Thread regarding Chevron Corp. layoffs

There’s pretty much a clear line between those who should choose the annuity vs lump sum. Those with a Chevron career over 20 years, have amassed substantial assets, don’t have significant debt, and have a good likelihood of living a long life— Those people are best fit to profit from taking the annuity. Virtually everyone else should take the lump sum buyout without much more thought.

Yes, I agree somewhat, if you cannot handle using the annuity intelligently as a means of utility and diversification, and have not reached a substantial level of asset value upon retirement age you have no business handling your own finances and perhaps should get a lump sum and put in into the hands of a financial advisor who can manage your investments for you, one who promises great returns, no doubt. That's the advice that I'd give to a single-celled simpleton who knows nothing about investing. I'm sure that's what you mean, Itys. There seems to be one guy who pushes the lump sum here, exact same guy every time and it's crystal clear that they have no financial acumen or ability. It's almost as clear as that magical crystal ball that they use to predict market returns and sequence of returns risk(SORR) at retirement age.

The only person that should take the lump and invest it yourself is someone who can handle normal market risk and would prefer average gains 2-3 times higher over their lifetime. Afraid you can’t handle money, then take the annuity. Why the same guy obsessively post the same opinions again and again on this thread is beyond me ... if you are happy you took the annuity then perfect, enjoy.

Just stumbled across this thread and learned quite a bit by reading through it, including previous posts. It seems like from all the serious posts, the annuity is quite a good deal for those who have accumulated a significant amount of wealth and need a guaranteed stable source of income as a baseline to backup their other investments at risk in the market already. At least the financially adept, knowledgeable and secure people make that assertion. The only reason to take the lump sum buyout is if you desperately need to leave some resources to heirs who have not been taught to stand on their own two feet or you are so early in your career that the amount is insignificant and you are consolidating to simplify accounts. At least that's what the adults in this thread concluded. If you need money to bail yourself out of debt I suppose that could be a reason to take a lump Doehear there are more people like that than you know. Bless their hearts!

Yes, the ever-lumpers who basically have about enough for a double whopper, like a previous posted stated, have been incessantly beating their "lump sum is da only way ta get da money dat dey owes me" drum, green with envy over the wealthy annuitants, on and on. These people keep on spouting the same useless drivel about how well that they think that they can predict market returns, which no one is arguing. They just can't seem to comprehend diversification since the people with decent lump sums also have 401ks and other assets worth much more and have been doing this much longer than them. These said annuitants also have orders of magnitude more at risk in the market already than the children beating the lump lump lump drum. I hope that they can afford whoppers for their entire family. That sure would be nice.

@Hphe, that article you refer to is no useful counterbalance. Nobody’s “buying” an annuity with the Chevron pension. It’s “given” as an annuity. If you want a lump sum buyout, it’s yours for the asking, but it must be converted from a single life annuity. If you want an annuity, you better take the Chevron pension as such because you will never get a better annuity deal in your life. If your situation dictates it’s better to be bought out for a lump sum, then t’s all up to you once you take it.

A useful counter balance the all the advise below is at https://www.forbes.com/sites/forbesfinancecouncil/2018/03/29/five-reasons-not-to-buy-an-annuity/#4b73c72f61f7

I suspect it is the same person (or the same few people) banging the annuity drum here. Everyone has a different situation, and the previous thread on this gave a more balanced prospective (at least it did early on, before all the trolls took that over). Historically the lump rolled into an IRA with a balanced stock/bond fund will give you better returns over the span of your life (there is really no debate on that!), with more flexibility and returns taxed as capital gains rather than income (basically at half the rate for me). If you want an annuity, for whatever reason, then by all means take the one offered at retirement by Chevron, which is a good deal on that class of asset.

That’s because @Hlof at an early age, cashed in his lump sum for a double whopper with everything.

@Hlof, "at an early age"??????????????????????????????????????????????????????????????????????????????????

