How much has your lump sum fallen with the rise in interest rates (as a percentage of your total). I retired a bit over a year ago, without a package, which probably was not the ideal timing financially but I was ready to leave. Now that there is again talk of layoffs I am curious as to what my numbers could have been had I waited.
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@ofqb: Agreed that pension calculations do not really matter until you get close to retirement. That said, I know at least two people who did very well taking the package and cashing out their pension a few years ago and then going to work for someone else. Many times in this volatile industry it does not pay to be loyal to your employer… those that keep an eye on other opportunities and are willing to accept some risk commonly end up ahead long term.
@guiu, You make a valid point, but what can be done? Simply retire? My view is if you enjoy your job and the company, just stick it out. First, interest rates will eventually come down. While you stick it out, you obviously get paid a salary— that’s a plus. You also get older, which increases your eventual Social Security benefit, for you and your spouse if you’re married. You also should be in a better position to save more money and payoff and mortgage debts. Don’t focus on rising interest rates, for that’s being a bit shortsighted. In this world, the economic pendulum swings both ways, you know.
fqhe: Most folks nearing retirement keep an eye on their pension numbers, particularly if they have had a long career at Chevron. The recent raise in interest rates has caused some pensions to drop in value by amounts equal to a year or more salary (my pension would have dropped well into six figures had I not retired) … so ya if you are close to retirement you got to really love your job to stay… like love it enough to work for free. For some (particularly those over 60) the smarter move was to retire, cash out the pension, and then find a job somewhere else if you are so keen to keep working.
Don’t sweat trying to anticipate the interest rate average to calculate your lump sum. There are other important variables to consider as well. You will almost always end up in the best overall financial position when you work for as long as possible. Of course, this is mainly true if you enjoy your work.
The value of a lump sum pension benefit can be affected by changes in interest rates. When interest rates rise, the discount rate used to calculate the present value of future pension payments also increases, which can result in a lower lump sum payment. The exact impact on the value of your lump sum benefit will depend on various factors, including the specific terms of your pension plan and the size of the interest rate increase.
It's not possible for me to determine the exact impact on your specific situation without more information. However, it's worth considering that timing your retirement around market conditions or changes in interest rates can be challenging and may not result in a better financial outcome in the long run. There are many factors to consider when making the decision to retire, including your health, personal circumstances, and financial goals. It's important to work with a financial advisor to review your options and make a decision that's right for you.
Thanks @cwyb, so the lump has dropped in the neighborhood of 25-30% with recent increases in interest rate.
Um, the pension plans are on the external and internal benefits web site.
The monthly age-65 annuity will be 1.6% of your monthly Highest Average Earnings
TIMES
years of Benefit Accrual Service
LESS
Social Security offset.
Do the math boys and girls. The lump, as discussed below, depends on your age when you take it and on interest rates.
For example psg 25 and 30 years, let's say your salary and bonus was $200,00k/yr. That works out to $8000/mo minus $3k SS so $5k/mo or $60k/yr at age 65. If you take it sooner, then it gets discounted a bit. Then there is the lump sum calc. Lump would be something like $800K today or $1.1 in 2020.
Thanks for letting us know. I obviously don’t understand the calculus well enough.
@bhbh, I agree with you, it SHOULD be around $1 million. But let me set the record straight. It’s not that. I had 30 years with Chevron and my last four years was at PSG25. My lump sum pension in 2016 was $649,800.
For a 30 year career ending grade 25, the lump sum should be between $1.5-1.7 million (at the 3% interest rate)
Lump sums of over a million are commonplace for people who reach psg 25 or higher / 30 years at cvx. It is the slow lottery. The pension is about half as good for those just starting now though.
@9egv, Popcorn is what the popcorn troll calls anyone who posts something he/she disagrees with on this site. just ignore it. trolls hate that.
@9rjv: You might be correct today, but run your number again with segment interest rates set to 2% like they were a few years ago. All I can say is that I actually received a lump just over 1.2 million with only 17 years of service and a highest grade of 26 … either Chevron made a big mistake or your calculations are off.
I call BS on that.
Look at the person description online. Three years at, say, PSG 27 and 25 years service gets you $1.5 million.
What is popcorn supposed to mean??
Awwww, Popcorn's not buying it.
Wrong @9ubl. You overstretched your credibility and lost. Move on and think of something to post that comes close to being true.
