Thread regarding Chevron Corp. layoffs

I would prefer an annuity with payments indexed to inflation, and maybe even deferred to age 70, as that would focus on hedging long-term market investment risk on the rest of my moneys (but no one offers such a product). -2ymug makes a good point that current interest rates are rock bottom, so, given that, it might pay to wait on setting the start date of any Chevron annuity (if you can afford to). Others have posted previously that there is a percent penalty on the moneys for the annuity (or lump sum) that you start before age 62, so that might be another reason for me to postpone the start (I am only 58). Just now I am thinking that I could postpone the start until I am 70, giving me almost a deferred annuity. I am sure those with the highest risk tolerance would say just get it out asap as investment return would be higher than any gains of moneys left in and early retirement withdraw penalty. I do think we are likely to have some increase in interest the next few years, so for me I am thinking it worth waiting. Long-term, the mortality age tables might rise due to better medical science, which would tend to reduce payments of any annuity started later.

The risk a gradual loss of income value vs running out of money before you die: pick your poison! That's life.

-2ymug. Agree with everything you said, but am still planning to put the lump sum part of my retirement into the annuity (given my larger investments already in the market). Insurance costs money, obviously. What you say is true about any annuity (even those fixed annuities with an inflation adjustment have a fixed adjustment rate (1 or 2 %), such that in my book they do not reduce risk much. The big annuity risk is huge inflation increases: gradual steady inflation is a predicable factor. Variable annuities make little sense to me because they are complex (easy for companies to hide a lot of extra charges) and I already have significant exposure to the market with investments outside my planned annuity (then again, I never understood the attraction of whole life ins. either). The older I get the less confident I will be that I have your 30 years to make up losses and to me having some predictable base is reassuring. I also think an annuity principle is somewhat more protected from creditors (not that I am planning to get sued for anything specific, but one never knows: ice on my sidewalk or what have you). With assurance of a base income comes more confidence for me to invest the rest at reasonable risk levels (more stocks relative to bonds), such that at the end of the day I actually expect I will pull in more than if I follow your advice. To each his own and your mileage my vary.

@2ymug, and you forgot the last part of your post... Even living to 100 is not really an upside, as you will also outlive your invested lump sum.

Both pension payouts are actuarially equivalent in value (based on your mortality age). Everything else are variables outside your control or knowledge. So, pick anyone you feel most comfortable with.

Just be very clear that when choosing the annuity, you are making a clear trade off for security of an inflexible, fixed, non-inflation adjusted income rather than a larger lifetime accumulation of wealth. In the history of the stock market, there has never been a 30 year period when the real return on an indexed investment did not exceed what is offered by the current annuity (because current interest rates are rock bottom). So, there is essentially no downside to the lump sum and huge upside plus the flexibility of always having the full amount for other purposes. There is downside to the annuity in the form of inflation and no flexibility, but no upside. Even living to 100 is not really upside as inflation will crush the real annuity value.

As some recent posts hint, people's inclinations are often swayed by how the lump sum compares in size with the rest of their portfolio. Those for whom the pension is a small fraction of their retirement resources will often opt for the annuity, since it is a good deal as annuities go, and provides a hedge against poor investment performance in the rest of their portfolio. Those for whom the pension is large compared to their other retirement resources are more likely to favor the lump sum, in order to try to take advantage of the higher long-term returns that the stock market has provided in the past and as a hedge against a strong resurgence of inflation wreaking havoc with the buying power of their main source of income. As an earlier poster said, to each his or her own.

Excellent post and analysis, 2xghx. Thanks.

To boil down 200 posts. If you want an Annuity, this is a good deal. If you are willing to take on more risk, you can probably make more money by investing the lump sum. Easy enough. I plan to take the annuity because I already have 5 times my lump sum fully exposed to the market and I want a bit in an annuity as a backstop. To each their own.

The annuity is working out great for me and twice as great for the double dipper dude.

The consensus Is that lump sum is the best financial choice by a wide margin, particularly in the current low interest rate setting. Annuity will pay less money and get destroyed by inflation but appeals to a few people unable or unwilling to manage and invest on their own. Some of those people have large 401k account and like the diversity of a different income stream, even it it comes at a severe financial cost. Nobody knows what percent take the lump sum or why and it probably doesn't matter.

I do have a better life than yours, 2vqjx. You're green with envy, sad sack.

My annuity payment hit my bank account today, both of them. Just gotta love it.

-2vuie, don't be naive to think this sort of thing never happens in pension plans. It's a more common occurrence that you think. I read of some cases with other company pensions where double payments of a retiree's annuity went on for over 15 years and was missed despite annual audits. My opinion is that the person on this thread genuinely doesn't intend to keep the extra payments. He/she would invite the company to sleuth out the mistake and hold the inept people responsible for the gross oversight. I hope to continue to hear periodically from the person receiving the double payments. I'd like to know what the Chevron response would be. I work at Chevron and expect my pension plan to be run by professionals.

