Interest rates were just released for ExxonMobil employees, and pension lump-sums will be reduced significantly as a result. Rates increased by over 0.8% in the second segment (which is the most significant) for non-grandfathered employees. When rates increase by 1% employees will, on average, see a 10% reduction in their lump-sum. Which means an employee with a $1,000,000 lump-sum could lose $80,000 by retiring in Q3 2022, instead of Q2 2022. If an employee was not at least 64 years old with at least 24 years of ExxonMobil service by December 31, 2021, then they are not grandfathered into the old pension calculation method.
For grandfathered employees, there was a 0.5% increase in interest rates from Q2 to Q3. Therefore, an employee with a $1,000,000 lump-sum could lose $50,000 by retiring in Q3 2022, instead of Q2 2022. Grandfathered employees were at least 64 years old, with at least 24 years of ExxonMobil service by December 31, 2021.
Video Link: https://www.youtube.com/embed/TUiX61ZU9Fw
Interest rates dropped dramatically during the pandemic, which resulted in an increase in lump-sum payments, culminating in record highs for individuals who commenced their benefits in the first quarter of 2021. However, since then, rates have increased, causing a reduction in pension lump-sums.
The Retirement Group is now offering a complimentary cash flow analysis to help ExxonMobil employees determine their ideal retirement date. The goal of The Retirement Group’s new service is to help ExxonMobil employees avoid retiring on the wrong date, unnecessarily reducing their lump-sum.
The Retirement Group also offers a webinar series for ExxonMobil employees which helps tackle interest rate issues, as well as inflation. Inflation can affect pension values as it often causes rising interest rates which, as discussed earlier, reduce lump-sum values. Inflation can also be detrimental to an employee’s annuity. The annuity is a fixed payment, therefore if inflation were to rise by 10%, an employee’s annuity payment will become 10% less valuable.
According to The Retirement Group’s website, receiving the pension as an annuity may be a better option for certain individuals, despite the attractiveness of the lump-sum. Every situation is unique, and a cash flow analysis will allow employees to compare all pension options.
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 ExxonMobil.
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. ExxonMobil is not affiliated nor endorsed by The Retirement Group or FSC Securities.
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Company Name: The Retirement Group
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City: San Diego
State: CA
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