@9wkz: I don’t know we’re you are coming from: My lump was also about 1.2 Million and I only worked for Chevron 17 years and had a maximum grade of 26. Others I know who worked for Chevron longer and rose higher must have had a lump well of at least a couple million.
@8ryb, sorry fella. That 1.2 million lump sum pension claim of yours is a little bit exaggerated. Believe me, I know.
There are a lot of moving parts in the lump sum calculation. It is not a one-size fits all. Your age is used to determine your life expectancy. Someone retiring at age 50 will have a much larger lump sum than someone retiring at age 65, assuming identical annuity payments. The social security offset also counts as it reduces the lump sum, so everyone will have a different future SS income and SS start date relative to retirement year. You can do the annuity to lump sum payment calculation YOURSELF with Excel. It is simple. I ran an example using my figures from Dec 2020 when I retired. If I had been forced to use today's rates, my lump would shrivel by 1/3.
In my case, that is about one year's salary and bonus so I might have done better to work 2021 and 2022 even as rates fell. However, it sounds funny because my salary was high relative to the lump which it was. So I was also getting lump benefits in the Retirement Restoration Plan. A whole other kettle of fish. Confused yet?
For most people the lump also levels off around age 60 - it almost stops increasing annually, despite working, for assorted reasons. In that case, there is no lump benefit to working and a drop in interest rates can quickly overcome base salary and eat into bonus. The older you are, the more carefully to need to watch rate falls lest you end up working "for free" several years.
i left in march before all of the rate increases. my lump sum was $1.2. i’d done the pension modeling tool before then and each quarter point increase came out to around 40k less in the model. 4.0% increase would be 16x 40k decrease in lump sum. so lump sum today would be ~less than half of what i got by leaving before the rate hikes
So no one actually calculated what percent their lump dropped last year?
Bitcoin is down quite a bit. Risky.
I retired 20 years ago and put my whole lump into bitcoin. Texting now from my private jet. Love to make up stories!
I elected to retire in 2018 and put most of my lump in Tesla. Held on too long but still up by a factor of ten. I’m happy.
“a wash” only if investment return rates stayed low for the folks who took the lump a few years ago and stay high for those who take the lump today, but that is not how it works. In reality those that get out when rates are temporarily low (an the associated lumb value high) will do better at the end of the day assuming both folks put their lump into similar investments.
Its true either way you potato.
That would be true if you had anything to invest, popcorn.
The lump sum amount may have dropped but interest rates and market yields have increased. So its a wash in terms of investment income.
You mean the layoff's site "greeter" popcorn troll guy who trolls this site 24-7 and thinks he can tell who people are online and calls miscellaneous people "popcorn" and "poppy"? That's all just one person messing with his head, popcorn, poppy, etc., he has that one guy all figured out, he is quite the surveillance expert. it's just one person haunting him posting under different personas.
Popcorn! How is the greeter job working out so far?
@2bvq, Hi miserable complaining Popcorn Troll with No Life who lives on this site!
The nice thing about layoffs like Google laying off 12,000 is the stock surges since they don't have to pay anymore for the useless deadwood that has been piling up. Sort of like not having to pay for the popcorn troll with no life posting below. The one with the shriveled up pathetic lump who's always complaining on this site, desperately attempting to project his grief on some imaginary nemesis, lol!
Don't let Popcorn find out about your double lump - he is crying in his milk as inflation demolishes his ill-planned retirement. Send him some love!
@1svh. HR here; we are going to review all of our account for retirees in 2016.
I'll put this catch on my PMP!
I was involuntarily retired in 2016 and received a one year severance for my 29 years of service. I passed on the lump sum and chose the annuity. As Karma would have it, I’ve been getting paid two times (double) the annuity payment every month. It has kept rolling in each month like clockwork. It’s clearly a mistake that hasn’t been caught yet, but Texas law states that Chevron can only claw back 1 year of overpayments once they make their claim for it.
Thanks jbs, but the value indicated only has meaning as a percent of the whole… one person’s pension might be $500k while another might be looking at ten times that. Obviously the person with a $5M pension would lose more in real dollars with rising inflation that one with a more modest pension.
I believe that The pension decreases $50,000 for every .5%. So calculations are easy. You left at a good time but would have been better off leaving early 2021.
If you had waited you would have lost more than a year of salary. You chose well!