Hope Tribune

Chevron employees could see a significant reduction in the value of their pension lump-sum, if interest rates continue to surge. When interest rates move up or down, an employee’s pension lump-sum amount will move in an inverse relationship. Chevron interest rates increased last month for those who commence their benefit in March of 2022. With both short-term and mid-term blended rates rising over the last month, these higher rates will result in lower lump-sums for those retiring in February, and even lower for those retiring in March. 

When Chevron employees elect the month they would like to begin receiving their pension, Chevron looks back to the third, fourth, and fifth month’s rates to calculate the rates used for pension disbursement. Due to the pandemic, interest rates dropped dramatically. This resulted in an increase in lump-sum payments, culminating in record lows for individuals who commenced their benefits in December of 2020. However, since December 2020, rates have increased, causing a reduction in pension lump-sums. 

The Retirement Group’s goal with their new webinar series is to help Chevron employees avoid making big retirement mistakes. The Retirement Group states on their website that one of the biggest mistakes Chevron employees make is retiring on the wrong day.

Chevron Update on Interest Rates January 2022:

Video Link: https://www.youtube.com/embed/C5KOvQVntDY

A Chevron employee’s retirement date and interest rates have a large impact on a their pension. In fact, on average a 1% change in interest rates can equate to an 8% to 12% change in Chevron employees lump-sums. So, for someone with a $500,000 lump sum, that could mean a move of about $50,000. A $1,000,000 lump sum would drop by roughly $100,000. While rates have not increased by 1% since the 2020 low quite yet, the 10 year Treasury Rate has soared. This is typically seen as an early indicator that rates will continue to rise. 

Among other dangers, The Retirement Group discusses the outcomes that rising inflation can cause. Inflation can generally be detrimental to either pension option.  Inflation can often cause a rise in interest rates which, as discussed earlier, reduces lump-sum values. Inflation also hurts the annuity option, since it is a fixed payment. If inflation increases by 10%, an employee’s annuity payment becomes 10% less valuable. 

Given the current interest rate environment, The Retirement Group suggests that Chevron employees discuss their options with an advisor who can monitor the rates and keep employees up to date on the monthly changes. 

The Retirement Group states on their website that it is important to remember the annuity option may be a better fit no matter how attractive the pension lump sum looks. Every situation is unique, and a cash flow analysis will allow employees to compare all pension options. The Retirement Group can provide a complimentary cash flow analysis to show Chevron employees how various retirement dates may play out.

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. 

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.

Media Contact
Company Name: The Retirement Group
Contact Person: Tiffany Hill
Email: Send Email
City: San Diego
State: California
Country: United States
Website: https://www.theretirementgroup.com/