This monthly newsletter aims to track the interest rates that calculate the lump sum in the Chevron Retirement Plan and give an estimate of how it might affect your retirement benefit.
October Segment Rate Summary
The segment rates for October are 0.87%, 2.74%, and 3.16%. This brings the three-month average to 0.74%, 2.60%, and 3.11% for a January 2022 benefit start date. For Chevron employees hired before 2008, we estimate the lump sum benefit to decrease about 0.35% for an average vested 65-year old in January versus December; though please check your benefit calculator for your actual calculation.
All three segment rates increased in October, with the biggest jumps coming in the first and second segments, which influence the lump sum calculation more than the third. The first and second segments now have a clear “back-heavy” rate pattern, which makes it much more likely that the lump sum calculation will fall even further in the coming months. For more information on how to spot rate patterns and their influence on the lump sum, please see the article linked below.
How Does this Affect Me?
The Chevron Retirement Plan offers a substantial benefit to Chevron employees over many other companies’ plans. It is one of the few remaining retirement pension plans that still offers a lump sum benefit. Since the Pension Protection Act of 2006, the calculation of the lump sum has become more complicated now relying on corporate bond yield curves, known as segment rates, instead of the 30-year treasury rate that was used in the past. In a low interest rate environment, it is important for Chevron employees to understand how their lump sum is calculated and how quickly the benefit can change. As interest rates lower, the lump sum increases, and vice-versa. If rates increase 1% across the board, it could lower your lump sum by almost 10% depending on your age and length of service. This calculation applies only to Chevron employees hired before January 1, 2008.
Baird Retirement Management provides highly specialized retirement planning expertise for business professionals nearing retirement. Our perspectives are backed by our extensive experience, comprehensive industry knowledge and immersion in the latest retirement, income, and tax planning strategies. By focusing on select companies and industries, we can tailor our retirement planning advice to help meet the specialized planning needs and considerations of employees within a company or industry.
"Perspective and expertise from specialists who understand retirement planning and, more importantly, the specific situations you're in."
Enjoying the read?
Subscribe to read more retirement insights.
The PL Group from Baird Retirement Management has not been hired by Chevron and is not affiliated with Chevron in any fashion.
Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™ and federally registered in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirement.
Robert W. Baird & Co. Incorporated. 777 East Wisconsin Avenue, Milwaukee, WI 53202. 800-RW-BAIRD. rwbaird.com. MC-38536. RB2021-0120