounts equivalent to the annuity each month. The result was 17 years and 3 months. So if I presumed to live for 30 more years, which is the average life expectancy for most retirees, my non-invested lump sum amount would run dry just halfway into my expected life expectancy. That means I would need to invest my lump sum sufficiently well to make it last 30 years while taking periodic distributions to Iive on. It doesn’t take a genius to figure that as your principal capital diminishes, it takes consistent returns on your remaining capital to make your money last from year 17 to year 30. I chose the annuity for peace of mind and financial diversification. The annuity is a lifelong stream of income. If I died first, my spouse continues to receive the same amount. Social Security bolsters the income stream and that part is COLA adjusted for inflation. My retirement accounts continue to grow in conservative index funds, ETFs and money market accounts. This combination of financial structuring works very well for me and spouse, and it’s guaranteed to last us a lifetime while allowing us to Will our remaining money in 401k and IRAs to the heirs.

Someone below attempted to relate a mortgage to an annuity. I think it's the other way around, the lump sum is the equivalent of them paying YOU off early. I paid off my mortgage early, which allowed me to pay less overall. (Not all mortgages work out like that) Now one could argue that I should have kept paying and invested that money, and come out ahead by beating the interest rate while investing. The interest rate that I got was extremely competitive at the time, the 90's and it was 6.75%, no "points" as they call them. so that's what I would have to beat. Now, investing in the market at the time, would soon put me vulnerable to the dot-com crash.

It's not that simple. Everyone bases their own suggestion on their own prediction of what interest rates and the market as well as inflation will do based on the past. Get out your crystal ball. Let us know. We would all like to hear!

I guess taking the annuity is similar to paying off your mortgage early. Financially, it is a big mistake but emotionally it makes some people feel better. If they can live with the financial consequences and sleep better, then bully for them.

When I survey the results of this thread and others, it looks as if more people have chosen the annuity,

are very happen about it, and have no regrets and the ones who post that it's a bad idea seem to be immature, naive and arrogant people hurling insults. Why is that? How is that adding any useful information for those undecided like me?

@htsty, If you want to be credible, do your research first, then speak with certainty. Here’s a quote and the source; “PBGC increases maximum monthly benefit guarantee for 2019. The Pension Benefit Guaranty Corporation (PBGC) has announced that the maximum monthly insurance benefit for participants in underfunded pension plans terminating in 2019 is $5,607.95 per month or $67,295 per year for those who retire at age 65.

• https://lrus.wolterskluwer.com/news/pension-benefits/pbgc-increases-maximum-monthly-benefit-guarantee-for-2019/65343/

And as for social security, that program is not going away anytime soon. The reasons are quite obvious— just use logical thinking. Currently, the SSA is saying (warning) benefits may be cut by 17 or 20% in about 15 years to all recipients, but recent authoritative news articles are indicating both Republicans and Democrats see the time horizon nearing on social security and are coming to the consensus that taxes will need to be jacked up on highly paid employees and businesses. So @htsty, don’t propagate false notions. Everyone can be advised to “prepare” for eventualities, but not necessarily panic.

You should be quite careful counting on government programs like PBGC and Social Security. They are poor safety nets which could go away. 2019 PBGC limit is about $30,000/yr. SS benefits are at constant threat of reduction or elimination. Still, if the stock market frightens you, these may be your next best alternatives.

@hcowb, The decision of taking the annuity or lump sum is a personal one and based on each individual’s needs. For the average person’s mortality statistic, both are equivalent in value. The Chevron pension is given as a single-life annuity. To take your pension any other way, requires converting it. It’s in the conversion where it could possibly lose its value because other factors are introduced to the conversion formula. The lump sum privides the retiree a payout. Once you receive it, Chevron is done with you. The money is yours to manage now. With the annuity, Chevron is not done with you until you (and your in the case of a joint & survivor annuity) are dead. Chevron remains responsible for managing the pool of pension money that is paying your annuity each month of your life. The PBGC guarantees the pension and your annuity in case Chevron goes bust. On the other hand, the US Stock Market does not guarantee you anything. You may make smaller gains than you counted on, it could even provide you loses while you take your monthly or periodic distributions. The only downside to the annuity is the slow and constant decline of purchasing power from inflation. But, that inflationary decline will be more than offset with income from social security. One must think long term and try to remain financially diversified. One part of your income which comes in steady and guaranteed like an annuity and social security is balanced by your retirement savings. Both work together to provide you balanced and long lasting retirement. Go putting all your eggs in one basket and you are thrown to the mercy of the US Stock Market. Your working years was your chance to gamble and take risks. Your retirement years are times to take things more conservatively and relax. I chose the annuity and enjoying life with little to no worries.

Yes that's all fine and wonderful and all that you guys have these tall tales of fiction to tell, people here coming out of the woodwork who hit the imaginary lottery, The tired ol' BS tale of people receiving 2, 3 and 4 times the pension, more than one check, the same time every month what's next, the CEO comes over and shines your shoes and he insists that you screw his trophy wife - lol?

Please, the topic is Lump sum or Annuity, not how much BS you can come up with. This is a very helpful thread to those of us trying to make this important decision. Try to stay out of LA-LA land. Thanks.

I had a similar situation with my annuity as it was several times more than the one I expected and had calculated for years. They must have a few gliches in their system. The annuity that I receive is at least 3 times the number I was expecting, as I posted here a while back. It is not 2 checks, which is obviously a glaring error, just a simple single check way bigger than the roughly 5K a month I was expecting. The nice thing about my case is there's no question about getting an extra, obvious erroneous check which was a mistake that really should not be accepted, but sent back in some people's minds. I have no intention of giving any figures and I would suspect anyone who does. this site is not as anonymous as you may think. I am quite happy with my decision to take the annuity, which is better for me and my young spouse who will likely outlive me and still live in the lap of luxury that we do now. The stock and bond market, as well as inflation, are uncertainties, as much as some people who have crystal balls claim. I wish I had one of those crystal balls, that would be nice - lol!