@2uyja, I suppose the Chevron attorneys will have the double annuity payments stopped someday, but after 15 months of this ongoing mistake, who knows if or when. The money is waiting in a separate account, just waiting for the request to send it back. Until then, the money and interest is sleeping at my bank.

I suspect Chevron attorneys would find a way to cancel any further annuity payments, full stop, since you are keeping them in bad faith.

Double the annuity is useless as Chevron can opt to back that out at any time either with a bill for the difference plus interest or suspending the annuity payments. I'd prefer double lump sum. Take it, close accounts, move to Costa Rica.

How did you manage to pull that off? Sounds like you hit the lottery since its ongoing for 15 months now.

Wow! 2tjen, good deal. Good for you.

I received the deposit advise today in the mail for my upcoming August 31 annuity payment. Again, for the 15th straight month, Chevron will direct deposit $8,778 in my account, double the $4,389 amount I'm supposed to get. I'm aware some of you denounce me for keeping the overpayment and I won't repeat the reasons I do so again. I've made my point of view clear as to why I am keeping the extra amount in a separate account and unspent. Just follow the thread if you're interested. This post is only to keep everyone up to date with the latest concerning my annuity.

Like I said, 27gat... The decision to take the pension as an annuity or lump sum is a personal choice and must be based on each person's unique circumstance and wishes. I do believe there's a "general" mid point where the decision to take the annuity is safer or more attractive than the lump sum. But this mid point cannot be calculated definitively. You cannot calculate or quantify a person's dreams, wants, desire to take risks, etc. I can only say that for me, I was able to achieve enough wealth during my working career to put me past that so-called mid point and my decision was a much easier one to take the annuity. I chose security over risk of out living my lump sum.

Thanks for your info, -27cbo. There are studies which show that those who take a lump sum are much more likely to end up being poorer because of it. I think that a lot of it has to do with human nature, since many want to spend it and they think they can and it's OK. Another aspect is the over-inflated view many youngsters have of their ability to invest. I have learned that lesson over the years. Don't confuse timing, luck, and good fortune with investing expertise. Not that I do not have successful investments. There is just the risk vs reward factor. Why take that chance when you have an opportunity for a secure, comfortable retirement where you can sleep well and content knowing that the market won't affect you?

@27hlc, I retired in 2015 after 26 years with Chevron at age 59. I took the annuity pension for reasons you cited; generous Chevron annuity rate vs having to invest my lump sum with future uncertainty in the markets. I'm already investing a large amount in my 401k. For me, the monthly annuity amount I get pays for all my living costs and enough for reasonable discretionary expenses. It works for me while providing a guaranteed income stream until Social Security kicks in. For a younger retiree with fewer years of service, the annuity may not be large enough to be of much help, especially because inflation becomes an issue through the years. The lump sum, in that case, may be the best route since it could be used to reduce or elimate high interest debt. Each person's situation is different and so is the call on whether to take the annuity or the lump sum.

I don't know who posted that off-topic gibberish below, but I think that it was obvious that the previous poster meant (Financially Independent Retire Early) for "FIRE". That's a common expression in retirement threads. This is the Lump Sum vs. Annuity thread IIRC. I'd like to read more input on that subject. There seems to be more people opting for the annuity these days than you would expect. In the past, the lump sum was always favorable. Now, with the instability in the market, and the exorbitant cost of annuities on the open market, the company annuity seems to be gaining some ground.

@27ftk - Fire is the rapid oxidation of a material in the exothermic chemical process of combustion, releasing heat, light, and various reaction products. Slower oxidative processes like rusting or digestion are not included by this definition.

Or were you referring to FIRE - Foundation for Independent Rights in Education?

@GEjhx1M-26jiq, Very funny. not misguided nor generalizing, very studied and please do look up "FIRE" acronym. Educate yourself. Google is your friend. I think you are acting the idiot. I can't believe a mature professional is that stupid.

To each his own, 26hem. But, I think you are generalizing things a bit or are misguided. Many savers like me have a future goal in mind to become financial independent. We know through the lessons we learned along the way, that you cannot rely on anyone but yourself. Some take that to heart and become disciplined savers and cautious spenders. Sorry to hear you were fired from your job years ago. Don't let that experience keep you down. You owe it to yourself to establish a goal for your future and not rest until you achieve it. How much money you accumulate in life is not the real measure of a man or woman. How well you prepare for your future and ultimately how satisfied you feel at the end of your working career is what's important.

@GEjhx1M-26ies, No, I am not generalizing at all, but you seem to have taken it personally, which it was not meant to be. I "FIRED" many years ago and have done extensive research on the subject. Save the luck for yourself. I do not need it nor do I rely on it.

@26qri, I think you are generalizing too much on the "saver" type of personality, which I am. During my career with Chevron, I earned a good salary. I invested and saved well, but that was done with one purpose; to retire as best as possible. We all have to retire one day, you know. Now that I'm retired, debt free and with a large enough nest egg, I plan to enjoy life and all my money. You see, "saving" is actually a discipline, not a mental disorder. You seem to be focusing on a small sliver of society and painting us all with a broad brush. I hope you've saved enough for your retirement. It's never too late to become disciplined in saving money and spending it wisely. Good luck.

