I separated from exxon in March so I have no idea whats going on internally but all of a sudden my LinkedIn is flooded with retirement posts. If interest rates are high doesnt that mean retirement is less attractive? Or what am I missing?
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OP, the flurry of retirements that you’re talking about are June 1st retirements, meaning the last Q2 retirements, which in turn is the last quarter with extremely favorable rates (~2.72%). Q3 already will go to something like 3.25% and the rate might quickly jump to levels we have not seen since this lump sum calculation method was implemented (5.25% was the highest in the last 14 years). Roughly speaking, each 1% of rate increase means about 10% less for the lump sum, as a result of inflation levels not experienced in 40 years.
So although a lot of people turning soon 55 are so disgusted with this cesspool of a company and willing to go, the rates will force them to stay as long as possible. The NSI will probably increase accordingly, to “take care” of them.
I do not believe you that you did not know what happened internally at EM. Most of retirements are because the pressure of the company put on its employees.
I took the lunp sum because the annuity wasn't enough to live on as an experienced hire with under 25 years(25*1.6=40%), and I have no great belief that I will live as long as the mortality tables say. So, with interest rates going up and lump sum dropping, it was time to go.
It’s all about risk management/ risk tolerance and planning for your own individual situation. Annuity payment is not tied to interest rate but is tied to assumed mortality for you and your spouse/partner. Payout is fixed until death. The lump sum is tied to interest rates. The lower the interest rates, the larger the lump sum. You get the cash to do what you want with it. This is often rolled into a IRA.
Same EM annuity but lower lump sum. In theory should be a wash. Only affects the financial geniuses who think they can do better investing lump sum or people who have a financial plan to need maximum cash upon retirement. Personal choice and circumstances
Interest rates do not affect the pension annuity.
High interest rates means your dollar is not worth what it was last year. This means if you were able to buy a whole loaf of bread for a $1 last year, you can only by 2/3 of a loaf with the $1 now. Another words, it now costs you a $1.33 to buy the same whole loaf of bread that you were able to buy for a $1.00 last year. Therefore, you are paying an extra 0.33 cents now. You may have notices, most food prices are doubling now. And with the rise in food shortage (especially wheat), it's going to triple. So before you throw out the left over dinner, think about cooking less so there is no waste. Else you're throwing money right into the garbage and food that someone else could have had.
Does higher interest rates mean lower pensions?
Higher interest rates mean lower lump sums.
“Why am I seeing so many retirements?”
People long past their prime who spent years doing as little as possible while collecting a paycheck are finally throwing in the towel. Good.
Duh,,,,Discount rates, Another id--t