Thread regarding Chevron Corp. layoffs

Too early for regrets. Wait 20 years then get back to us.

@iqgh, Do what you like. It’s your money and your life. I did what I wanted to do because it is my money and my life. It has been 3.5 years since I retired and no regrets on my decision.

-hdbg: I agree with your analysis, except with the lump there is potentially more upside. If I withdraw 4% and inflation takes 2.5% but the market rises 10% (the average S&P return: about 7% adjusted for inflation) then the real value of my lump will increase over time. That plus at some point I can start spending the lump, or buy that annuity with a small part of that lump way down the road, when I can get that same annuity payout rate for a lot less money. Three unknowns: market return, interest rate, longevity. Interest rates are low today, but I for one worry the fed will be able to hold interest rates with the ever increasing federal deficits...eventually someone will have to pay the fiddler. I would not want to be holding the annuity when interest rates return the 1980s double digits!

@hdbg, That’s a well thought out plan, but if I go along with your thinking, I’d have to take the annuity. Why? Because I would prefer the certainty you give in the annuity lasting 25 years, whereas the lump sum is always at risk. I don’t have a crystal ball, but I’m in the camp that inflation is something that is a whole lot more controllable now than in past decades. Inflation rates over 5 percent are not likely anymore. If inflation becomes a factor, I have sufficient 401k and IRA money conservatively invested to draw from. The annuity provides certainty for the first 25 years and as you stated, it beats the lump sum out of the gates for 12+ years. I think it would be longer than that because we won’t have 4+ percent inflation. The Fed will control inflation to below 4%.

The decision is all about the long game and inflation. If you are using a 4% starting withdrawal rate on the lump sum, the annuity will crush it initially at 6% effective withdrawal rate. For example, at 2.5% average annual inflation the annuity will pay more per month than the lump at 4%+inflation for 12 years. Starting year 13 the annuity loses ground every year. However, because it was paying more for 12 years, the running total of annuity payments doesn't lose to the lump until year 25. This all changes with higher inflation rates. At 5% inflation (half of what we saw in the 80s!), the annuity is dead in five years. There is really no way to mitigate this risk.

So the if you can predict inflation (I want your crystal ball), want to live better for the first 25 years of retirement and don't much care what happens after that, take the annuity. If you think you will be spending money after 25 years or you remember the 80s inflation, the lump sum wins. The lump sum brings almost no risk if you simply buy 80/20 stock and bond funds. It has never run out in history.

I know it can go down. I have a very conservative position. Yes I could add risk to make more but don’t need to. Basically if I go down we are all heading for bunkers so it doesn’t really matter.

@gitx, Enjoy watching your lump sum grow, but realize that what goes up, also comes down. Whenever you lose while at the same time take your monthly distributions, it takes higher earnings to regain the position you had. You will need to count on consistent good earning in the market to make your money last a lifetime. You have to know that’s not possible. Good luck. For me, I prefer the guaranteed income stream of my annuity.

I am living very nicely on my lump sum and it is worth more now than when I got it. Of course past results don’t guarantee future performance but I enjoy watching it grow.

How can this still be spinning. You will do much better investing the lump, on “average” (no surprise, insurance costs money!). The annuity is solid protection from market risk (but not from inflation risk). Take the lump, invest that plus your 401 in broad-based mutual funds ... good choice. Take the annuity and invest the 401 a bit more aggressively... also good choice. Take the annuity and keep your 401k in a money market fund (not so smart). Take the lump and spin it all on black 22 in Vegas... also not too smart.

dosq - give it a rest you obviously don’t have any financial acumen whatsoever.

It seems as if many lump sum takers on this thread are incensed by other opinions and regret their decision when they read about the ramifications of their choice and learn of the actual financial and mathematical details and facts about this important retirement option. There is no reason to spout hatred and vitriol on this thread towards others who had the foresight to make better decisions, lumpers. You should take your lumps(that you have on your head now) and use this as a lesson, read and learn.

Full disclosure. I took lump Doedid so because I trust me. So far so good. What I find so fascinating about this thread is the vitriol. Why are annuity takers so incensed by other opinions? Keep the discussion financial.

