Financial Intel Monthly

Interest rates are trending upward, and if this trend continues ExxonMobil lump-sum payments will drop again in the fourth quarter of this year. The IRS has recently released the Segment rates for the month of April, recorded at: 3.00% / 4.22% / 4.17%. April's segment rates saw an increase of about 0.5% (in the second segment), which is a substantial jump for a single month.  This ongoing trend upward looks to be an early indicator of bad news for ExxonMobil employees opting for a lump-sum in the future.

ConocoPhillips employees considering the lump sum option on their pension payment may have an opportunity to take advantage of lower interest rates in Q2 2022. With higher interest rates taking effect in Q3, and Q4 projecting to have even higher rates, retiring during Q2 may be the last opportunity to avoid a reduced lump-sum. April's segment rates were just released and they are 3.00%/4.22%/4.17%. These rates increased by about 0.5% (in the second segment) since March, which is a very large increase for a single month. 

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Many KP employees who are waiting to commence their pension lump-sums, are now seeing a significant decrease in their value. New segment rates have been released and there was a 0.5% increase in the second segment over the previous month. The second segment is the most impactful so if you have a pension of $1,000,000 you could see a reduction of about $50,000 simply by commencing your benefit in June as opposed to May. This is because when KP employees elect the month they would like to begin their pension, KP looks back two months to calculate the rates for the pension disbursement. When these interest rates move up or down, your lump sum amount will move in an inverse direction, so if interest rates increase, your lump sum amount will decrease and vice versa. Through the pandemic, interest rates dropped dramatically which greatly increased many lump sum payments. This trend culminated in record lows for individuals who commenced their benefits in December of 2020. However, since then this trend has shifted, as interest rates have been increasing rapidly, causing a large reduction in pension lump-sums values.

Many Chevron employees who are waiting to commence their pension lump-sums, will now see a significant decrease in their value. With short, medium, and long-term rates rising significantly over the last month, the higher average rates will result in lower lump-sums for those retiring in July of 2022. This is because when Chevron employees elect the month they would like to begin their pension, Chevron looks back at the third, fourth, and fifth months' rates to calculate the pension disbursement. When these interest rates move up or down, your lump sum amount will move in an inverse direction, so if interest rates increase, your lump sum amount will decrease and vice versa.

Through the pandemic, interest rates dropped dramatically which greatly increased many lump sum payments. This trend culminated in record lows for individuals who commenced their benefits in December of 2020. However, since then this trend has shifted, as interest rates have been increasing quickly, there has been a large reduction in pension lump-sum values.

Many KP employees who are waiting to commence their pension lump-sums, are now seeing a significant decrease in their value. With short, medium, and long-term rates rising significantly over the last month, the higher average rates will result in lower lump-sums for those retiring in April of 2022. This is because when KP employees elect the month they would like to begin their pension, KP looks back two months to calculate the rates for the pension disbursement. When these interest rates move up or down, your lump sum amount will move in an inverse direction, so if interest rates increase, your lump sum amount will decrease and vice versa. Through the pandemic, interest rates dropped dramatically which greatly increased many lump sum payments. This trend culminated in record lows for individuals who commenced their benefits in December of 2020. However, since then this trend has shifted, as interest rates have been increasing rapidly, causing a large reduction in pension lump-sums values.

ConocoPhillips employees considering the lump sum option on their pension payment, may have an opportunity to take advantage of lower interest rates in Q2 2022 before higher rates take into effect for the Q3 2022. Over the course of 2020, interest rates dropped dramatically, which greatly increased many lump sum payments. However, interest rates spiked modestly through 2021. While the overall trajectory of interest rates has been higher, Conoco Philips employees who retired in the first quarter might have seen their lump sums increase, but any increases in lump sums going forward will be entirely diminished due to rising rates now in effect for Q3.

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Many Chevron employees who are waiting to commence their pension lump-sums, will now see a significant decrease in their value. With short, medium, and long-term rates rising significantly over the last month, the higher average rates will result in lower lump-sums for those retiring in June of 2022. This is because when Chevron employees elect the month they would like to begin their pension, Chevron looks back at the third, fourth, and fifth months' rates to calculate the pension disbursement. When these interest rates move up or down, your lump sum amount will move in an inverse direction, so if interest rates increase, your lump sum amount will decrease and vice versa.

Through the pandemic, interest rates dropped dramatically which greatly increased many lump sum payments. This trend culminated in record lows for individuals who commenced their benefits in December of 2020. However, since then this trend has shifted, as interest rates have been increasing quickly, causing a large reduction in pension lump-sum values.

Interest rates are tending upward, if this trend continues it will decrease the value of ExxonMobil employees' pension lump-sums. The IRS has recently released the Segment rates for the month of March, recorded at: 2.44% / 3.71% / 3.94%. Over the course of 2021 and now into 2022, interest rates at ExxonMobil increased significantly, which greatly reduced many lump sum payments. With record low rates culminating in the first quarter of 2021, ExxonMobil employees have since seen a significant increase in interest rates. We saw rates rise consistently in 2021 and with the announcement of March segment rates those waiting until the third quarter will likely see an even further reduction in lump sums. This ongoing trend upward looks be an early indicator of bad news for ExxonMobil employees opting for a lump-sum in the future.

The Markets (as of market close May 20, 2022)

Lump-sums are decreasing for KP employees who wait to commence their pensions lump-sum.  With both short, medium, and long-term rates rising over the last month, the higher average rate will result in lower lump-sums for those retiring in March of 2022. When KP employees elect the month they would like to begin their pension, KP looks back to two months to calculate the rates used for the pension disbursement. When interest rates move up or down, your pension lump sum amount will move in an inverse relationship. Through the pandemic, interest rates dropped dramatically which has greatly increased many lump sum payments. However, rates have increased significantly over 2021 and 2022, causing a reduction in pension lump-sums.