I missed where anyone recently referred to or even remotely hinted about receiving their pension in annuity, lump sum or any other way "at an early age". "At an early age" your lump sum OR annuity does not amount to much and it's probably more practical to take the lump sum of a few nickels and dimes and consolidate it with another rollover investment account, just to simplify tracking,etc.. That was covered months, probably years ago in one of the other twin threads to this one. Please try to keep up. And even keeping a tiny annuity (like yours, obviously) in play until you are old enough to receive it is not "against all common and financial sense", I am quite "not at an early age" and know quite a few people who count their blessings that their small pensions from past jobs have GROWN a bit and are still there, good for the taking, and reliable (not blown like young ignorants do), to support them in their golden years. You just do you. We all promise that we won't be around to belittle you when you are old and broke, which is inevitable

I suppose if you are bound and determined to have an annuity at an early age, against all common and financial sense, the CVX annuity is no worse than other options.

I also agree @Gcef. Just as @rxxy posted, “The financial performance of the Chevron pension annuity is exceptional and well above average in it's class. It has been extensively researched and compared to open market alternatives and consistently excels. It would behoove each and everyone one of you to consider making it a part of your well balanced, diversified portfolio.”

Well said, @rxxy

Eiew, Now that's something else, maybe a different problem. Never really ever wanted anything that bad and the few things I did, I found a way to afford. Now that I can afford those things ten times over+ some and more I really don't have those desires. Don't really want a bunch of junk that I don't need and would have it hanging around, vehicles, and such. Maybe it's Houston? I only lived there for a spell but it was rather stressful. I prefer a different area with less traffic. No need for the lump sum either, I have at lease ten times that much in my portfolio. You guys talk about the lump sum like it's some sort of a windfall. Should have focused more on your own savings and investment, as has been stated here in some earlier posts. The annuity is only a little monthly bump, like Vegas money. If that's all you have to live on, that's not a good sign. Wait until SS & MC kicks in is your best bet.

Skrimping and saving for 40 years in the Houston swamp, splurging on the early-bird at IHOP for birthdays, and driving a rusty Toyota, only to retire to 30 more years of the same. Kinda sad, really. A lady I know used her lump sum to get the heck out of Texas. She never looked back.

I managed to built a substantial retirement nest egg over the many years. I have a comfortable home in an affluent area of Houston that was paid off years ago. It has doubled in value since I purchased it. My joint survivor Chevron annuity alone pays for about 90% of our monthly expenses. We live and eat well, no skimping. I draw less than 1% from my retirement accounts to make ends meet, but as soon as I start drawing social security benefits next year, we’ll actually be saving money and not tapping the retirement accounts until the IRS requires RMD to be taken at age 70 or maybe 72, as they are thinking of raising next year.

Yes, I agree wholeheartedly. We should not be embarrassing anyone on this thread, it is not our place to judge. In particular, we should not make fun of the financially challenged, illiterate persons who made the mistake of taking a lump sum buyout before getting an education in investing and financial planning, or who simply cannot afford an annuity as part of their well balanced portfolio due to lack of substantial assets. The frightened who fear the outcome of having to invest wisely and don't comprehend the wisdom of having a high rating pension and who need " muh munah" now or else it will evaporate. The unscrupulous who did not save and invest early in life, made poor decisions and still need to rely on the market to remain solvent since they haven't won the game. Very sad yes, but the mistake has been made and the damage done. No sense in rubbing salt in their open wounds.

Nothing to be gained from embarrassing the annuitants. They chose the path of most convenience. They will adjust to this as they go.

Yes, it's better to take the annuity, as many on this thread have illustrated in detail, unless, of course, you wish to fund some irresponsible trust fund babies, and you want to sacrifice the good life now to leave more of an inheritance for others to abuse. In that case, the value would be greater when you die if invested as a lump sum and not touched, that's never been disputed. But of course, that defeats the purpose and utility of an annuity or pension. It's similar to the take SS late or early argument. Is your goal to milk the most out of someone else, regardless of the cost to your quality of life and security? Many retirees don't have that goal. They want and can afford to have a convenient monthly paycheck that they can blow, and are not afraid, like chicken little, of things like Chevron or

the PBGC guarantee corporation going bankrupt. For many who can afford it, it's all about convenience.

And Also, I would say , if you already retired, voluntary or otherwise, and chose the annuity, you made the best decision, as you and your spouse, if applicable, will be taken care of financially for life - Congrats and enjoy your retirement while the rest of your investments can grow freely without having to touch them at least for some time. Have fun!

If you have already retired (voluntarily or otherwise) and opted for the annuity, for reasons of your own, there is not much to say. Best wishes.

