Thread regarding Chevron Corp. layoffs

2nxsi, Happy Holidays, and welcome to soon to be 2020. The person below claims(false or not, makes no difference) to have retired with the annuity, not the lump sum, leaving his nest egg to grow. $2 to 3MM or more is not even close to sounding "exaggerated" or "disingenuous" as you might seem, at least compared to my investible assets, being an average employee. We are all in Oil & Gas, and paid relatively well. And I am not at retirement age( but getting close), nor a VP, or president. Far from it. Welcome to the real world. Some people enjoy saving and investing, some like to blow their cash or just raise big families. No one's judging.

2ntpq, I can certify that very few retirees would come close to getting $2MM in a lump sum pension. The math would indicate the former employee had to be on the level of a President or highly paid VP to earn that amount. I can quickly assert that $2MM is more probable for nearly half the workforce in their 401k after some 25+ years of service. So, I do believe you exaggerate greatly or flat-out being disingenuous with your claim.

Yes, In fact, because I retired around that time and took the higher overall value annuity which more than covers my expenses, My Portfolio is actually worth much more than $3MM today. It really helps when you don't have to take expenses out of it, like if I would have made the horrible mistake of taking the lump sum. Thanks for reminding me of the excellent decision that I made and how wealthy I have become because of it! It's been a wonderful Christmas present.

Imagine, if you were “forced” to retire Jan 2016, your $2MM lump sum would be worth $3MM today, with nothing more than DOW average performance.

2016 was a great time to retire and the package just made it sweeter. I could live several years on severance and unemployment. Your lump sum must gone Through the roof. The DJ was under 18000 in 2016. It is closing in on 29000 now. Amazing run.

I was ready to retire and EOI'd (expression of interest) in 2016. Worked out for me, got my 1 year severance plus unemployment.

For educated people 2 + 2 = 4. For 2maqa, 2 + 2 = 2. lol.

Before you know it you will find (Annuity + SS) = SS

Smart move.

Once you elect the lump sum, the onus is on you to manage it to last a lifetime. If you select the annuity, it’s on the company to make sure those payments last your lifetime, even you live to see 105. With already having 4 times the pension lump sum amount in my 401k, why would I risk putting all the eggs in the Wall Street c-sino? I opted instead for the J&S annuity plus social security. Happy as can be getting a guaranteed continuous income stream for both me and my wife. It won’t stop until both of us are gone, while the bulk of our retirement money is conservatively invested and growing untouched for the next 12+ years. Best financial scenario for me and the wife. Your mileage may vary.

Being as the lump sum buy-outs benefit the company and the sustainability of the pension plan more than having to fund annuities, your impression of what HR's imaginary goal is would be wrong.

I agree it would make sense HR is hoping to dupe employees into the annuity trap in hopes of minimizing lump sum exposure at current low interest rates. Why else would anyone argue for the annuity death spiral?

2kxek, I’ve known during my long career a handful of colleagues who were overly vocal about their desire to retire around times of company downsizing. None of them were ever offered a severance package. It would be advisable for anyone who is approaching retirement to not discuss or advertise their wish to retire or volunteer to leave around potential lay-off season. Management and HR know it’s cheaper for them to keep you hired and wait for you to submit your retirement papers later. This is especially true for older employees who are over 55 and have been long term employees.

Good point. In most cases the annuity is the better choice from a financial and mathematical standpoint for those who care to crunch the numbers. Also I have been wishing for the package for years and never get the option. I suppose if you want one, you never get offered one lol. Nothing to complain about anyway.
Merry Christmas and happy holidays to everyone and good luck in the new year!

There’s no “great” package. Are you expecting an extra bonus on top of what it is? The amount you get is based on your years of eligible service. Maximum is 1 year of salary and not a cent more. It’s never a good year to retire unless you’re prepared and willing to retire. As far as the lump sum goes, that’s an individual’s choice to make. Good choice for some, not such a good choice for others. 2020 is going to be a soft year for business. The economy is more likely to bump along or slow down a little. Not the best time to be looking for a comparable paying job if you’re laid off before your time.

Happy Hanukkah to all and best wishes for a great package in 2020! Great year to retire and invest the lump!

2jkwd, Who's post are you referring to below, which element in particular and do you offer any counterpoint? Reading the OP, it's obvious that most commenting would have either the annuity or lump sum in addition to Social security so your nonsensical trolling is obvious.

Sounds like a very misguided recipe for disaster. Hope you can live on SS!