No, you are not missing anything, @GEjhx1M-26ykf. With a pension & SS, $1 million or even $500k in the defined contribution plan and no debt is more than adequate for most in many moderate COL areas of the country. There is however, a "personality type", if you will, who are addicted to saving just as some are addicted to spending. They never will be comfortable with what they have and will cite numerous bad luck events that they feel could drain their finances such as premium long term health care, etc. Check out some of the early-retirement and retirement sites, they are full of these people, some with in excess of 10 million in assets. Most of the discussions with plenty of input come to a consensus that many of the people in the group will die with a huge amount in assets that will never get spent by them. The issue there becomes who or what charity do you leave it to!

How you cannot feel comfortable with $2.5 mm in your 401 is unbelievable. With that in your account plus a retirement payout or annuity that will obviously be high, you should be able to live high on the hog going forward. Did I miss something ?

Actually, if you only had 2% contribution with a PSG 20 or lower and for only 28 years, your 401k is extremely remarkable!!! You definitely picked the right funds, and did the right thing, did not move them around unnecessarily. The proof is in the puddin'!!

Thanks for your well wishes, 24cit. It's true that $1.6MM in my 401k after 28 years may seem a bit low to some in Chevron. I wasn't the savviest of investors and didn't move my investments around too often, but I accomplished this feat on a non-exempt hourly pay for half my career and not exceeding a PSG 20 for the last half. My contribution to my ESIP was a flat 2% of my annualized pay for 20 years, until residing it to 4% for the last 8 years. For my modest lifestyle, I'm proud of this accomplishment. I do have real estate holdings, as you accurately figured. I have a comfortable modern one story, 4 bedroom home in an affluent neighborhood in the suburbs that is paid for and I own a 3 bedroom single story rental home that I purchased 15 years ago. It has never gone without a tenant and I derive a nice cash flow from it. Being the only bread winner (my spouse never had to work), we always lived within our means, were always debt free, outside the mortgage I once had, and we saved money outside of the Chevron 401k. I don't mean to brag, but just to explain why it is I only have $1.6MM in my retirement savings. My wealth is in more than one place. I can easily live off my annuity pension and I'm looking forward to enhancing my monthly income with Social Security soon enough. Everything else I sweated for in life is all the safety net my spouse and I need.

@GEjhx1M-21iqw, Sorry about you only having $1.6MM in your 401k after all that time, I and many of my coworkers have at least $2.5 MM if not double that and even we do not feel entirely comfortable retiring. But you are not telling us the whole story, you could have much more in real estate, etc. that you are not telling us. In any event, Good luck with your retirement.

I'm glad I decided on taking the annuity pension over the lump sum payout. I know it's said the value of each is actuarialy equivalent. But, with the general economy in poor shape, interest rates to stay low for years to come, and the stock market being too risky for small gains, I know I made the correct choice. My lump sum payout was an attractive figure, but the guaranteed monthly annuity is enough for me to live on without tapping other resources. Besides that, my Vanguard 401k surpasses $1.6 million and Social Security will kick in 3 years down the road. Thank God for my 28 years at Chevron and the good fortune to have invested well and having retired free of debt. May the rest of you also be so fortunate.

I don't think that guy is anything but a paranoid old fruit if he's really telling the truth, which he most likely isn't . I don't believe it. I don't think if that was happening and you decide to continue with it, steal the money etc., that you would post about it online. Anonymous or not. There are ga-zillions of ways to find who he/she is with the info provided even without knowing his/her name. No one is that stupid. This whole thing is a story perpetrated by a bored idiot without a life. This thread is about Lump Sum vs Annuity, Does anyone actually have anything truthful and of value to add to the discussion?

That guy sounds more like a double saver to me.

Thanks, Jenny, for acknowledging that this person is indeed "stealing" and should feel guilty about it, since he is taking resources due to others that he did not earn, similar to a liberal demonrat Hillary voter. They are self-serving and only vote for what they can get from others and give nothing in return, being greedy and selfish parasitic leeches on society like the double dipper.

Jenny here again - Sorry -I meant "Conscience". And thanks for being so candid about your predicament , mr. double dipper, it may encourage some of these other people who fall into similar predicaments to air it out and get things off their chest if they are feeling guilty about stealing anything, which is OK and shows that you are just human. We should perhaps call this thread - "double-dippers anonymous". LOL!

I don't know about you guys but that's not a situation that I would want to be in, in any way, shape or form and I would report it continuously until it was corrected or I had formal permission that it was OK. I would never be able to rest easily if I knew that was going on in my life. I want My retirement to be nothing but carefree utter bliss, but that's just me. And my calculated pension or lump sum is way more than I ever could spend anyway. I could never be jealous like some of you guys are of that poor guys predicament and I don't think that it's something to make fun of. He wouldn't be posting here if he wasn't all torn up about it and self-conscious. I bet he has more of a conscious than many of you jealous types.

Damn right I'm jealous.