The IRS has adopted the newly updated life expectancy tables effective Jan 1, 2022. It shows, as we all know, the average American is living longer. What impact would this have on the Chevron pension if taken as a guaranteed lifetime annuity payment? It’s only obvious the annuity payment will be lower, as the formula would stretch payments over a longer period.
https://www.narfe.org/blog/2022/01/04/new-irs-life-expectancy-tables-take-effect/
@kese, so you're Popcorn, the guy who everyone feels sorry for. got it.
Popcorn is the guy we all feel sorry for. He is is own worst enemy. Poor creature.
Oh sure, the guy who calls everyone popcorn who lives on this site 24-7. Come up with a new line, loser. Yawn.
Popcorn, you can't hide. We warned you about inflation and, bo-m!, here it is. The annuity was a terrible choice even with 0% inflation, but at 7% it is a fiasco. You got bad advice, buddy. Suck it up and move on. Tighten your belt and learn to do more with less (less every year!). Maybe your wife can find work?
@4lgg, I think I've seen you post this same drivel about "some guy from 2016" over and over again with no source, nothing to back yourself up or your claims and not displaying any financial acumen at all countless times. I tend to not believe or pay attention to hopeless unintelligent rubbish like the stuff that you spew. You should contact a financial advisor for your problems. It's obvious you need one.
It is just the one guy who took the annuity in 2016 posting again and again, and again. He just can’t get over that he f%^*ed it up. Oh the annuity is way better, I get 6%, I have so many other investments I just wanted to pi-s the lump away, and if you need to invest the lump then YOU are a total loser. On and on. Sorry bozo I have lots of money now because I know how to invest well and I will have even more when I throw the lump on the pile for continued long term growth in any economy (high inflation rate times included!).
Yeah, if you have been a loser for all of your investing career, with no nuts and have been basically a coward your entire life, you mostly likely don't know the difference and think you need to get dat lump sum monay to buys mo stuffs or to gets rich in da mawkit! We get it. Those with investment expertise are independently wealthy already from a lifetime of proper investing, not waiting for some windfall or a bailout and watching and laughing at the lump losers, lol!
It makes a massive difference, financially. The annuity is a complete loser, but if it makes you more comfortable because you are a nervous investor, go for it. Just know you are leaving a fortune on the table, financially speaking.
That's misinformation, @gctc, to claim that one or the other is better. It depends on your situation and as correctly stated below, they are actuarially equivalent. If you did poorly during your career and are a poor or inept investor you are more likely all hyped up on the lump sum. For those who built up a substantial retirement, it makes little difference as it is but a small part of your portfolio and some take the annuity for them and their spouse as good insurance.
gctc: thanks for the input Popcorn.
For everyone one here who is so anxious and willing to take the lesser value lump sum buyout to help shore up the pension plan for CVX, Thanks! And the rest of the company thanks you.
But wait, it's worse than that. By the time you reach 80, inflation has eaten most of the value of your annuity so you don't actually even get back what you put in. While your lump sum has soared in value and you can withdraw more and more, the annuity shrinks under inflation and you are left with less buying power each year for essentials like food, utilities, vehicles, gas, healthcare, etc. If you really want an annuity, take the lump sum, invest it sensibly, then take half of it and purchase an annuity when you are 80.
Gjug. Apples and oranges. Depending on your retirement age you very well might be getting 6.1% of the lump paid to you every year for life, but that is not your rate of return because you “spent” your lump to get it. For the first 16 to 17 years you are just getting your lump returned to you: if you die before then your rate of return is negative! So if you retired at 64 then you need to live until 80 to just get the lump back! You need to live until 96 to get twice the value of your lump returned to you, for a rate of return of 100% over 33 years is an annual rate of return of about 3% a year. Thing is, most do not live to 96, so their rate of return on their lump will be lower (just under 2% on average). If you live to 112 you could get a 200% total return over just under 50 years for a rate of return of 4% per year, but the likelihood you or your life lives until 112 is low.
@gnqw, I really don’t know where you are pulling that 2% average rate of return from. I retired in 2016 and took the 100% J&S Chevron annuity. I calculated the average internal rate of return and actually had a Certified Financial Analyst with Vanguard Investments confirm that for me, that percentage was 6.1%, which at that time, and still today, is a great return for a guaranteed lifetime annuity.