Those are some interesting observations, and some quite valid, but most of them ignore some very obvious points for most successful investors/savers nearing retirement. To begin with, many have as much exposure as they want to with equities within their 401k's and if like me, with outside accounts/investments as well as real estate. When you retire, you are late 50's early to mid sixties and older. At that age, the last thing retirees want is to tilt their asset allocation more toward equities, in fact, it's just the opposite. In addition, many have nest eggs which dwarf the size of any lump sum buy-out, if taken. The choices for the 40% in the typical 60/40 portfolio are generally bonds, fixed income and cash, CDS' and other cash-like vehicles. If you are heavy in equities, or simply desire to replace your bond allocation with a guaranteed fund which performs better than any bond, fixed income or cash-like vehicle available today, the pension annuity outperforms them all.
And I happen to be almost 100% equities and real estate, being young, still working, and like the risk so this is just some helpful data points for some who post here who are obviously a bit misguided and still learning about investing.

“some monies being immune from the effects of inflation”... no one said anything of the sort. What is true, is that an invested lump has a high probability of returns equal to the annuity payments plus enough more to correct the held nut for inflation. Lump investment provides some flexibility as market conditions change but the annuity, once lock, is only going to decline in value over time. Assume super low interest rates will continue forever at your own risk.

• 23rka is incorrect on every count. Gotta love the bogus claims about some monies being immune from the effects of inflation, and other investments & savings aren't. If you're doing the comparison where one or the other "ignores inflation", redo your calcs, and figure it into both. Or get a new Financial Advisor, whatever the case may be,

"The only long term scenario where the annuitant comes out ahead is where inflation stays at 0% for decades while the stock market tanks" wrote the person who failed math in public school, or didn't attend at all.
We deserve more than that level of education for our tax dollars! America is failing it's children, it's future! Write to your congressmen and women. We deserve better.

If you lump is decreasing it is a sign you should retire. Should only happen near age 60.

Interestingly my lump decreased in value by nearly $100k over that last two years, which if a demonstration of just how important interest rate at the date you retire is on the lump (or annuity) amount. That’s a 7-8% decline in lump value from a 2% increase in interest rates!

• 23rka is correct on every count. Rolling the lump into a tax deferred IRA is as close as one comes to a sure thing in investing (compared to the lump). Also for those of us who already have significant other moneys, the lump can be used for philanthropic activities completely tax free.

The fact that they are actuarily equivalent 1) only matters to the insurer (Chevron), not the individual since individuals live to actual ages not average ages, 2) is only equivalent with the assumed interest rate and 3) ignores inflation. For item 1, you will live to a different age. If you die sooner than average, you will get ripped off by the annuity. If you live longer than average you will also lose since inflation will k–l the annuity value. The only long term scenario where the annuitant comes out ahead is where inflation stays at 0% for decades while the stock market tanks. It has never happened. For item 2, it has been stated many times here there is an enormous opportunity to get the lump sum "overpaid" by a huge amount due to the current low interest rate assumption which is way lower than long term market averages. Near term, you have the flexibility of the lump sum if you need it, long term it will out-pace the assumed market behavior. Item 3 is inflation. It is real and it will destroy the annuity. If you want an annuity, take one or several late in life (when terms are great, even double what Chevron offers) as longevity insurance and as a simplifying financial means in case you lose your wits. I'm talking age 75-80. Inflation matters less at age 80 and annuities are available which pay out like 12% annually. People with RMD concerns should also avoid the annuity since it locks in taxable income and thereby limits Roth conversions. Lumpers can effectively pay zero income tax with as much as $1-200,000 annual income while converting their IRAs to Roth before age 70. Financially, the Chevron annuity proposal is a loser in every way. But if you don't want to invest, it is a winner from the peace of mind perspective.

I don’t quite agree @23bil or maybe you’re over simplifying the argument. For most retirees and varied scenarios, both the annuity and lump sum are going to be equivalent (in actuarial terms). Nobody should make a blanket statement on which is better, unless they are stating what’s best for them alone. I see both pension options having about the same financial value if you live your entire statistically presumed lifespan, but can be total opposites in value if other variables are introduced into the mix. On a scale of 1 to 10, most people considering either choice of pension would be near a 5 on the scale. And depending on the additional variables, like your current age, number of years of eligible service, your health outlook, total debt and burden at retirement, and the total 401k and other savings you have— your choice of annuity or lump sum can vary to the extremes, from 1 or 10 or somewhere in between. For me, the choice I made and the score I grade it at was about 8, in favor of the 100% joint and survivor annuity. The leading factors of why was that I had 28 years of service when I retired, I had zero debt and owned my house, I already had over $1 million in my 401k and $200k in bank savings, my health outlook is good and was going to complement my lifetime annuity with social security within 2 years of retiring. I simply preferred the comfort of having two lifelong income streams which is enough to comfortably live in for at least 10 or 12 years. Soon after that time, when I would be needing to begin tapping my retirement accounts, the IRS would have been demanding me to start taking RMD distributions anyway. You see, there’s no easy answer when it comes to choosing the annuity or the lump sum. It matters only to you, the individual retiree. One shoe certainly doesn’t fit all.

