IRS segment rates shot up again. December remains as the lowest rates ever recorded, pushing lump sums to all time highs. Hope you all caught that wave.
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@18rkf, you're definitely right about that, anyone who posts on here incessantly (same guy, who chose poorly and regrets it, obviously) that December was the best rate doesn't know the 3 segment rates, can't do the calc, and sux at math!
I suspect you don’t know how the three IRS segment rated impact the lump sum calc... too bad for you!
Yes, , I am Soooo glad also that I took mine last year, also around August, the rates were awesome and didn't wait like some here chasing interest rates. But the main reason is all I have are simple index funds and it looks like everything is up over 35% since then. To heck with the relatively small chump change that this thread is about, I'd rather not miss the bigger gains. Of course the market could have been not so kind, it can go either way, lol.
The rates I get from my financial advisor bottomed in August, rose a wee bit, hit almost the same bottom in December, and then gradually rose 0.4 above the bottom this year. So from my numbers the true bottom was August...and two months after that was the best time to pull the lump. That said, anytime late last year was a great time to pull the plug and now lump values are down about 5% from their highs. Going forward it is not clear where we are heading, but the more the market rises (more the economy recovers from the pandemic), the more likely some inflation pressure will appear, and the more likely the fed will start to rise the rates further. If growth stalls (or a new variant of the virus appears) the rates might return closer to their recent lows, but as others noted if you are ready to retire best bet is to pull the lump asap and get it invested.
You first, loser chasing the 0.04% while we are making coin in the market all year, lol!
post your figures!
Sorry about that last post. I re-crunched my numbers, I meant that November was the bottom.
Rate are only going up and up. Dec was the bottom.
@17ppo: Agreed. Long term the safest bet is money makes money, so the sooner you can get your lump out and put it to work the better you will likely do. Compared with that, waiting around hoping rates will drop is a suckers bet.
@17akx, also you need to figure time in the market. The S&P is up over 12% YTD. So, regardless of the interest rates, that lump sum would have been better off in the market than chasing the + or -5% (50k on 1MM) if the choices were equal otherwise. Yes, $50k is closer to a month of my compensation also, before taxes, 401k, etc., of course but not chump change in any respect.
I appears rates are up 0.4 points from recent lows. My current lump estimate is about a 1 million and when I calculate the difference between these rates using Chevron’s calculator I get a value less than $50K. While $50K is nothing to ignore, it is closer to a month of my current total compensation rate (not a year!).
Yes, those without any financial acuity like the OP still think that December or November or whatever month that they happened to pick was a better month to take their lump sum than any, It's called selection bias and is fueled by regret and resentment. Similar to buyers remorse. Don't feel bad. Maybe you can make up for it with the Target funds and the Whole life Insurance investments that your financial advisor picks out for you.
Oops I meant to write Jan 2021 on my last post!
Sorry for your tremendous financial loss and lack of mathematical acumen if you chose an extremely poor month like December 2020 to take your lump sum as the OP did. You missed out on a lot of easy money. C'est la vie!
Sorry for your loss if you chose Jan.
Yes, January 2021 still had the best interest rate for the period that I had to select from, which includes Feb, 21, Nov. And Dec. 2020. Seems some one here needs to brush up on their math skills, or never had any. Sorry for your loss.
Interest rates continue to rise, as everyone knows. Dec 2020 is still the lowest ever rate and highest ever lump sum available. Good luck everyone!
@2wvu, sorry about that, yes, you should take the annuity in your case. we cannot help you.
If you can't do the simple math to calculate the interest rate, I suggest you take the annuity!
Yes, the previous poster was correct. Jan 1 2021 lump sum had the lowest rate.., Thanks for clarifying. I crunched the numbers. I came out about $250k ahead by picking that.
Dec was the low but I think if you didn’t already send in your paperwork that opportunity has passed!
Sorry, a Jan 1 2021 lump sum had the lowest rate. My mistake.
Correct, and a Dec 1 2020 lump sum had the lowest rate.
It’s not only a single month corporate interest rate that is used in the formula for determining the lump sum pension. Remember it is the average of 3 months that make up the bend points in the factoring.
@1gue, yes indeed, that's very important to those on the layoffs boards who have no life.
It is important to watch rates monthly and some people have been caught out and had to rush their retirement to avoid a financial disaster (e,g, earning one year or salary and losing the equivalent or more in the lump sum). However, even for people who have left Chevron, there is the key decision of WHEN to activate the lump sum. It is not automatic. You choose the date. You can choose one around the time you retire or let it ride until you are ready. The two month lag gives you plenty of time to think and see how rates are moving. We just saw rates hit their lowest ever in Dec and rise thereafter. The Fed will keep rates stable or start raising them so Dec will probably be the all time low for many years to come.
the 3 segments rates are combined and averaged arithmetically (i.e. equal weighting for each of the 3 rates).
Though there is a two month lag, before the new rates take effect— the simple equation is interest rates go up, your lump sum goes down.
When I retired, a 1% interest rate increase would have reduced my lump sum by over $200,000.
Be knowledgeable of the pension calculation as you approach your decision to leave CVX
Well, thank you so much for this Breaking News! I am thinking of EOI'ing and taking the lump sum because of that now, up until now I had some reservations. It's still an option, isn't it? That's why you're posting this, I presume....................
Not sure what you mean. The first rate is used for years 1-5, second for 6-15, third for 15+. You plug those rate assumptions in to calculate a lump sum. You can look it up in the IRS Code Section 417(e)(3)(D).
Do you know how the 3 segments rate are combined (averaged, weighted, etc.)?