“ which is actuarily equivalent”… that an actuarial analysis of Chevron costs including a greatly inflated admin cost, and not your expected outcome. If you have any tolerance for risk at all you have a high probability of doing much much better investing the lump. The annuity gives the average person a rate of return of about 2% which does not even keep pace with inflation. An invested lump in a balanced portfolio historically returns on average over 8 percent (4% with a very conservative allocation). Obviously your call.
There are plenty of threads, even on this non-financial site, that explains the merits of the annuity over the lump sum, which is actuarily equivalent, by design, there is no mathematically better selection. You can go on and on about the one that you happen to prefer but that does not make it better for anyone else. It's a personal decision and it depends on your financial status at the time. It's more likely a sign of not having won the game yet if you still need to be playing to get ahead.
There are previous threads here that discuss the relative advantages of the annuity vs. lump ad nauseam (use search), but the basic conclusion goes against the idea that the annuity makes sense for those with large 401k accounts (or anyone else for that matter). If you retire at 65, it typically takes about 15 years of annuity payments just to get out what you could have had from the start with the lump (go on the HR website and use their calculator to estimate your specific pension numbers). That means you need to live to 80 just to break even. If you live to 95 you will receive twice the lump in annuity payments (over 30 years, so the rate of return would be about 3.4%). If you live to 105 you will receive 3 times the lump in annuity payments (over 45 years, so the rate of return would be about 4.4%). You can make the equation more complicated obviously (if you are living off the lump the invested value declines over time, rates of return on a invested lump would be compounded, and the annuity payments would continue to lose value due to inflation). If you are confused then run the numbers with a financial advisor, but most conclude they are better off investing the lump in a balanced investment portfolio with their other assets. 3 to 4% return on is commonly taken as a worse case long term investment scenario: No reason to lock in the worse case with an annuity.
I see a lot of going back and forth on here that’s really pointless. If you retire with a good 401k nest egg, then go for the annuity. The 401k will grow with the stock market - or decline - but you’ll still have a steady income regardless of where the market goes. That stability is worth much more than some slight calculated increase from the lump sum. The annuity plus social security (which IS indexed to inflation) will be enough to live off of for most people well into their 90s. Thus, the income from the 401k will be gravy iin increasing markets, and just let the money slide in decreasing markets. A good financial planner - NOT one that charges for assets under management - will tell you this. (The planners that are AUM fee based want you to take the lump.)
If you started late saving in the 401k, or you don’t mind losing half your principle in the market, take the lump sum. Otherwise, take that peace of mind that the annuity gives you and enjoy your remaining years with a stable income and diversified 401k investments. Don’t worry so much about what you’re leaving your heirs - most inheritance is gone within a few years. Don’t fly coach so your kids can fly private jets.
If you are a studied and successful investor with knowledge of market trends and a healthy substantial nestegg from a lifetime of success, you will start to see the light. Keep studying, son, you're not there yet. Not even close......
The annuity will never make any sense financially. It is purely emotional. If you want guaranteed income that shrinks steadily over time, it is your choice.
In the future when feds raise their rates and the discount factor becomes higher and higher the lump sum will go down significantly then maybe the annuity makes sense. But right now with the discount factor so low its still too hard to pass up these very large lump sums.
yah and the popcorn guy who says popcorn all the time, who lives on this site and posts from his mom's basement. that's the type of person you are getting advice from here
There sure a lot of people all concerned about the annuity guy, talking about inflation and walmart jobs, and cracking jokes. That's quite the sign of desperation, likely young naive inexperienced workers. who must know a lot about minimum wage. Every one of the old timers that I know who took the annuity have a lot of investments and are wealthy as sin from that, hence them not needing to worry about the lump sum or annuity, as it was explained to me and took it because they like an eternal paycheck for them and their spouses. I would rather be in that position than scared $hitless about inflation and having to work min. wage jobs like a lot of the clueless losers on this thread, but that's just me.
Wholesale inflation jumped up to 10% in Dec. At that rate your annuity is down the drain by 2028. So much for longevity insurance! This is why people are best advised to wait until age 75-80 to purchase an annuity. The terms are fabulous at that age and inflation has much less impact.
The link is for life expectancy changes to RMDs, only.