It is definitely true that 1) if you just need something to tide you over until social security kicks in and 2) you can't manage the hassle of investing and 3) you can live off the annuity alone until age 70 in any inflation scenario, then it is a good backup choice to the lump sum. Just don't take it without realizing how much you are giving up for the sake of avoiding investing.

Nobody takes the annuity if they haven't saved, prepared well and can't afford it. If you are still worried about interest rates to build your nest egg at that point in your career you haven't won the game.

That's the truth, and with the pension annuity and lump sum being roughly equivalent in value, the annuity is more attractive to older folks since it's hands-off and guaranteed. There's not many companies left that offer pensions and the reason is it's hard for them to sustain it. Sure, if you had nothing to do with your life you could play the market until you croak and hope it lasts, but No matter what the market does, you still receive your annuity. Most people prefer less hassle in their retirement years which is why the annuity is still very popular.

Sure, the company would love to buy you off with the lump sum. That way they could say goodbye at last and see you take your pension to go invest it yourself. Not me. I put in near 30 years and was hoping to retire on my own terms at 65, but Chevron laid me off two years before my goal. But even though I was tossed out 2 years early, I was able to retire very well after all. I took the annuity for two principal reasons. One was because I could and the other reason was to simply remind Chevron every month that I’m still around. The annuity keeps the monkey on their back to keep paying me the rest of my life and my wife’s life too.

Lots of great questions at the town halls this week about The Package so lots of people thinking about it. Keep up the faith! Looks like stars are aligning.

Seems like any upstream reorg will extend well into 2020 so could be a bit of a wait to cash in. Interest rates should stay low so great conditions for package and/or lump sum.

You seem to be confusing company withholding taxes and actual taxes due when filing in April. The former are not really an issue.

@1qpgv - Only the Social Security and Medicare taxes for the RPP amount are paid during the final year. And yes, you have to pay it even though you haven't received the money yet and might not for several years. Since many people in this situation have already paid the maximum Social Security tax for that year, it can actually be a good thing. However, you still will have to pay the full Medicare tax, because there is no upper limit on that. Federal and state income taxes are not paid until you actually receive the money. In my case, I even had to pay the Obamacare Medicare surcharge in that year because my income subject to Medicare was so high. However, in the end, since I didn't have to pay Social Security on any of it (because I was already over the max), I may have come out ahead, though it will actually depend on what stock options I cash in and how much they are worth during the years I receive the actual RPP payout (since they are subject to SS and Medicare taxes as well) . As you can see, these things are difficult to predict.

@1pplk, Yes the pension in all of it's forms, particularly the best choice if you are in a position to afford it, the monthly annuity, as well as the RPP payment are all treated as normal income, no one on this thread claimed otherwise. There are various ways to minimize the tax impact, which is the issue being discussed.

You mean the taxes are withheld by CVX in your final year? And you also owe that tax when you file your return, without having received the income yet? How does one declare unreceived income on taxes?

The stock options can wreak havoc on taxes but I guess there are ways around that via donations or trusts, etc.

@1oxlm - RRP payouts are not capital gains, they are ordinary income, and are even subject to FICA and Medicare taxes (though in a strange twist, you pay the FICA and Medicare taxes the year you retire, even if you defer the payment until later). If your RRP payout(s) are large and your annuity is large, it will affect your tax planning. In addition, those at 26 and higher with enough years of service may have up to 10 years vested stock options they can exercise over the course of the 10 years after they retire. These are also taxed as ordinary income, which adds another extremely unpredictable wrinkle.

I was subject to the RRP but I have had no problems dealing with the taxes at this point as they are mostly from capital gains. I also opted for the 100% joint survivor annuity and I have been thoroughly happy with my decision. Agree with @1hlqk. It allows my other investment to soar unfettered and also I have no qualms about having an aggressive portfolio with the annuity as a backup. As for taxes, if a larger chunk of the tax pie and how to reduce it is all that you have to worry about, then that's a great problem to have!

The RRP only affects those employees in PSG 26 or higher whose normal pension payout is larger than allowed for qualified pensions by IRS guidelines. The amount over the limit is moved into a separate plan called the Chevron Retirement Restoration Plan and by default is paid out in a lump sum a year after retirement, though the option exists to spread it out if you defer it for 5 more years. If you don't know anything about it, it's because you weren't at a level where it was needed. For those who do get it, it can be quite substantial, so it would definitely enter into any tax planning.

I think it is also called the Retirement Restoration Plan or RRP. You can find more online. There are various ways to take it to manage tax impact.

@ 1mosk, What pension restoration plan are you talking about? Especially the word ‘restoration’. And what tax impacts are you referring too? I’ve been retired from Chevron since 2016 and haven’t come across anything adverse about the Chevron pension. Can you explain your point please?