Chevron employees have lost a significant amount on their pension lump-sums as interest rates have soared over in the first half of 2022. The most recent interest rates for Chevron employees were just released, and the second segment (which is the most impactful), is now up 1.57% since January 2022. When interest rates move up or down, an employee’s pension lump-sum amount will move in an inverse direction. A 1% increase in interest rates typically means a 10% decrease in lump-sum value. Considering the rates rose by 1.57%, lump-sums will decrease in value by about 15%*. This means that an employee with $1,000,000 lump-sum has lost around $150,000 so far this year, not including the interest they would have earned on the $1,000,000.
When Chevron employees elect the month they would like to begin receiving their pension, Chevron looks back at the third, fourth, and fifth months’ rates to calculate the pension disbursement. If rates continue on their current trajectory, Chevron employees will continue to lose money on their pension lump-sums. This rise in rates may motivate some employees to retire earlier than they had previously anticipated. For those expecting to retire in the next few years, many have come to the conclusion that they are working for free.
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The Retirement Group is now offering a complimentary cash flow analysis for Chevron employees to help determine their preferred retirement date. The Retirement Group is not affiliated with, nor endorsed by Chevron. The Retirement Group states that by receiving a Cash Flow Analysis, Chevron employees can potentially avoid making big retirement mistakes. With a cash flow analysis, Chevron employees will have a better idea of how rising interest rates will impact their retirement.
The Retirement Group also offers webinars for Chevron employees which discuss market volatility and interest rates. It may be in a Chevron employee’s best interest to adjust their 401(k) in an attempt to try and mitigate some of the negative effects of the current market volatility.
With interest rates rising significantly over the past few months, The Retirement Group suggests that Chevron employees discuss their options with an advisor. These advisors track the interest rates and can keep employees updated on any changes that may impact their retirement plans.
The Retirement Group states on their website that no matter how attractive the pension lump-sum looks, it is important to remember the annuity option may be a better fit for certain individuals. Every situation is unique, and a cash flow analysis will allow employees to compare all pension options.
*15% is an estimate and the actual number could be higher or lower depending on the individual.
Disclosure: The Retirement Group is an independent financial advisory group that focuses on transition planning and lump sum distribution. Neither The Retirement Group or FSC Securities provide tax or legal advice. Please call the office at 800-900-5867 for additional questions or for help in the retirement planning process. The Retirement Group is not affiliated with, nor endorsed by Chevron.
*** When referencing the “pension” in the title we are referring to the lump-sum option.
Securities offered through FSC Securities Corporation (FSC) member FINRA/SIPC. Investment advisory services offered through The Retirement Group, LLC. FSC is separately owned and other entities and/or marketing names, products or services referenced here are independent of FSC. Office of Supervisory Jurisdiction: 5414 Oberlin Dr #220, San Diego CA 92121. Chevron is not affiliated nor endorsed by The Retirement Group or FSC Securities.