Everyone at work talks about the lump sum timing with regard to interest rates, timing, etc. What are your suggestions?
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Another minor correction to your response, the lump sum and annuity are roughly actuarially equivalent(sp?), so there is no "better deal". Even the most conservative investments that you reference are not comparable because they are not guaranteed. It depends on your situation, but at retirement many older folks would get poorer returns than even an annuity would represent as they tend to be extremely conservative and many are quite wealthy. This topic, however, already has it's own long worn-out thread if anyone cares to read it.
A few corrections -
The pension payout is based on your highest 36 months average earnings. There is a maximum and anything higher results in a pension restoration lump sum.
The SS offset is calculated from your highest 35 years earnings. If these were not with Chevron, Chevron extrapolates based on the years you were with Chevron. If you earned less than the Chevron salary, extrapolated using the Federal COLA figures, you can tell Chevron your actuals and it will boost your pension payout.
Interest rates seem poised to go down. In my case, an interest rate change has a 10x impact on the lump sum. E.g. a 0.5 point decreased in the Fed rate would yield about a 5% increase in the lump sum. The current rate is crazy low and can only reasonably go about 1 point lower.
Best to go to the HR site and look up the formula. I have not looked at it for some time, but it is an equation that considers the replacement of some specific percent of your base salary for the rest of your life with an offset to account for what you will get from Social Security. Base salary is averaged for the last 3-5 years (somewhere is there). The conversation to the lump is then based on assumptions of how long you will live and the interest gains the lump will generate as you gradually spend it over your retirement. The assumption of the amount gained from investment is very conservative (which is what makes the lump a better deal than the annuity). That said, the lower the reference interest rate the day you retire, the higher the lump payout will be, since the amount rises to offset the lower assumed gains). The other variable, the social security offset, can also change the lump payment. If you did not make an industry average salary compared to others in your grade (e.g., you worked in another industry for a time or were laid off for a while), then if you share your real Social Security numbers with Chevron HR before you retire this may increase your lump (then again, if you made more than average, sharing you numbers might decrease you payout).
If you had a decent job you wouldn’t be worrying about a pension