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Navigating the Retirement Income Valley for Occidental Petroleum Employees

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Healthcare Provider Update: Healthcare Provider for Occidental Petroleum Occidental Petroleum collaborates with Lyra Health to provide enhanced mental health benefits. This partnership offers employees access to cost-free mental and emotional healthcare, focusing on making effective services convenient and accessible. Potential Healthcare Cost Increases in 2026 In 2026, healthcare costs for employees at Occidental Petroleum are expected to rise significantly due to various market pressures. A recent forecast indicates an overall increase of approximately 8.5% in healthcare spending, driven by rising hospital and health system operating costs, along with increased demand for behavioral health services. Additionally, if enhanced federal premium subsidies for ACA marketplace plans are allowed to expire, many employees could face drastic hikes in their out-of-pocket costs. This scenario underscores the need for proactive planning and strategic adjustments in employee healthcare benefits amid a shifting economic landscape. Click here to learn more

'Understanding the 'income valley' offers Occidental Petroleum employees a critical opportunity to strategically manage their tax burdens during retirement, and with the recent SECURE 2.0 Act changes, it's more important than ever to implement tax-efficient strategies well in advance of required minimum distributions.' – Paul Bergeron, a representative of The Retirement Group, a division of Wealth Enhancement Group.

'Occidental Petroleum employees approaching retirement can significantly benefit from planning during the 'income valley,' utilizing tax-saving strategies and Roth conversions to lower their overall tax burden, especially with the SECURE 2.0 Act providing more flexibility before RMDs begin.' – Tyson Mavar, a representative of The Retirement Group, a division of Wealth Enhancement Group.

In this article, we will discuss:

  1. The concept of the 'income valley' and its significance for retirement planning.

  2. Tax-efficient strategies such as tax-saving withdrawals, Roth conversions, and charitable giving during the income valley.

  3. The impact of the SECURE 2.0 Act on retirement planning and RMDs.

When it comes to retirement planning, time is one of our most precious resources. Building a nest egg that can support a comfortable retirement requires effective use of time, particularly in the form of compound profits. Traditional and Roth retirement savings, taxable accounts, and Social Security income are frequently used to finance retirement. But for many people, retirement doesn't always begin at a specific age, and when to make key retirement-related decisions can significantly affect increasing retirement income and reducing taxes.

For Occidental Petroleum employees born in 1960 or later, the full retirement age for Social Security benefits is 67. However, recent legislative amendments have added additional factors to retirement planning. The required minimum distribution (RMD) age was raised from 72 to 73 by the SECURE 2.0 Act, which went into effect in 2023. This presents new opportunities for tax planning by allowing those who retire at age 67 to delay RMDs for an additional year.

Starting in 2033, the RMD age for individuals born in 1960 or later will rise to 75, providing more time to manage taxes before required withdrawals from tax-deferred retirement plans like 401(k)s and IRAs. Though this change is still years away, it will significantly affect how retirees manage their taxes and income in the years before RMDs.

For tax planning, understanding this time frame—known as the 'income valley'—can be quite beneficial. The period between retirement and the start of mandatory minimum distributions is called the 'income valley.' During this time, a retiree may find themselves in a lower tax bracket due to reduced taxable income. Depending on the retirement income sources and withdrawal strategy, this period can vary significantly.

Consider the situation of Sally and Carl, a Occidental Petroleum couple in their early 60s preparing for retirement. With a total pre-retirement income of $150,000, Sally and Carl plan to retire at age 67. They have $55,000 in available income, drawn from a mix of Social Security, their 401(k), and taxable assets, to cover their estimated $95,000 in yearly retirement needs. However, their taxable income may be much lower in the early years of retirement than later on, as they begin their retirement before the mandatory minimum distributions start.

The Income Valley's Mechanisms

In this example, Sally and Carl plan to use their $250,000 bank account and $1,000,000 401(k) to pay for their living expenses in the first few years of retirement. They can tap into their taxable accounts and take withdrawals from their checking accounts during this income valley period without incurring significant tax liabilities. Sally and Carl would be able to live on relatively low taxable income during this time since withdrawals from non-tax-deferred accounts, such as their bank or brokerage account, would not be counted as taxable income.