For me, my annuity provides me with a steady stream of guaranteed income, while deciding when and how to invest my 401k and IRA retirement accounts. In less volatile times with a bright growth future, I would invest more aggressively and in uncertain times, I would cut back to safe havens like federal money markets and maybe some bond exposure. My annuity pension when I retired had an estimated IRR of 6% compared to the lump sum. Not a bad comparable return to rely on until both I and wife die. A small percentage of my overall weath now provides us about 85% of our month expense needs. Once social Security kicks in next year, I’ll actually be saving money and not taking small distributions of my taxable retirement savings. Your mileage may vary.

An annuity does not replace cash and bonds in an investment account, because those positions are there so that one can rebalance after a market fall. Having an annuity might allow some to be more comfortable taking greater market risks with ones other moneys (thus reducing cash and bond percentages), but that is a different issue.

Selling your own point of view and opinion will never apply equally to others. Just make your independent decision on what type of pension you like and be done with it. I respect every poster’s reason for their choice because it works, or will work, for them.

I agree that if your only “investment” vehicle is cash, then the annuity may work for you. Bonds are a completely different matter, however.

I enjoy investing too, have always, and have been investing since the 80's, not sure why taking an annuity would be tantamount to being out of the market. Some people seem to be alluding to that in their posts. I second the suggestion to have a typical pension as a back-up plan to all that most have invested in the market, Real Estate, and other more risky investments. It's the perfect solution and you're not going to get a much better deal than the one Chevron offers. Do many of you have 100 stocks or do you also have 10- 20% cash, bonds, or more stable investments? Consider your annuity the cash portion, except that it never runs out. And if your annuity or lump sum is more than 10% to 30% of your assets than you have bigger problems than whether to choose annuity or lump sum.

@XQF61HS-ubcr, You should stick to topics that you know something about, which is neither pensions nor annuities, as clearly revealed by your post, instead of calling people more knowledgeable than you "stupid".

You are quite stupid if you think the annuity is based on an investment return. Read your pension benefit description. Depending on which legacy company you are with and when you were hired, the monthly benefit will replace a portion of your salary according to a formula which uses highest average earnings, years of service, etc. It's as simple as that.

The lump sum attempts to give the forecast value of the pension payments all in one payment. To do so, a forecast stock market performance is required. The forecast is extremely conservative and uses bank interest rates. Everyone will beat it if they invest in stocks.

The only relevance of the 6% figure is that if you took the lump sum, you could spend about 6% the first year and it would approximate the pension payment that year. No future inflation adjustments - just flat amount each year. It would have a 100% chance of paying the same amount every year until you are forecast to die (depends on your retirement age and gender) by being very conservatively invested (e.g. t-bills).

In actual fact, if you take the lump sum and invest it in the stock market (70/30 indexes) you can withdraw 7% annually (with no inflation adjustments) and it has a 95% of lasting at least 30 years based on historical results.

This statement is 100% incorrect, totally wrong or someone is just intentionally being a troll:

"The Chevron basis for calculating the lump sum to make it equal to the annuity assumes you will get something like a 2.5% annual rate."

I'm not sure what incentive anyone would have for posting such a lie on here. The Chevron pension annuity is based on roughly a 6% initial return. The "initial return" is a figure that they use for pensions since that number is the one that can be nailed down. That's typical for most pensions + or -. That number is not exact, there's some math to it, and everyone's is different and it changes based on the calculation that month that they do it so please don't come back and argue fractions, 5.75, or 6.25, whatever, thanks. Yet I know people will.

It turns out that number matches what you can get on the open market but a slightly higher cost than the lump sum. The difference is not dramatic, but the Chevron offering is a better deal.

I am not the poster below but most people in the retirement forums refer to the 1 to 10 as the range so "mid" could be anything and could very well be 3 to 4MM ( easily achievable today). 10mm is eight figures. There are quite a few older investors in various fields who think over 10mm is nothing and normal. You know, Doctors, Lawyers, Financial people who want you to take the lump sum and invest it with them or per their advice instead of a secure pension. Don't jump to conclusions so quickly. $1 million is no where close to what it was in 1960. That's considered the bare minimum for retiring early.

Hundreds of millions is nine figures. Seven figures is only millions. Unless you count the decimal points.

