Thread regarding Chevron Corp. layoffs

Lump vs Annuity

When interest rates were 2% it was obvious that the lump was a much better deal than the annuity, but now with interest rates rising I would guess that at some point the annuity might actually become more attractive (this assuming that high interest rates are temporary, which seems a reasonable assumption given the aggressive actions by the Fed). Anyone run numbers to define at what (short term) interest rate the annuity becomes the better bet?

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Post ID: @OP+1iVo0h9J

50 replies (most recent on top)

@5few, That's funny!, Good one. Most who took the annuity already had enough to live on, no debt, the big house, vacation home, cars and boat paid off, and it goes straight into VTSAX and keeps growing and growing , but your way is fine too, Cheers!

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Post ID: @5fcn+1iVo0h9J

I took the annuity and like it because it keeps me from overspending. I get my check early each month, pay some bill and the rest is mine. I spend a lot of it at the dog track most months. One time I won like almost $700. This month I have to save up because the wife wants new linoleum in the dining room.

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Post ID: @5few+1iVo0h9J

@5kzx, You are referencing plain vanilla PSG numbers and "invested well". Think outside the box. To start with the person mentioned Real Estate. It has been possible to double your assets in a few years with real estate in some markets. That's not me, but there are some people with business savvy who have fared well. Don't be jealous and try to blow it off with. "oh well they got lucky". Sometimes business sense is more than luck. don't be the angry envious popcorn guy poster below who calls everyone he disagrees with or has done better than him "popcorn".

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Post ID: @5xwo+1iVo0h9J

I don’t have Eight figures, but then I don’t estimate my self worth based on money. I have more than enough money to be happy and to do that which I wish with the ones I love, and by that measure I consider myself lucky and very rich.

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Post ID: @5mnr+1iVo0h9J

I don't know, I'm at around $ 12mm NW and I sort of consider myself "mid 8 fig" but Maybe I over estimate my self worth. Too bad what other people think, It's an arbitrary statement, not an absolute. Sort of like calling yourself middle class or upper middle class.

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Post ID: @5onm+1iVo0h9J

Eight figures is $10-99 million. $15-20 million would not be "mid". I guess if you invested well and had 35 years ending around PSG 30 you might have $50 million saved.

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Post ID: @5kzx+1iVo0h9J

@4jsg, I’m afraid there’s no salvation for asinine people like you, so before I waste any more time texting, just remember to jump off a bridge when you’re down to your last buck. The rest of us are doing fine enough. R.I.P.

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Post ID: @4cwo+1iVo0h9J

I also took the annuity and it's doing fine, like clockwork. My assets are down about 20% YTD. Not too happy about that as that is 90% of my income, not the annuity. It seems like the kids on this site are depending too much on a windfall to bail them out. Not a good idea. Building up your 401k is more important. You're welcome.

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Post ID: @4chz+1iVo0h9J

What he/she is calling mid eight is likely 15-20MM, not really that uncommon in real estate, just not common for the losers on this site. The miscalculation is assuming that the trolls here represent the average CVX employee/retiree.

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Post ID: @4bch+1iVo0h9J

Mid eight is huge. $50 million. Mr Kirkland?

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Post ID: @4ixh+1iVo0h9J

I took the annuity in 2020 and I am happy as a clam for doing so. I already had a mid-eight figure portfolio of stocks, securities and RE and it is down a little recently but still chugging along quite nicely. CVX was good to me. Cheers!

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Post ID: @4bzm+1iVo0h9J

I also retired in late 2020 and took the lump. I am a d-mb investor so I did what most everyone else did and put it all in VTSAX (a popular index). In Jan 2021 it was around $95/share. Today is has crashed all the way to $87, a whopping 15% drop. I'm waiting for it really drop so I can invest some cash I have. I love big buying opportunity. Anyone who has lost 75% of their lump has serious issues and needs to probably turn their finances over to a caretaker of some sort. I guess you could all Britney Spears' father and see if he is available.

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Post ID: @4jsg+1iVo0h9J

@3idz, All you want is one plausible scenario? Well, here it is…. I am satisfied with having chosen the annuity, whereas you seem so angry about it. That sufficiently summarizes everything you need to know. Cheers from paradise. YMMV.