Since their Social Security payouts are taxed up to 85%, using non-taxable funds first can provide substantial tax relief before RMDs begin. This period also offers them a chance to figure out the most tax-efficient way to manage their 401(k) withdrawals. The scenario changes when they start taking withdrawals from their 401(k) at age 72, as they will be taxed as ordinary income, which may push them into a higher tax bracket.

Handling the Income Valley

For retirees, the income valley presents a unique opportunity to implement strategies that can lower overall tax burdens. Retirees like Sally and Carl might want to consider three tax solutions during the income valley years:

Tax-Saving Withdrawals

Making tax-efficient withdrawals is one of the best ways to manage taxes in retirement. This involves carefully selecting the source of the money used to cover living expenses based on tax treatment. For example, a retiree might withdraw from taxable assets first, followed by tax-deferred accounts like a 401(k), and finally, tax-free Roth accounts. This strategy organizes withdrawals in the most tax-efficient order.

Another tactic is proportional withdrawals, where money is withdrawn from each account based on their total amounts. This strategy helps reduce the chances of being pushed into a higher tax bracket later in retirement and maintains a more stable income stream. By carefully managing withdrawals from tax-deferred accounts, retirees can reduce lifetime taxes and future RMDs while in lower tax brackets.

However, this strategy's impact on Social Security taxes must be carefully considered. Withdrawals from tax-deferred accounts raise taxable income, which could result in higher taxes on Social Security benefits. Additionally, the retiree might be placed in a higher Medicare premium bracket due to increasing income. It is essential to consult with a tax professional before making any retirement planning decisions.

Roth Conversions

Converting tax-deferred retirement funds (like an IRA or 401(k)) into a Roth IRA is known as a Roth conversion. While Roth accounts grow tax-free and allow for tax-free withdrawals in retirement, retirees must pay taxes on the converted amount today. Conducting a Roth conversion during a period of low taxable income, such as the income valley, is especially advantageous.

Retirees can reduce the size of their tax-deferred accounts and, consequently, their RMDs (and related taxes) after they start by transferring a portion of their 401(k) funds into a Roth IRA during the income valley. Roth IRAs provide more control over retirement income in later years since they are not subject to RMDs.

However, like tax-efficient withdrawals, Roth conversions may temporarily increase taxable income, which could lead to higher Social Security taxes and higher Medicare premiums. Future tax implications should be carefully considered before deciding to convert funds into a Roth IRA, as the timing of the conversion can significantly impact its outcome.

Charitable Giving

Charitable donations can substantially lower taxable income during the income valley for retirees who are philanthropically inclined. By contributing to charities, retirees can support causes they care about while lowering their taxable income. Donations can dramatically reduce tax liabilities if the retiree itemizes deductions.

The Qualified Charitable Distribution (QCD) is particularly beneficial for retirees. A QCD allows individuals to donate up to $100,000 per year to a qualified charity directly from their IRA. The QCD is not included in taxable income but counts as a distribution for RMD purposes. This strategy allows retirees to meet their RMD requirement without increasing their taxable income. As of 2025, retirees may be able to lower their RMD levels and further reduce their tax burden by using QCDs.

QCDs are a simple method to give back while lowering taxable income because they don't need to be itemized, unlike traditional charity donations.

Considerations & Restrictions

While these strategies can be effective in reducing taxes during retirement, not all retirees will have the same flexibility in managing their retirement income. Some retirees may have limited options for withdrawing funds, particularly if they mostly rely on tax-deferred accounts like 401(k)s or IRAs. In such cases, the ability to strategically withdraw from taxable or tax-free funds may be limited, reducing their ability to lower taxable income.

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Moreover, retirees with additional income sources—such as pensions, annuities, or rental income—may find their taxable income increases, making it more difficult to implement these tax-efficient strategies. While they may still be able to manage their withdrawals, they have little control over the taxation of their other income sources.

