I sent in all my paperwork more than a month ago but still haven't seen my lump sum for an annuity start date of April 1. For those who have been through the process, what, if any, interest did they add for delayed payments?
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@emlr. Good story and I’m glad the lady’s financial situation worked out for her. “Timing” has alot to do with luck too. Her CPA advised her at a time right around or after the US financial crisis. The stock market crashed hard, but was about to skyrocket like never seen before, from 2009 to 2017. You could hardly lose money by putting your money in the stock market during that boom period. Today is is different story as thinks won’t be the same as before. After an incredible bull run, things are set to flounder for a while. It’s a different investment environment now. So I’m glad to hear your friend made 25% more on her lump sum investments, but that was not an unusual feat for most. Going forward will another story, I’m afraid.
I knew a lady who worked in the medical department who retired about ten years ago. Her CPA told her to take the lump sum and how to spend it. She was a nervous wreck in 2009. Had to get pills to sleep and said she couldn’t stand thinking about stocks. Borderline hysterical. But she stayed invested and spent. New cars, sent son to college,etc. Today she has 25% more than what she started with in 2007! She says it was the best decision she ever made. She still doesn’t like checking her balance.
The ones who recently retired choosing the lump sum and now living off retirement account distributions amidst the current market declines and volatile ups and downs, have got to be cursing the skies for that decision. Not having been greedy and gone with the annuity, they’d be more relaxed living off a guaranteed monthly income source and maybe dipping into their 401k nest egg when necessary. I’m not regretting my J&S Annuity decision. To each his own situation. Good luck with the choice you made. Too late for griping.
diag. That's true and he knows that. But now he realizes that he did not choose wisely and is on this board going on and on trying miserably to convince himself that he made the right decision. Poor guy. Hate to be him!
Thanks @dzbm. I understand all that too. But instead of thinking of what-ifs and I-coulds, just make a decision in the present, when you go to retire, and choose the annuity or the lump sum.
@cfli, yes I do understand how the Chevron pension is paid out and the fact that the lump sum and annuity are actuarially equivalent for a given set of interest rates. What I also understand is that when converting to a lump sum, the lower the segment interest rates (especially the longer-term rates), the higher the lump sum payout. I also understand that when purchasing an annuity on the open market, the higher the interest rates (especially the long-term ones), the cheaper the annuity. I'm not talking about taking the lump sum and immediately converting it into an annuity - of course that is stupid. What I said was that I chose the lump sum option now, when the long-term segment rates are at or near all-time lows (and the new 2018 mortality tables were finally implemented), thus resulting in a higher lump sum payout. If, by chance, and it appears to be heading in that direction, that the long-term interest rates increase, then purchasing an annuity similar to the one I just converted will become cheaper and may peak my interest. I could also talk about IRR comparisons, investment strategies and time horizons, tax efficiency and other boring topics for the annuitants but I'd rather not interrupt their nappy time.
The optimum age to purchase an annuity is 75-80. The optimum interest rate environment is high rates which crush the lump sum value. If you take the lump sum now, it is huge and you can ride the market for many years and use a small part of your lump sum to buy an annuity at a much better rate than we see today, assuming interest rates rise, which I'm pretty sure they will. They certainly will not be lower for a decade or two.
@ctjp, I’m not sure if you realize the Chevron pension is paid as a Single-Life Annuity in the first place? When a retiree elects to take their pension in a lump sum, the value of the Single-Life annuity is converted to achieve the payout as a lump Doem not sure why anyone would want to lose money on re-converting all or part of a lump sum payout back into an annuity on the open market. To conserve the maximum value your pension, make up your mind on whether it’s the annuity or the lump sum you need and go with it. No room for half measures here.
If interest rates increase as they are now and expected to keep doing, you may be able to take your lump sum proceeds and purchase an annuity (equivalent to the one CVX is offering) and still have some money left over. Again, it all depends on the interest rates at the time you purchase the annuity.
I am coming up on having to make the decision soon and plan on taking the annuity. Why risk everything in the market. Many I know with no pension take about half of their savings and purchase an Immediate annuity at a higher cost. You cannot purchase a 100% joint/survivor annuity for the same price as the lump sum buyout. Like many posting here, I have more investments in value outside of the pension and the pension is just one leg of the stool, as they say. Just another version of diversification. If you have dependent heirs that you need to leave it to, yes, the lump sum is the only way.
How long does it take for HR to process a Lump Sum request? Much longer than it takes me to excrete my lump sum after breakfast.
LOL at the 3rd post below, where the “PGPA guy also wanted it [the annuity] because his hairdresser told him stocks were for svckers.”
I think it’s also time for me to make an appointment with my hairdresser, because the Charles Schwab broker also wants me in stocks. LOL.
OP here, CVX wired the lump sum money to my 401k account on the last day of the month. Any later and they would have had to pay interest for late payment.
Everyone I knew in engineering and finance took the lump sum as did all middle and upper management. One HR lady said she wanted the annuity because the stock market scared her. I think a PGPA guy also wanted it because his hairdresser told him stocks were for s---ers.
4khc, Quite the contrary, I only know of one (who posted a thread here, don't really know him or her) who took the lump sum out of all the retirees that I know from Chevron. I heard that there was one or two more, according to the HR people. Are you the other one?
I may be one of the exceptions as a not ready to retire young employee but I am at a new employer and will receive the delayed annuity because the deal is too good to pass up on a pension that many do not offer. I will be getting the 100% joint survivor, a great deal for us. I look forward to sitting pretty when I do retire thanks in a large part to Chevron's pension and 401k match.