The primary IRS rules and Mortality tables for Defined Benefit Plans, which govern Chevron and its Lump versus Annuity calculations, were last updated in 2018. This update is required every 10 years. That change increased lump sums ~4% as I recall. There are a few optional methods and updates the IRS allows, but doubt Chevron goes there.
Lucky for the guy who loves to brag on his annuity, Walmart is now paying $15/hr for their Sr. Greeters… so don’t worry about that inflation thing, they got ya covered.
The good news is that the job market is red hot so if you are stuck with the annuity at least you can find a job to support yourself.
Welcome back Popcorn! You are still the only guy who fell for the annuity trick. Sorry about inflation demolishing your income, mate. We warned you years ago but you kept spouting how inflation would be low forever. The worst is yet to come, sorry to say.
Popcorn is back to repeating posts by flipping words to reverse the meaning. Rather pathetic when one has no real point to make. I see this behavior a lot from the trumpolites.
Looks like the HR and Finance trolls are here, promoting the cheaper-to-Chevron lump sum. There's a very good reason why (literally) 70+% of retirees take the annuity. You get your money forever, not betting on how the stock market will do. Very, very few people have a productive or enjoyable lifestyle after 80, and do not care to monitor and negotiate finances so your bet of the lump paying out more than the annuity is rather hollow. Spend to your hearts content with the annuity, it will be there until you die. After that, you don't care. do you? If so, where's your 401k, and all the rest of your investments? Did you miss out on the last 30+ years?
Inflation is running at 7% and increasing fast, as of December. At that rate, your annuity will be worth half as much in ten years. Instead of $5000/mo you will be getting $2500/mo. Meanwhile, the lump sum will probably have tripled in value.
Looks like the HR and Finance trolls are here, promoting the cheaper-to-Chevron annuities. There's a very good reason why (literally) 90+% of retirees take the lump sum. You get your money right now, not betting on how long you're going to live. Very, very few people have a productive or enjoyable lifestyle after 80, so your bet of the annuity paying out more than the lump sum is rather hollow. Invest to your risk preference, even go out and buy your own annuity if you will.
My children are independent and have very good jobs. They were brought up well and are not parasitic leeches on their parents nor society. They are givers, not takers who vote for a living. I am happy to be self-supporting and not a burden on them. I am not the one you replied to, but will you be relying on the pension only for your retirement? That's your first problem if that is the case. Annuity vs lump sum at that stage in your investing should not matter much and did not matter much to me because I had real investments outside of the pension and 401k. The pension is small by comparison.
Oh get the annuity so if you pass away in 3-5yr or even 10 years there will be nothing to pass on to your heirs. The annuity is by fair the superior choice. My dad had the annuity with 70% survivorship. When he passed away me mom had to cut back on a lot of things it was great. Then when my mom passed there was no inheritance, it kept the bickering down between the kids as we all had to chip in to close out the estate.
Annuity all the way
In any case, the annuity generally results in the larger payout, from the calcs that i've seen. In some cases, I have come across impotent investors who never had the gonads to take any risk, and all the time that people who aren't pathetic cowards are in the market watching it grow, like during the recent bull run they are making nothing or losing money since they have no investment skills or nads. Those people think that the lump sum will save them and are the first to claim how great they think it is vs the annuity and will argue incessantly how great they think it is. That's typical for a simpleton with no brains, or someone who needs to grow a pair, if you get my drift.
The annuity payment are based on your final salary, years worked, ect., whereas the lump is calculated from the annuity based on expected total payout, interest rates, ect. Given this, I would expect the lump to increase with a rise in projected longevity (just as it decreases with a rise in projected interest rates).
Don’t start the “annuity is better” again popcorn. Since the lump is based on the projected payout of the annuity, I think it will be little changed by a modest increase in longevity.
The annuity is the mathematically superior choice today if you run the numbers, but all of use future retirees would appreciate it if you help shore up the pension plan and take the lump sum buy-out.
Don’t take the annuity, but the lump sum is based on the annuity, so that will reduce the lump sum payout!! Good luck!!
The 100% J&S annuity worked out great for me and spouse in early 2016. Our jo--t situation made it the best choice for us back then. If I were retiring in 2022, I think my choice would now be the lump sum.