The SECURE 2.0 Act's delay of RMDs provides retirees more time to strategize their tax planning. It is crucial to consult with financial professionals to understand how these changes might impact individual situations.

In summary, the income valley offers retirees a valuable window to manage taxes before RMDs begin. By implementing strategies like tax-efficient withdrawals, Roth conversions, and charitable giving, retirees can reduce their tax burden, spread out tax payments, and preserve more of their hard-earned savings.

Occidental Petroleum employees should also consider healthcare expenses as they approach the income valley. According to a Fidelity Investments study, excluding long-term care, the average couple retiring at age 65 in 2023 will need approximately $315,000 for healthcare expenses during retirement. By planning for these needs during the income valley, when taxable income is lower, retirees can better manage their resources and avoid financial strain. Planning for healthcare is essential to long-term financial well-being.

Learn how to navigate the retirement income valley with smart withdrawal strategies and tax-saving solutions. Discover how you can lower your tax burden, enhance your retirement savings, and take advantage of the SECURE 2.0 Act's provisions to safeguard your financial future. By making informed choices today, you can plan for a more comfortable retirement.

Consider the retirement income valley as a calm stretch of a long journey. Just as a driver might ease off the pedal to conserve fuel on a flat, easy stretch of road, retirees can reduce taxes and preserve wealth during this period before RMDs begin.

Source:

1. 'What the Wealthy Get Right About Retirement Withdrawals.'   Investopedia , 2 May 2025,  www.investopedia.com/articles/retirement/101/wealthy-get-right-about-retirement-withdrawals . Accessed 4 May 2025.

2. 'Charitable Trusts vs. Private Foundations: What Is Right for You?'   Investopedia , 2 May 2025,  www.investopedia.com/articles/retirement/101/charitable-trusts-vs-private-foundations . Accessed 4 May 2025.

3. Foster, Lauren. 'The Market Is Swinging Wildly. Should Retirees Wait to Take RMDs?'   Barron's , 1 May 2025,  www.barrons.com/articles/market-swinging-wildly-rmds-should-retirees-wait . Accessed 4 May 2025.

4. 'Understanding the Retirement Income Valley.'   Fidelity Investments , 30 Apr. 2025,  www.fidelity.com/retirement-planning/retirement-income-valley . Accessed 4 May 2025.

5. 'SECURE 2.0 Act Changes RMD Rules.'   Ascensus , 25 Oct. 2023,  www.ascensus.com/news/secure-2-0-act-rmd-changes . Accessed 4 May 2025.

What are the key provisions of the Occidental Petroleum Corporation Retirement Plan that employees should understand to maximize their benefits, and how does the company structure its contributions relative to employees' earnings? As employees of Occidental Petroleum Corporation consider their retirement planning, it's vital to grasp how the company's contributions function, particularly concerning the wage base and annual earnings limits.

Key Provisions of the Occidental Petroleum Corporation Retirement Plan: The Occidental Petroleum Corporation Retirement Plan is fully funded by the company, with contributions based on an employee's annual earnings. The company contributes 7% of annual earnings up to the Social Security wage base ($137,700 in 2020) and 12% on earnings above the wage base. This structure is designed to help employees build substantial retirement savings. The plan's benefit limits align with IRS regulations, and employees should be aware of how these contributions are applied based on annual earnings limits to maximize their benefits​(Occidental_Petroleum_Co…).

How can Occidental Petroleum Corporation employees manage their investment options within the Retirement Plan, and what resources does the company provide to help them make informed decisions? The investment options available through the Occidental Petroleum Corporation Retirement Plan serve as a significant tool for employees wishing to tailor their retirement savings according to their financial goals and risk tolerance. Understanding these options can be complex and requires an in-depth exploration of available funds, associated risks, and projected performance.