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Post ID: @4vxh+1iVo0h9J

4jrx: You can stop making up these fake posts popcorn: No one cares about your foolishness. It is a beautiful weekend here in Texas. Put your mistakes behind you and enjoy life!

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Post ID: @4naj+1iVo0h9J

I took the lump sum in 2020 and it is worth about 25% of what it was due to market losses and distributions. Can't say I would have done it any different knowing what I do now but I would be better off had I taken the annuity, in hindsight. Looking forward to receiving SS when I can maybe live normally again. I guess I fall into the category of not knowing how to time the market or invest properly. Or maybe just unlucky.

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Post ID: @4jrx+1iVo0h9J

Anyone who managed to squander a seven figure lump sum (plus savings and 401k I imagine) in a couple years has larger issues to tackle. They may be better off moving back in with mom and dad.

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Post ID: @4mlj+1iVo0h9J

@4wor, Totally agree. Pretty obvious popcorn boy has no investment experience. He thinks like child who wants an allowance. Im pretty sure he lives annuity check to annuity check.

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Post ID: @4yix+1iVo0h9J

@4xsb: Popcorn, your pathetic posts fool no one. You say you have other moneys, so just get over your mistake of taking the annuity and enjoy your retirement. It is not the end of the world, but why try to lead others down your wrong path. Have you no human decency? Please, move on!

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Post ID: @4wor+1iVo0h9J

I took the lump sum 3 years ago and I have about 10% of it left. From the pandemic to the recession and inflation and everything else it has been a total disaster. It was the worst decision I have ever made. At least with the annuity I would still be getting it until I die Not anymore It's almost all gone now.

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Post ID: @4xsb+1iVo0h9J

Imagine you could have the entire lump sum today or have it slowly drip fed to you over 30-40 years with no interest paid. Incredible choice.

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Post ID: @4tja+1iVo0h9J

You must keep working forever to support the left progressives' strategies. We need your taxes. We will impose a wealth tax. Don't even think about stopping. From each according to their abilities and to each according to their needs. How selfish to think you could stop supporting everyone else. Inflation, increasing taxes and the green new deal will keep you in your proper place for ever.

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Post ID: @4lme+1iVo0h9J

I took the lump sum ten years ago and my yearly dividend income has increased every year. Its more than double since I retired. Glad I didnt take a fixed income annuity which would have half the purchasing power of a decade ago.

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Post ID: @4jni+1iVo0h9J

@4kgd, Ahhhh, yes I know, but there's nothing to ease YOUR pain in that respect. Like many have said, those poor financial decisions that you made earlier when you should have been saving have consequences, and now you have to face them..........

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Post ID: @4ykb+1iVo0h9J

Insults might ease your pain, but….

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Post ID: @4kgd+1iVo0h9J

Enjoy your healthy retirement in Paradise as the funds keep pouring in through thick and thin, @3nuc. You earned it!

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Post ID: @3wqg+1iVo0h9J

3nuc: Are you just the same guy posting again and again still bu-t-hurt that you took the annuity. Please explain one plausible scenario where you would be ahead in the end by taking the annuity instead of the lump (that is investment reasonable market return and inflation scenario) .... just ONE plausible scenario! The fact that you have others moneys and incomes has no baring on the question of which is a better choice with this part of your assets! Those that take the lump generally have other assets also, and I am sure they generally manage all their assets reasonably: your continued childish insults really don't change anyone's calculations of their own best interests. Get over your mistake and move on to enjoying your retirement!

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Post ID: @3idz+1iVo0h9J

I should point out that many retirees who had many years of service with Chevron tend to choose the annuity over the lump sum. The pension formula in the Chevron Retirement Plan is designed that way to incentivize and reward long term employees in retirement, hence the pension defaulting as a single-life annuity. The other payout options are simply conversions of the annuity. I point out that many, not all, retirees with long term service choose the annuity because many of these people no longer have a mortgage or any major debts or children dependent on them. Most long term career retirees have their financial life prepared for a successful and happy retirement. Most of these people who are prepared already have a handsome nest egg and understand the value of maintaining a diversified portfolio, including fixed income streams. To this last point, the annuity is right up their alley, at least it is for this poster. Cheers from paradise. YMMV.

