For those of you like me who have retired from Chevron , how are you investing your retirement dollars ?With CD's or even AAA Bonds yielding close to nothing, stock markets going up and down and somewhat risky, how is one to earn at least 5 % with minimal risk, is that even possible in this low rate environment ?
57 replies (most recent on top)
The thieving fellow without a conscience getting double payments posts regularly on the "Lump sum vs Annuity" Thread ;
https://www.thelayoff.com/t/GEjhx1M
He is ridiculously trying to convince himself(and others) that by simply putting the money (extra pension check every month) into another one of his own checking accounts other than his main one that it is not stealing. He plans on waiting for them to find the error, and if they don't then he'll keep it. What part of stealing does this idiot not understand? The "Steal" or the "ing"? Go figure. Many have talked him down because the concept is pretty far-fetch, Like, I'm taking and accepting it, but I'm not taking and accepting it, so therefore, I (falsely) claim that I'm not stealing from the Chevron pension fund and all of my fellow retirees. Pension funds are not as carved in stone and guaranteed as some think. They rely on a certain amount of interest from invested assets to stay solvent. People stealing and double dipping, etc. is not good. Some people need every penny to survive. Not good, Larry, not good at all Larry............
You can take the lump sum, but how are you going to get a risk free 5 % rate of return ?
I would always take the lump sum payment. A bird in the hand is worth 2 in the bush. Just my preference.
Who's the fellow getting double payments?
@rnm, Did you say: "None of the segment interest rates have ever been at 6% or above"? Well, that tells me you don't understand anything. Computing the equivalent % rate of return of an annuity vs lump sum payout has nothing to do with "segment rates". You're really amusing.
Just take the annuity and lump sum figures Chevron gave you down to your Financial Advisor's office. Not me or anyone here is going to convince you of anything, so I won't waste my time. I know what I'm being paid.
@okx - Give me the honest numbers and I will compute it myself and see. Better yet show me how you did your calculation. If you're a finance major that shouldn't be so hard. It's always possible they made a mistake in your case, like the fellow who is getting double payments, let's see. None of the segment interest rates have ever been at 6% or above. If you're not willing to share your calculation here, I'll assume you're just another troll trying to mislead the readers on this site.
@dcc, go back to the drawing board. The annuity payout is closer or just a hair above 6%. Take it from a Finance major.
I am also happy with the amount that I calculated that Chevron offered me for my annuity at the max age, and it calculated out to be about 5.7%, or I guess you could call that 6%. I tried a few different calculators and I'm pretty sure I did it correctly. I plan on taking that because I don't think I can get that in the market these days or consistently at all.
In addition, I will invest my 401k in about a 60/40 AA since I have the pension to fall back on.
Like I said, it's just not possible. The interest rates that Chevron uses are all less than 5%. Many people don't understand how to do the calculation correctly. Please read my note if you haven't. If you're still not convinced please post your values (lump sum offered and annuity received) and I will take a look. Also, your approximate life expectancy would be helpful (there are calculators for that) or I can figure one out if you give your approximate age. If you're concerned about your privacy you can multiply the dollar amounts by some random factor, it won't matter.
I have done all of the calculations from various sites and have checked it, and back-checked it on many different calculators determined that it indeed has an equivalent rate of return of 6%. Maybe your pension was lower than mine? I have a really good annuity amount and it surprised me. I suspect that maybe others have different monthly pay- out amounts depending on age, years of service etc.
Go with 80% in dividend aristocrats, chart and split your sectors to anticipate cycles to the highest degree possible, don't be jumpy and when a sector is historically high, pull some (sell) and move into a low sector. Do this over years and you'll smoke any of the big name investment groups out there, just be patient and think long. for the 20% keep 15% in the highest return easy out bonds you can find. The remaining 5% keep in cash or money market/passbook equivalents.
60 percent in money market yielding nothing ? Isn't that a bit too conservative ?
I ran calculations on my annuity estimate after providing Chevron my SS earnings statement which changes the offset figure. Believe me, it's equivalent to 6.02%. Every case will be a little different, but based strictly on the default Chevron pension formula, your 5% return is accurate.
You are not getting an equivalent 6% from the Chevron annuity. All the interest rates that go into the calculation are below 5%, so that's impossible. Let me repeat what I posted in a similar thread earlier.
The calculations of the annuity interest rate that have been described in these posts by dividing the annual payout by the lump sum amount are oversimplified and misleading. To get the correct annuity interest rate you need to do a proper annuity calculation such as the one at http://www.bankrate.com/calculators/investing/annuity-calculator.aspx . Having $1,000,000 and earning 6% interest for 25 years is a lot better that getting $60,000 a year for 25 years and then dying because in the former case you (or rather your heirs) still have the $1,000,000, whereas in the latter case they get nothing. The two are only equivalent if you plan to live forever, which is probably an optimistic assumption. The equivalent interest rate for 25 years is 3.74%, for 30 years it's 4.70%, for 35 it's 5.27%.
Note: I'm not saying that the Chevron annuity is a bad or good deal. It depends on your needs, health status, tolerance for risk, what you think the future holds for interest rates, stocks, and other investments, etc. However, if you are going to buy an annuity with the lump sum, or just invest it in CDs, the Chevron annuity is almost certainly a better way to go.
10% Vanguard Total Bond.
I decided to take my Chevron pension as a 100% Joint & Survivor annuity. It has an equivalent rate of return of the lump sum amount earning 6% each and every year. My 401k investments are for the moment at Vanguard invested in 60% Vanguard Prime Money Market, 30% Vanguard Institutional and 30% Vanguard Total Bond.
I hang my balls out there and keep my money in stocks, yeah it's risky. But that is where the money is at. If you don't like risk put on your pretty pink dress and go home.