If you recklessly take the lump sum and get the same as the worst 30-year return in the history of the stock market (1929 retirement doomsday scenario), you will get 8% nominal average annualized rate. The Chevron basis for calculating the lump sum to make it equal to the annuity assumes you will get something like a 2.5% annual rate. On the other hand, if you are sloppy with money, the annuity could work out better for you.

Er... seven figures? Hundreds of millions? Did someone forget to carry the 2?

-uhyu: mid 7 figs?... hundreds of millions?... and the annuity even enters your mind? Sorry, but I got to call out b---s--- on that one!

I love the stock market and love to see my money grow. And I have an account at GSbank.( They call it Marcus). That's why I have over 70% invested. That's mid seven figures, fortunately, call me lucky. I have been in the game for a while. And I keep some in other investments. My pension, which will be quite substantial, and enough to live on, , about $6k monthly, I predict, give or take, I will happily take as an annuity, to hedge against market fluctuation. I can then leave all that I want from my untouched grown investments to my dear son and daughters, and the grandchildren. Their inheritance will grow substantially as Paw-paw's expenses are generously covered by the pension annuity and our combined Social security payments (dear wife and myself) which are cost-of living adjusted. The pension is merely a back-up, our funny money, for the Bahamas, Florence, Barcelona, Cabo, Vegas, and such. We don't travel near as much as we used to, but you never know when you're gonna get the urge. If I hadn't planned as well and saved as much I would probably take the lump sum and have to gamble some more with it. Whatever you pick, It's all good!

@udce, You are a one reason the stock market big boys at Goldman Sachs keep getting richer and richer. They love and need so-called investors like you to keep piling your pension money into the market while they skim off the top. Don’t get me wrong, because I have a big chuck off my retirement savings in the c-sino too, but conservatively invested. I preferred taking the guaranteed no-risk diversification of the Chevron annuity do my market invested money doesn’t have to be placed at high risk, yet grow fairly steady. When one is retired, the risks you can take with your money changes. It changes to one where you can’t afford to lose any. Another important thing too is to enjoy your own retirement. You earned it, not your heirs. Teach them the lesson that if they want to retire one day and enjoy life, they better start earning it too, not relying on Daddy to hand it out to them. You are enabling them to be weak children if you don’t teach them self-reliance early in life. My Dad taught me that lesson. No hand me downs. He retired well, and now I did the same.

Just looking at my numbers. The annuity would pay me basically 5.75% for my life and that of my spouse. If I take the lump, withdraw the same 5.75% but make only 4% on that money (a common conservative assumption), then the lump will last 55 years...which should be work out ok since we would then be 120 years old. If my lump return was only 3%, then it would last only 36 years, so I might be in trouble when I turn 100 (except for all my other moneys). On the other hand if my wife and I get t-boned by a truck the day after I retire my heirs get the whole lumb, vs. nothing with the annuity. Further if I get “normal” market returns, my lump will grow larger even as I pull out the %5.75.

It is, unfortunately, clear that several people here do not understand how interest rates affect the lump sum calculation nor why the forecast appreciation rate of the lump sum is extremely conservative. Even if you are so conservative as to invest the lump sum in t-bills, their performance is likely to outperform the current interest rate assumption as rates are bound to rise. If you have any gumption at all, however, you will invest in normal stocks and bonds and simply demolish the assumed appreciation rate and have more than you can spend.

@typu— You may be confident in your interpretation of what “actuarially equivalent” means, but it’s incorrect. The key word here is “actuarially”, as in calculated by an Actuary. The equivalence in value between the lump sum and the annuity is not the “cost” at the start, but the projected or anticipated value based on statistical assumptions. These assumptions are a moving target. That is why, actuarially, it is calculated as a snapshot in time, with known statistics at the time the decision is made. The known variables used to make the calculations include current mortality statistics and accepted market performance targets, all published by Society of Actuaries (SOA) and used as the official standard by the IRS and every insurance company in the US. So, I’m afraid there is a big difference in your interpretation. Being “actuarially equivalent” really refers to projected outcomes, not the cost from the start.

At the time I retired, the annuity rate was low and so I took the lump sum. With my portfolio, my annual yields have been comparable to what my annuity would have been. I have been living comfortably on my passive income and when I pass on, my heirs will get the appreciated value of my lump sum (plus my 401(k)). I think you need to look at the numbers WHEN you retire and see what makes sense to you (good/bad health, any survivors, lifestyle, charitable donations you want to make, etc).