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Post ID: @3nuc+1iVo0h9J

Ask any Chevron DE if they would invest in a project with a 30 year breakeven/payout!

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Post ID: @3wws+1iVo0h9J

When I retired in 2020 (lowest interest rates and largest lumps ever), it was 24 years to get the lump value back vs annuity at 0% inflation. 2% inflation took 32 years and 3% 40 years.

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Post ID: @3rhu+1iVo0h9J

If you can control inflation rates and guarantee they are under 1% or so during your entire retirement, then the annuity is less of a disaster. Still a disaster, just less of a disaster.

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Post ID: @3bhk+1iVo0h9J

Chevron provides an annuity pension based on a function of your final year(s) salary and also let’s you trade the annuity for a lump sum based on a function of current interest rates. When I retired a few years ago the reference interest rates used were all well below 3% and the annual annuity payment was 1/18 of the lump. I was 62, would have been 80 before I got the lump from annuity payments and 98 before I got twice the lump from annuity payments (for an annualized return 2.75%, if I live to 98). By my calculations the lump was a no brained. Now the offered annuity is the same, but the reference interest rates are higher, so the offered lump (relative to annual payments) is lower. I am curious how much the lower (I obviously don’t have access to Chevron’s internal calculator anymore). If for example the ratio is now 1/10, then retiring at 62 I would get the value of my lump out at 72, twice the value by 82 (5% return), three times the value of the lump by 92 (6.7% return): that might have been more attractive, but only if inflation rates turned very low again.

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Post ID: @3htq+1iVo0h9J

We argue but in all these years only one guy, the Popcorn Guy, has tried the annuity. We will check in with him every few years to see how he is doing and if he prefers Purina or Friskies.

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Post ID: @2fei+1iVo0h9J

@2rfa, how wrong could you be. People take the lump sum because they are smart enough (or more correctly, know a financial advisor who is) to re-invest it to beat inflation and the annuity payout. You're suggesting that people treat the lump sum like a lottery winning and spend it all. Nothing could be further from the truth. See @2tch for methods of diversifying your retirement portfolio. He/she is also an example where the annuity may be a good idea - when you have other significant portfolio holdings.

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Post ID: @2src+1iVo0h9J

I agree with you also on the lump sump buy-out. if someone has always been uneducated and too ignorant to learn to develop a stable self-sustaining nest egg on their own and never knew how to invest or has been a timid pathetic coward for their entire life, then they may need the lump sum payoff just to be able to eat, they have no choice. Others who prepared wisely have more options. It's a pleasure to put icing on the cake of a successful long-lived surviving portfolio either way in that case.

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Post ID: @2rfa+1iVo0h9J

I agree. If you can live entirely off social security and are afraid to invest, no harm in taking the annuity. When inflation destroys it, shrug and move on.

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Post ID: @2znf+1iVo0h9J

Under current market performance lump sum is demolished to half it's value in less than a decade. Hope you like cat food.

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Post ID: @2gcb+1iVo0h9J

Most of the posters on this thread don’t understand or refuse to admit that both lump sum and annuity have their pros and cons. Either one will be the wiser choice all depending on the individual financial needs and peace of mind of the retiree. I took the annuity in early 2016 and am still happy with my decision. I have a sizable amount in retirement savings that I haven’t had a need to touch yet. My pension annuity along with social security and rental property income have been more than enough to live on. My retirement accounts, despite recent setbacks in the market, continue to grow. Putting all your eggs in the same basket is never a good financial strategy. Diversify your portfolio and fixed income streams.

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Post ID: @2tch+1iVo0h9J

Under current inflation is annuity is demolished to half it's value in less than a decade. Hope you like cat food.

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Post ID: @2moj+1iVo0h9J

@2jqq, So basically you are saying that you don't have enough sense to pick a few mutual funds or ETFs and you need to get/pay someone to hold your hand?
Don't have children, nor plan to, like many younger couples. That's not a valid argument for or against two actuarially(?) equivalent choices, in any case. You guys sound like a bunch of ol geezers who can't do math or invest properly.

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Post ID: @2glu+1iVo0h9J

Couldn't care less. Pension went to sh-t in 2008.

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Post ID: @2miq+1iVo0h9J

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