The seller of an annuity is only interested in how much he’s going to make not how much you are going to get. Wake up

Some people are foolishly duped into taking the Chevron annuity on the basis they think it is a better deal than annuities on the open market. That may or may not be true, but next to nobody buys annuities on the open market because they are inferior financial instruments. The few who do, buy them at age 70 or 80 when the terms are better and inflation is not a concern. Starting one before age 65 or so is very risky.

@9lhk, If you’re talking about annuities you purchase on the open market, there may be commissions on the sale. But with the Chevron pension annuity, there are no commissions or sale.

Any id--t knows an annuity is means for making a commission on a sale. That’s it. Nothing else. The last thing is to help you in retirement.

There is no such thing as a long term inflation forecast. If your retirement is 5 years or less, you should be ok.

@8qcy, What 3-10% haircut? Inflation is low and forecasted to stay that way for a long time. Just this week, one of the Federal Reserve presidents stated the Fed is taking a more patience approach to raising interest rates. This wasn’t only to calm market fears, but actually stating that inflation is tame and nothing to be concerned with. You want a real risk of a getting a 3-10% haircut, then go keeping your money in the stock market.

The only thing guaranteed about the annuity is that it will disappear due to inflation or CVX bankruptcy, it is only a matter of how fast. If you don't mind a 3-10% haircut on your spending every year or you don't understand that, it could work for you.

To answer the topic of this thread, if you are a long term employee of Chevron and ready to retire, most would profit from taking the annuity. There’s a reason why Chevron offers the pension as an annuity. Long term employees who are prepared for retirement, are on average, persons over 55, have already paid off their home mortgage, have manageable or no debt, have built a large enough 401k balance and have external savings. An annuity would serve this type of retiree best because it offers a steady and guaranteed income stream, while maintaining their retirement savings growth and tax deferment.

The principal thrust of an annuity is to make money for someone else. You become a pawn in a game of chance where rapacious endeavour subverts subliminal ethical standards. Just remember, you cannot absolve yourself from the consequences of your action (of taking an annuity) by blaming an unruly fate. Taking an annuity is co-terminous with asking someone to plan your retirement for you though some might consider that somewhat disdainful much less haughty.

@4btx, I too won’t be too surprised to hear an FA say anything else other than “take the lump sum and invest it”. But, when I just retired and was deciding whether to take my pension as the annuity or lump Doecalled a Certified Financial Advisor at Vanguard Investments. Chevron provided me and all retirees a free 1-hour long retirement planning consultation with a CFA. The over the phone conversation was very productive and gave me several options within my own parameters and risk tolerance. Although I’m sure the Vanguard CFA would have loved me to take the lump sum and invest it at Vanguard, he was honest enough to advise me to take the annuity and offered two plans of how to manage my existing 401k money. I appreciated his candid opinion on the Chevron joint and survivor annuity as being more lucrative than others were offering, including Vanguard. I decided to take my pension as a joint and survivor annuity. I’ve been retired 4 years and don’t regret my decision.

I agree, your friend was trying to rip you off for sure. Don't fall for those tricks and stock market gimmicks! Keep your money safe in an annuity where you know exactly what you have coming in a monthly check to the mailbox.

There already is a thread that has been resurrected on this, as well as many older lengthy discussions, chock full of info, why start another?

TO READERS/USERS, CLICK the "ACTIVE" button to see the active posts.

It's not necessary to start a new one or search.

Since we're all plagiarizing posts done by other users, like the OP did, - here goes:

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.

So if your pension annuity is > $5607 per month and also Chevrons pension program goes belly up

(Not simply Chevron corporation) then you may have some concern.

That has about the same chance of happening in your lifetime as them reducing Social Security.

Great question! I am just curious why you are asking such an important question here?

Annuity is insured but not necessarily at full value. If kids are through college, mortgage is paid and you expect to live a really long time with no major health issues, an annuity is okay. If any one of those things is not true, the lump sum can look pretty good. If I live to 99, my lump sum will run out. I will only have social security then. I am rock solid through 98 even assuming modest returns.