I took the annuity. I surveyed all of the options and picked the one that looked best for me. I know at least a dozen or more in my age group who did the same. I know very few who took the lump sum. The ones who did had very little in the program and most likely wanted to consolidate investments with one brokerage. That makes sense to me. The number of younger recipients who have a long career ahead of them who take the lump sum is larger. For older folks looking to retire now, the annuity selection is higher and appears to be the majority, from what I have seen. In addition. the older folks who took the annuity also have a lot of their nest egg in the 401k, or now a rollover IRA, and in many cases that is much larger. The pension is only a small piece of the apple for most of us. Just my observation.
I’m an annuitant. Loving it. It gives me the income diversity and the peace of mind I need. Best to you from sunny Portugal, my vacation home 6 months of the year.
I guess the millions you claim (or hope) exist can no longer afford internet access or don’t have a device at this stage. Any other annuitants up in here? Crickets...
@3dxz, I’m positive I’m not the lone annuity selector (as you put it). Maybe you want to justify to yourself that you made the right move when you put all your chips in the crap shoot casino, called the stock market. Truth is, so many talking heads (most without much financial understanding) say the lump sum is the best option, that others who are not too convinced, stay quiet or agree with the blowhards to move past any arguments on the topic. In reality, it’s about 50% of retirees who put in 22+ years with Chevron opt for the annuity. The other half take the lump sum.
If this Board is still around in 20 years and you can still afford internet access you can let us all know. I think you are the lone annuity selector!
For those of you considering the lump sum over the annuity and especially those of you who already did, how’s it working out for you so far in 2018? I’m so glad my philosophy of ‘slow and steady’ is working out for me. I took the annuity and am very cautious on my invested 401 and IRA accounts that for the last 3 months have been parked off the board. While the recession is bearing down on everyone, I’m in safe harbor while drawing a guaranteed income from the annuity. And before one of you parrots the “I” word, just know that inflation has always been around. There’s ways on a consumer level to deal with it. Cheers chaps.
2ptf, Delaying those taxes until RMD's kicks in is not a good solution mathematically unless you plan on just passing everything on to your heirs, which is a different story. Talk to a few high-income earner 70+ year olds and you may have a different outlook. Just a thought.
I don’t think the entire lump sum can be rolled over. The retirement restoration plan portion is taxable so waiting for a new tax year without other income could be advantageous.
@2vfi, what do you mean by “in order to minimize taxes”? The lump sum is typically deposited into an IRA or your Chevron ESIP 401k, si you won’t be impacted by having to pay taxes until you begin taking distributions. On the other hand, if you elect the annuity, those monthly payments are considered taxable income, and therefore subject to income taxes. You can minimize taxes by deferring taxable income, so taking the lump sum and putting it into a qualified retirement account would be the way to go to accomplish that.
Has anyone specified a delayed annuity start date for getting the lump sum in order to minimize taxes? I would guess this would be only a delay to the next tax year as longer delays result in only small increases to the lump sum (the annuity increases if you are less than 60 but the lump sum less so since you are closer to actuarial death).
It's not just inflation risk that led me to pass on the annuity, it's also taxes. My lump sum will grow tax free until RMDs in 16+ years, whereas I'd be paying income taxes on the annuity in 5+ years. Like others have said, it all depends on your unique situation.
Thanks for reviving this old discussion. Although most understand that there are definitely instances where one or the other clearly dominates and there is no one correct answer it does make for interesting internet fodder. Maybe if they were not actuarially equivalent and the market was not in the volatile state that it is in, the decision would be easier.
@1ege, I retired at 61, if it’s of any interest to you. Like I said, the choice of annuity or lump sum is a personal choice. You can parrot the Chicken Little phrase “inflation will eat you alive” line all you want, but dwelling on inflation alone is no way to make sound financial judgements and decisions. My financial path is the best one for me and I remain on top of things. I sleep well at night and hope you fair well too in your retirement.
Unless you are retiring at age 75 or higher, the annuity makes no sense. inflation will eat you alive.
It’s a matter of personal choice whether to go with the annuity or conversion to a lump sum payout. When I retired in 2015 (thank God and with a one year severance bonus), I chose the Chevron J&S annuity over the lump sum. At that time, segment interest rates were lower than it is now. The lump sum amount was higher. Many back then were mesmerized by the amount to the payoff. But even though 2016 and 2017 were pretty kind to the stock markets, 2018 doesn’t seem to be the same. It’s probably likely to see flat years for the foreseeable future. So much for keeping up with the fixed and guaranteed annuity. Slow and steady is a good motto, both in life and investing. I have a large 401k nest egg and an IRA portfolio to invest, but my annuity is a guaranteed income along with the Social Security income that starts for me next year.
"Segment interest rates".. ha ha ha by all means. Compare it to the lowest returns. which the annuity beats hands down and gives you guaranteed returns for life. NEXT!!! I think you need to try harder. I'll get the popcorn. Keep em comin! LOL.
@ikwh, Thanks for the info. I'm waiting for the $ to go into my 401k. As for @znt, I wouldn't call it chump change or my biggest mistake. Segment interest rates are near all time lows and my financial situation may be somewhat different than yours.
OP, it could take 3 or 4 weeks to get your lump sum payment. April 1 wasn’t but 3 weeks ago, so it it will be paid soon. BTW, yes, you will be paid interest for late processing and payment. It is specified in the Chevron Retirement Plan as being 5% APR (annual rate). I suppose you are anticipating a relatively small payout because you mentioned you are waiting for it, not having a direct transfer to an IRA or the Chevron 401k ESIP. Good luck. If you change your mind after getting the check and would rather put it into an IRA, you have 6 months to do so. But don’t deposit it at the bank first. You would need to deposit the check itself in a qualified retirement account.
Your biggest mistake was letting them buy you out for chump change vs the lifetime 100% joint survivor annuity. But that's another discussion. Hang on a few months. Nothing's instant.