I am getting ready to move my pension what are the pros and cons of leaving it with Vanguard. I am taking a lump sum. If you are under 59.5 have you done a 72T. I have had my 401K managed by Vanguard. Have you found better rates and options out there. Financial advisors always say what they want you to hear.
19 replies (most recent on top)
Don't know if this applies to the OP or not, but if you had 30+ years with Legacy Chevron, then you could have benefited from 2 or 1 splits in 1994 & 2004. If you were buying Chevron Stock in your Vanguard account, and not selling any of the shares over time, you may have a lot of Chevron Shares. With the dividends on those shares @ $4.32/share/year, you might be able to live just off the dividends from those Chevrons shares. As long as you are 55+, you can withdraw the dividends quarterly, as they are put into you Vanguard account. There is no penalty for for being <59-1/2, but you will be responsible for the taxes on the withdrawals.
I would avoid CDOs from investment banks. Loads of bad experiences there.
@-1uvl, I think that your advice is good, well appointed and generously detailed but should include an indication of the type of person whom it is directed towards. Specifically, one who cannot or is uncomfortable handling their own finances. There are many professionals reading this forum who are entirely capable and have ample investing, budgeting, accounting and math skills and experience who have been preparing for and/or executing retirement strategies on their own for many years. I would rather not get into the details as that is a thread of it's own but there are also endless resources on this topic, both in print and online. In any event, for those who need it, thanks for the info.
Does not matter, soon your pension will disappear. Total collapse is on its way. Just get food, water, batteries, guns, and wait, as you can do nothing at this point, even don't bother on how to save your money.
@1zyr, With most companies who still offer a pension, your only choice if you want the lump sum payout, an IRA. However, Chevron generously allows you the opportunity to directly transfer your pension lump sum to the Vanguard 401k. You are not boxed in to the annuity or IRA choices alone. Transferring your pension to the Vanguard 401k plan has it advantages. If you separated from Chevron in the year you were 55 years of age and transferred the lump sum to the Vanguard ESIP 401k (not the IRA), you would not be subject to the IRS 10% penalty for early withdrawals in the event you needed to pull some money out before turning 59.9. You should consider taking this route and later on after you are 59.5 doing a direct rollover of funds to an IRA of your choice, preferably using a local brick and mortar institution like Fidelity, Schwab, Edward Jones or Merrill at Bank of America. An IRA will provide you with more investment choices at a slightly higher expense ratio than Vanguard, but you will at least have a Financial Advisor you can sit down with face-to-face to discuss your investments. If I'm not mistaken, Chevron will allow you the flexibility to transfer your lump sum to both the Vanguard ESIP 401k and an IRA elsewhere in amounts of your choosing. You'll need to confirm this beforehand by calling the Chevron HRSC. Good luck in retirement. You are doing the right thing in reaching out to talk with several FA's before making the big decision. Take into account what wealth management fees are charged and whether it's best for you to go with an annual percentage fee or other fee method. The FA will ask you many other questions in order to provide you a complete plan with several scenarios. Bring as much with you, including an accurate list of all your assets and liabilities, other bank balances and credit card debts. The most important thing you should bring is your annual household budget. You absolutely should know exactly how much you need each month to live on and pay your bills and taxes. Do not overlook how much needs to be set aside each month to pay the end-of-year obligations, like property taxes, HOA dues, federal taxes, auto and home insurance, healthcare, etc. List these things out in a spreadsheet and break the costs into major categories. Include groceries, clothing and entertainment categories to your budget categories and go back 6 or 9 months in your debit and credit card statements to figure the most accurate averages to use. If you have these things at hand when talking with your financial advisor, the plan he or she works up will be more reliable. Best to you in your retirement.
You can also take the pension as an annuity. You can wait until you are older or you can do it now. Depends on when you need the $. If you leave it, it will continue to grow by 5% a year until you decide to take it. The financial advisor will tell you to take it out and give to him so he can start making $ off you now instead of later. That is unless you get an advisor you pay a fee to advisor are you.
If I have read right, we can only move the pension to an IRA... but I am only 56. That may make a difference. We meet with our first financial advisor next week...
Iam deciding to move my lump sum directly to an IRA. Any suggestions or experiences with specific IRA providers ? Does anyone know of any bonus offered if we open an IRA ?