I think double makes the annuity worth considering. A happy accident for anyone who gets it. Any tips for how to get double??

Yesterday, I got my end of month February 28, 2019 Chevron pension annuity payment. It is the 45th straight month they direct deposited $8,778 into my account. It is double the $4,389 amount I'm supposed to be receiving. The error has got undetected for so long, I’m thinking it won’t stop.

I took the annuity because I wanted a safety net/insurance policy and it's better than one which can be purchased today. I have a healthy portfolio, both tax differed and out. I am 80% in equities, no bonds. The pension lump sum/ or annuity represents only a small portion of my investible assets. I am a 35+ year employee. It's laughable reading the hecklers, trolls and naive young employees on here posting such nonsense about annuities vs lump sum. The best advice and information on this question will not be found in this thread. It's different for everyone.

h9wlu, So the point that you're making is you took the lump sum because you have no idea about investing or annuities so you might as well blow it after the record bull run that we had leads into the next recession. Got it.

I once asked a general manager about this and he said the lump sum was really more of a thing for management and higher pay grades to get at the cash without having to pay tax, like one would on annuity payments. He said typical rank and file would probably find it easiest to take the annuity and not worry about it.

After 330 posts, is there really more ground to be covered here?

@h8zxj, What hogwash are you talking about? Seriously? The Chevron annuity is not the same as that found on the open market. Chevron’s pension is given as a “Single Life” annuity. Chevron calculates the annuity more favorably that what an insurance company would pay. Chevron does not look to post a profit, whereas an insurance company does. That’s the principal difference. I hope I taught you something today.

Actually, open market annuities and Chevron annuities are the same value. You can check online. Taking the lump sum and annuitizing as and when it makes sense to do so is infinitely smarter and more flexible.

I hope your "financial advisor" is enjoying his new boat!

@h8tbz, Your premise is severely flawed. If you structure your lump sum to purchase annuities on the open market every 5 years to tackle inflation, how much money do you intend to live on? Besides that, it’s widely understood that purchasing annuities on the open market, after having just converted your Chevron annuity to a lump sum, is a costly (and stupid) mistake. I urge you to not advise people in financial matters. Much more, I advise you to seek a certified financial advisor for your own financial decisions. You can thank me matter.

For me, I could almost stomach the rapidly vanishing value of the annuity. The bigger issue is the unprecedented transition of our industry to unlimited shale and alternatives/renewables. There is significant risk that Chevron will cease to exist in the next 10-20 years, a la Kodak, as pointed out by the CEO last week.

I get the sense that people here don't quite understand what "actuarial equivalent" means. It is an insurance industry term and it works for large populations of people but means nothing for individuals. The insurer can use stats to calculate, on average, how long a person will live and provide a lump sum equivalent to the annuity payments that would be paid up until you are "calculated" to croak. There is no point in individuals using the actuarial figures unless they plan to pull the plug in the year the insurer says they will. 99.9% will die sooner or later than the insurer says. If you think you will die sooner, take the lump sum as you will get more money to spend now or pass along. If you think you will live longer, take the lump sum as the annuity will be demolished by inflation.

If you really must have an annuity due to stock market panic/fear, at least take the lump sum and build an annuity ladder, purchasing one every five years, to mitigate against inflation. As you age they get very generous with the terms. You will still get crushed by inflation, only slightly less so.

-h7emp, Who are you agreeing with, there were only a couple of posts in this entire thread by people foolish enough to take a lump sum and risk blowing it in the market?

@GEjhx1M-h7emp Yes, Easy. Until it isn't.

Source - Been investing for over 40 years.

I agree it is hard to imagine a scenario where the annuity choice makes sense. Even in current inflation rates you are slowly crushed year after year. Nice work testing it against some worst case scenarios since low side mitigation is critical, but even high side in annuity case is ugly: half or more of your buying power is gone after just 20 years.

Investing couldn't be easier with index funds. Buy 42% VTSAX, 18% VTIAX, and 40% VBTLX. Set it and literally forget it for the rest of your life. Rebalance if you feel the urge.

@GEjhx1M-h6qtl, Excellent analysis/success story of someone who actually played the game and won. I am of the opinion that since the annuity/lump sum are actuarily equivalent, as has been pointed out many times on this site, it is a individual decision and about equal either way. And although many naive, young investor types with recency bias tout the lump sum, they fail to look at the big picture and entire picture. Unless you plan to leave a bigger lump sum for heirs (some of us have none or do not wish to ruin them) in many cases the annuity is a more practical solution and a good insurance policy. There's a reason that a comparable annuity costs about the same or a little more (their fees/profit) on the open market. It costs a lot and is a lot of risk to guarantee that kind of return. On the other hand, a savvy 80 year old investor(lol) perhaps could handily beat that amount in returns. Take your chances. The statistics show that lump sums are more often blown quickly and frivolously than not.

Personally, my investments were fairly diversified during my working career. I never put all my eggs in one basket. I reallocated my portfolio balances at least once or twice a year and I did rather well. Since retiring, my investment strategy is diversified but more conservative, because I cannot replace loses in the market. I chose to take the Chevron annuity instead of the lump sum to remain diversified and to minimize market risk. I have no mortgage or any debt, so for me it works to receive a lifelong guaranteed income stream through the annuity and social security. Both steady income sources are sufficient to live on rather well. My 401k and IRA balances are high and my money is invested between index and money market funds. I’m not a jet setter, but I’m happy and financially safe for te rest of my life. For those of you with low 401k balances and few years with the company, my advice is to keep working.