Already retired from Chevron and working elsewhere, time has come for me to take the pension lump sum. A December payout has the lowest interest rates, and thus largest lump sum, used in the calculations since at least 2003. With the 0.1% increase in the October minimum present value segment rates used in the 3 month average for January and published today (https://www.irs.gov/retirement-plans/minimum-present-value-segment-rates), I anticipate the average interest rate bottom has been reached for at least the next 6 months, and likely longer. Even being under age 60 and applying a 5% yearly increase, I don’t foresee my December lump sum being any higher in the next 6 months.
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I think you did well by requesting a Dec 1 lump sum pension date, gyvw. Interest rates are going up in December after 8 straight months of declines. Did you consider sending Chevron your social security earnings statement? It's more likely than not, your pension calculation would be higher. If you didn't do so, you still have 6 months from the pension start date to mail it in. Chevron will recalculate the lump sum and pay you the difference, plus interest.
I waited to take my pension... I kept watching it and decided December was the month to request it. I turned in my paper work in November for a Dec 1 distribution date. Although we all know the actual date of distribution will be 12/29 or 30.... My paperwork should have gotten there on Nov 16 and I haven't received a letter yet that it was incomplete..It was definitely to my benefit to wait, but it does look like interest rates are starting to inch up...
Another thing to consider with the lump sum is that new mortality tables will most likely be implemented in 2018 to account for people living longer (they are well past due based on the Pension Protection Act of 2006 and many thought they would be implemented for 2017). From what I have read on many pension sites is that the expected lump sum conversion of an annuity will increase from 5-10% depending on the annuitant's exact age.
I took about 1 week for my pension packet to arrive at my mailbox after requesting it. Not fast, but not slow either. Good luck, @4xsu.
Thanks all, -4fgg is correct on the impact of the 5% discount compared to the average segment rate. I did just what was suggested and ran the retirement calculator for December thru September and for increasing average segment rates. I got a nice linear graph with the nominal value increasing to the right and parallel lines below for the average segment rates. For me I found that a +0.026 average segment rate will offset the 5/12% age discount per month. So for last month's 0.07 Dec-Jan rate increase will take over 2.5 months to offset.
This tells m that the age discount is not as significant as I had thought. And the fact is that there are investment opportunities that can obtain approximately 5% anyway. So this decision for me is to base it on the future interest rates. I am in agreement with many here that rates are heading up at least for the 6+ months short term and I feel that risk is greater to hold off than cash out. I will be taking the lump sum ASAP.
Thanks to the discussions on this board for making me aware of this and getting me to look into it.
I did not have an unexpired retirement package so I requested a new one yesterday with a BCD of December 1. They said it would take 10 days to receive it. I should receive it in time to execute it for December 1.
How long does it really take for CVX HR to get the retirement package to you?
After I retired from Chevron at 58 with 28 years of service, I did not pull the trigger too quickly on taking my pension. I waited almost 1 year to commence my pension. That was 3 months ago. I didn't want to wait anymore. I did well by doing that because the average rates were coming down and my early retirement factor was being reduced. Both those things were pushing up my lump sum calculation. Now that interest rates are on the upswing, the two previous posters make a lot of sense. If you intend to take a lump sum pension and invest it immediately, you may profit from requesting it now. If you don't intend to invest the lump sum right away or are still considering the annuity pension, then waiting a bit more will likely be your best route.
For people in their 50s or 60s who are already retired and waiting for the right month to pull the trigger on the lump Doethink now is the time to do it. Get your paperwork in by the end of this week to allow time for processing before the end of November. Request a December 1 annuity start date, which will get your lump sum based on the three months with the lowest interest rates in years (July, August and September of 2016).
Interest rates have been trending up over the last two months and they moved up sharply this week. Of course, everyone's situation is slightly different. But for me, as today's higher interest rates get reflected in the lump sum calculations over the next several months, I'm estimating that they would have reduced my lump sum by 7%. This outweighs the 0.4167% monthly increase that someone under 60 will get based on age.
Answering poster -3NTE, an average segment rate increase of ~0.03 offsets the monthly pre-age 60 discount for someone in their late 50’s. The most recent single month segment rate is 0.16 higher than the prior 3-month average. If the most recent rate is used as a 3-month average, then it takes 5 months (0.03 x 5 = 0.15) for the lump sum to reach a December retirement value again. You can further refine the 0.03 with the Chevron retirement estimator for your age & rate assumptions. Suggest using the retirement estimator to compare December 2016 versus a May 2017 retirement date using the current rates. May 2017 will use the most recent single month October 2016 rates.
58.583? I guess today it must be 58.585...whole different answer;-).
When my time comes I will take the lump sum and invest it immediately. Unless you need to spend the entire lump sum within a few years, investing it will always give a greater than 5% return. If you plan to spend it over 20-30 years investing immediately is a no brainer.
@3aws, you should be able to run a few assumptions on your Benefits Connection webpage. I cannot provide specific advice without knowing your situation with only your age. You would be best served sitting down with a Certified Financial Advisor and providing your complete financial details and your needs in retirement. You may also want to consider extending your working career a few more years until your are at or closer to 62 when you can take early Social Security. For now, however, I think you should not rush to pull the trigger on taking your lump sum pension. Yes, the segment rates are expected to go up again next month and in the next months, but the reduction of the prorated 5% annual early retirement factor in the pension calculation will offer a counterbalance to the bond rate increases. This will buy you time to seek the best advice for your situation. If you are also weighing the prospect of taking your pension as an annuity, any increases to the interest rate averages will work in your favor.
-tns what do you advise for me at age 58.583. I am currently waiting to pull the trigger while weighing the 5% discount against the segment rate changes. how much of a segment rate change does it take to offset the 0.4167% (5%/12) monthly discount for taking the lump sum before age 60. Thanks.
OP, your comment tells me you are well tuned to what's going on with your lump sum pension valuation.
The segment rates for October are 1.57%, 3.45%, and 4.39%. This brings the three-month average to 1.48%, 3.35%, and 4.29% for a January 2017 benefit start date. I estimate a decrease of around .6% in the lump sum benefit for an average vested 60-year old Chevron employee in January versus December; though please check your benefit calculator for your actual calculation.
All three October segment rates increased, causing a decrease in the January lump sum. This breaks an eight-month streak of lump sum increases. The August rates are the most favorable in the current three-month average, but they will drop out of the calculation next month for the February lump sum. Therefore, it is very likely there is another decrease in the lump sum next month.