Thread regarding Chevron Corp. layoffs

Laid off in Dec 2015. Glad I opted for the annuity because my untouched 401k investments at Vanguard did not perform to expected levels in 2016 and probably won't in 2017 either. If I would have taken the lump sum instead of the annuity, I'd be in a tough spot having to take on more risky investment funds just to meet my monthly draw and not depleat my retirement balance before 30 years.

Thanks for the observation on the varying bonus amounts each year. Yes, I think that's exactly what is causing the changes to the annuity calculation each year around April. On lower than previous bonus year, the annuity amount dips a bit, then recovers over time. So it's settled, the average corp bond rate affects only lump sum calculations, not the annuity formula.

Otsa. The monthly avg highest earnings component of the annuity calculation is based on a 36 consecutive month window. Thus if you are still working, that variable could possibly change as yearly bonuses (unlike salary) do go up and down. Now that I am retired, my annuity numbers are set and don't change with different interest rate scenarios.

I am convinced the Chevron annuity is my best pension option. Just as Ozqa did, I too keep a spreadsheet with monthly pension calculation results for my annuity vs lump sum. But, I have to question the following; if the annuity formula is as straight forward as he says and as stipulated in the CRP document online, why does the annuity amounts not always go up through time? You'd think the annuity results through the months would constantly increase gradually and steadily as your time on the job increased and your annual pay went up. I've noticed that sometimes the annuity amount came down before going back up again. Same occurred for the lump Doeve been told (and it seems to be true) that since the Pension Protection Act was passed, our pension plan is affected by the corporate bond rates, not only on the lump sum conversion, but the annuity calculation as well.

Maybe we are, Ozqa.

From CVX Pension plan document: Age 65 monthly single life annuity = 1.6% of monthly highest avg earnings x years of benefit accrual service - social security offset. No where in that equation do I see an interest rate variable. I just went to the CVX Benefits Retirement Calculator and ran the numbers with the current 3-mo average interest rates and then again with increased and decreased interest rates. The single life annuity did not change, nor has if for the last 24 months that I have entered in my retirement spreadsheet. I'm a career Chevron employee with 30 yrs who EOI'd last April. Maybe you guys are on a different plan?

I agree with the previous poster. For many years prior to retiring from Chevron, I had a habit of tracking my pension lump sum and annuity calculations every first business day of each month. I ran the same future retirement date scenario each month and noticed that both the lump sum and annuity calculations inversely went up or down with the average of the 3 segment corporate bond rates. Rule of thumb: When interest rates go up, your lump sum payout comes down and the annuity goes up. The inverse is true for the annuity - When interest rates go down, your lump sum payout goes up and the annuity amount goes down.

Ocyp: I urge you to bone-up on the workings of your Chevron Retirement Plan. Ever since the PPA took effect (in 2006, I think it was), the average bond rates most certainly affect not only the lump sum pension calculation, but also the annuity. In fact, Chevron Pension is calculated initially as a single life annuity. It's recalculated if you opt for the lump sum pension payout. Interest rates influence both the annuity and the lump sum. When interest rates affect the lump sum to the lower, it inversely pushes up the annuity. Check it out and see..

Ohcj - I'm also a big fan of the annuity. However, the annuity payments are not affected by interest rates (nor the price of oil, global temperatures or a DJT tweet). The only thing that could change the payment is if CVX went under and your payment is above the insurance limit.

While the Chevron lump sum discount rates continue to rise, the pension annuity looks better and better. That is if you were a long term employee with over 25 years service, are 58 years of age or older and have a tidy 401k portfolio balance. The annuity is looking nicer with each month. With enough money at risk in the market with my 401k, I hope interest rates continue to go up so I can get a bigger annuity check each month.

@ckor, don't be so hard on your wife. Give her the credit she is due. She's taking care of you, right? I'm glad the two of you have carefully considered the pension annuity. If you have sufficient 401k retirement money at risk in the market, it's wise to consider taking the Chevron annuity and combining it with social security to provide a guaranteed income base. Enjoy your retirement. You earned it.

I agree with you guys 200%. My wife can't even read a bank statement. When I go she won't even be able to pay the light bills without help. I was offered the huge lump sum, but like you all I am scared to death of investing. It could all disappear! I'm happier to just make do best I can with annuity payments. We don't eat much and never travel, so we should be ok. We will live on SS if we have to, or out the wife to work at Walmart again.