@hhf, The Chevron Retirement (Pension) Plan is administered by Chevron Corporation, however the Trustee is State Street Bank & Trust Company, Boston, MA. They are the trustee and hold the actual money in the pension plan. By law, the actual funds in a defined pension plan cannot be held by the employee's company. So, more more Enron type shenanigans. You'll find information about the Trustee in the Chevron Retirement Plan itself. If you download the SPD document, it is found in the section called Adiministrative Information, near the end of the document around page 46. Once you've retired from Chevron and not before, you have the option to withdraw what you've accumulated (called a direct rollover) and have the lump sum directly transferred to a qualified IRA of your choice. There will be no tax implications if you complete a direct rollover from Chevron to a qualified IRA. You will pay taxes only when you later take withdrawals or distributions from your IRA.
Can someone describe how the Chevron Pension is managed? I've heard others say that Vanguard is managing it. Is this true? Do we know how they are managing it? I'm guessing very conservatively. Since I'm easily 15+ years from retirement, I'm tempted to move the money into a vehicle that I can manage.
I'm assuming I could withdraw what I've accumulated and roll it into an IRA without facing any tax repercussions.
@oen, No, that is absolutely false. Your uncollected pension, as well as your 401k account(s) and any bank account is protected and doesn't disappear if both you and spouse die together. The succession laws in the USA provide for your wealth to be transferred to your legitimate heirs. You can take action to make sure how it's transferred and to whom. You can call Vanguard and the Chevron HRSC if you haven't yet named your Beneficiaries to your retirement accounts. You can and should also do this with all your bank accounts. In the event of death, your heirs will take ownership of the accounts. In the case of retirement accounts, the money will be paid out in lump sum immediately in full and without IRS imposed penalties. That's the law.
I have been doing that and they are slightly starting to work back up.... Is it correct that if myself and my spouse are killed or die together the funds are not available to our children.
OP, you are not obligated to touch your pension right away. You can leave everything alone until you hit 60 years of age, then commence your pension. The Chevron Retirement Plan includes an Early Retirement Factor that discounts your pension amount by 5% annually. The discount factor is prorated to 1/12th of 5% each month before your 60th birthday. So, you are effectively gaining 5% per year if you leave it alone until then. Be aware, however, the pension formula also uses the corporate bond 3-month average in its calculation. If rates go up (and it may start doing so next month), increased averages in the bond rates will lessen the lump sum amount somewhat. But I'm sure you'll still benefit for waiting to take your lump sum later. Just keep an eye on the corporate bond averages and run your Benefit Connection retirement scenarios every 2 or 3 months to know when it's best to pull the trigger. Good luck and happy retirement.
I am the original poster. What are you all thoughts of leaving the money in the Chevron Pension Plan, and living off of the 401K. Is the Chevron Pension a better investment than a financial group. I can't use the funds until I am 59.5 anyway that is another 3 years away.
Vanguard IRA fees depend on how much money you have invested. Here's the current schedule. http://www.vanguard.com/pdf/v414.pdf. Whether this is a good deal for you will depend a lot on how many transactions you plan on making and how much money you have invested. For example, with half a million each trade is $2, which isn't bad. Also, all Vanguard ETF transactions are free, which is handy for money you want to keep in the market but don't have a specific equity you want to invest it in at the moment, or if you like index funds with very low management fees.
if you move to a vanguard IRA, how are the transaction fees ?, Believe Schwab is under $ 10 per trade
OP, the previous poster, npu, is providing sound advise. I'd move the lump sum to another institution that has a local office (Charles Schwab, TD Ameritrade, Fidelity or Edward Jones, Bank of America Merrill, etc.). If you are under 59.5, but left Chevron in the year of your 55th bday, keep your Vanguard 401k, since you won't be subject to the RS 10% penalty in making withdrawals. You won't need to set up a 72(t) to pull money out from Vanguard either. It would be needed if you withdraw from an IRA before 59.5.
Thanks good point.
We moved our lump sum into managed care of one of the larger institutions were we have a local face to face several times a year. Our advisors recommended several investing options which we headed. Returns have been good considering uncertain economy now. Vanguard is largest CVX shareholder and has 38% exposure to the energy sector. Lots of eggs in one basket!