Thank you, bmph. I have much to thank Chevron for. It's a good company to work for and they offer generous benefits in return. A rarity these days. My message to the young employees is to give your best efforts to your work and take full advantage of the benefits. Max out your 401k contributions, reinvest any dividends in your retirement plan, keep your debts down to a low manageable level and if you have a mortgage, work hard to pay it off as early as possible. Focus your financial retirement goals to be able to call it quits at 52 years old. That's around the median age where your longevity to work at a productive wage declines precipitately. Another wise thing to adhere to at work is not sharing with anyone your financial goals, status or ability to retire early. That can likely lead to jealousy or resentment in those who may someday target you as an easy candidate to layoff.

btmh, it's good to read success stories like yours. With your wisdom and firm grasp of real returns and risk vs reward, you are sure to lead a prosperous and enjoyable retirement. Cheers!

I have a similar situation. My wife is not very well versed in stock or mutual fund investing nor inclined to learn. Not a problem. She is avid at other things that I'm not interested in, but that add value to our personal finances. We sat down before and after I retired from Chevron. We bounced our thoughts off 3 financial advisor professionals. The responses were all the same. We took the 100% J&S pension annuity and will couple that guaranteed lifetime income stream with social security that starts in 2.5 years. Our situation allows this to be a good strategy. We are completely debt free and the house is ours free and clear. The annuity income alone is more than sufficient for us to live well and we can even save money each month. Our 401k and other outside investment accounts is fairly large and conservatively invested as a nest egg to fall back on.

That person worried about his wife being supported and being able to handle finances after he is gone had a very easy solution with the 100% JOINT SURVIVOR ANNUITY. Guaranteed money for life until she dies, no matter how financially illiterate she is. What's to question? The CVX pension annuity is a rare gift that few megacorps are offering these days. However, too many people on these threads, which evidently attract the self-destructive types, insist on gambling their savings away in the stock market, under the illusion that they are market experts because the market has been inordinately bullish for the last several years. I've seen it many times. "well I can get blah blah blah return if I did this". Youngsters never learn until they learn the hard way. So sad......

@afgr, all the considerations you mentioned should have been taken into account before deciding on the lump sum. In life there's no certainty. You could die or go nuts early or late in life. If you are diagnosed with a desease early in life and want to protect your investments for your spouse, you can have the investment firm manage your nest egg for a fee and ask your spouse to take a fixed distribution as advised by the financial advisor.

I received my lump sum in December. If I had waited the additional 3 months until now that lump sum would have decreased by 5%. And with the recent stock market increases and somewhat conservatively invested my lump sum has increased 3%. At least in the short term the timing worked out ok. My primary concern with the lump sum is my spouses total lack of investment knowledge and will never be interested in investing. What if I die first or develop dementia, will appropriate investments continue?

Thanks @1beg. Good article to read. There is no slam dunk better option. Each individual will need to weigh their own circumstances and needs when deciding to take the lump sum or the annuity. Retirees who had a long career with the company and also have substantial 401 plan balances really have an easier choice justifying the annuity. If overall, your employment time was short and your total invested account balances are not too high, choosing the lump sum is probably the best option.

I agree with the annuitants. If you have considerable assets already invested in the market, why not supplement with a safe annuity - think of this as the Bond portion of your portfolio. I was on the fence and ready to pull the lump sum trigger when the rates were at their lowest last December but some research led me to keep the annuity option. Try the Government Accounting Office (GAO) report GAO-15-74: Private Pensions - Participants Need Better Information When Offered Lump Sums That Replace Their Lifetime Benefits. To quote the report: "Participants potentially face a reduction in their retirement assets when they accept a lump sum offer. The amount of the lump sum payment may be less than what it would cost in the retail market to replace the plan’s benefit because the mortality and interest rates used by retail market insurers are different from the rates used by sponsors, particularly when calculating lump sums for younger participants and women. Participants who assume management of their lump sum payment gain control of their assets but also face potential investment challenges." I find it interesting that if lump sums are more valuable to employees than annuities, why are companies so eager to offer lump sums (i.e., lump sums are cheaper for employers).

I took the 100% Joint and Survivor annuity instead of the lump sum pension, for my own specific reasons. I couldn't be happier with my decision from early 2016. I may have profited by waiting longer for interest rates to go up a little. But, even now, I have no regrets. I still have a large nest egg in my 401k and IRA that I'm safeguarding for my future along with Social Security.

My last day of service was 06/2016. I cashed in, in December. I watched and yes the numbers are increasing. I made about 75,000 holding out, but doing it in December.

And the remaining value can be given as an inheritance and doesn't vanish after you and your spouse are gone.

Um, if you just blindly invest the lump sum in VTSAX and forget about it you will absolutely crush the pension value over 15+ years, plus have access to the full amount at all times.

If you took a lump sum rather than the secure, rarely offered these days, lifetime 100% joint survivor annuity then the damage is already done. Poor decision. Too late for you. Sorry, buddy.