Managing Investment Options: Occidental Petroleum employees have control over how contributions to their Retirement Plan are invested. The plan offers various investment funds, including bond and stock market index funds, and target date funds. Employees can manage their investment elections through the online platform, oxy.voya.com, which also provides fund performance data and advice resources, such as Online Advice and Professional Management services, to assist employees in making informed decisions​(Occidental_Petroleum_Co…).

In what ways do vesting schedules impact employees' retirement benefits at Occidental Petroleum Corporation, and what rights do employees have under the Employee Retirement Income Security Act (ERISA) regarding these benefits? Navigating the vesting schedule can make a profound difference in the go-forward retirement landscape for employees. Occidental Petroleum Corporation offers a structured approach to vesting, impacting when benefits are owned outright, and understanding the implications of ERISA for retirement planning is essential for all employees.

Impact of Vesting Schedules: Occidental Petroleum's Retirement Plan vests fully after three years of service. Employees are always fully vested in any Rollover accounts. Vesting schedules impact when employees can fully claim their retirement benefits, with protections under ERISA that guarantee the right to earned benefits. Employees who leave before vesting forfeit the nonvested portion of the company’s contributions​(Occidental_Petroleum_Co…)​(Occidental_Petroleum_Co…).

What are the distribution options available for employees of Occidental Petroleum Corporation when they reach retirement age, and how do these options affect their financial planning? The variety of distribution options at Occidental Petroleum Corporation can create a much more personalized retirement plan, allowing employees to consider how best to receive their benefits while factoring in tax implications and future income needs.

Distribution Options at Retirement: Employees reaching retirement age (60) have multiple distribution options from the Retirement Plan, including lump sum payments and annuity options. These choices impact financial planning, as each option has different tax and income implications, allowing employees to tailor their benefits to their future financial needs​(Occidental_Petroleum_Co…)​(Occidental_Petroleum_Co…).

How does Occidental Petroleum Corporation support employees who experience disability, and what provisions are in place for continuing retirement contributions during such periods? Understanding the support structure provided by the company, specifically in relation to short-term and long-term disability, is crucial for employees who may find themselves in unexpected circumstances. It’s important for them to know whether retirement contributions will continue during their disability or if they might need to make adjustments to their financial planning.

Disability and Retirement Contributions: Occidental Petroleum continues to contribute to the Retirement Plan if an employee is receiving short-term disability benefits. The contributions are based on the employee's actual pay during the disability period. This provision ensures that retirement savings can continue during times of temporary disability, supporting long-term financial planning​(Occidental_Petroleum_Co…).

How can employees at Occidental Petroleum Corporation ensure their beneficiary designations remain current and what are the implications of these designations for estate planning? The process of maintaining accurate beneficiary designations is critical for the smooth transition of retirement benefits, and employees must be aware of how changes in personal circumstances can impact these designations.

Beneficiary Designations: Employees should regularly update their beneficiary designations to ensure their retirement benefits are directed as desired upon their death. Changes in personal circumstances such as marriage, divorce, or the death of a previously designated beneficiary should prompt an update. Failure to do so may result in unintended allocations​(Occidental_Petroleum_Co…)​(Occidental_Petroleum_Co…).

What are the specific eligibility requirements for the Occidental Petroleum Corporation Retirement Plan, and how do these requirements differ for various employee categories, such as full-time versus part-time employees? Recognizing the nuances of eligibility criteria within the retirement plan is essential for employees to understand when they can begin to participate and what contributions may apply, especially if they transition between roles.

Eligibility Requirements: Full-time and part-time non-union employees and some union-represented employees are eligible to participate in the plan. Contributions begin automatically on the first day of the month of employment or eligibility. Understanding the specific eligibility requirements, especially for employees transitioning between full-time and part-time roles, ensures accurate participation and benefit accumulation​(Occidental_Petroleum_Co…).

How can employees reach out to Occidental Petroleum Corporation for assistance regarding their Retirement Plan benefits, and what are the best practices for ensuring their inquiries are addressed promptly? Effective communication with the company is key during the retirement planning process. Employees should know how to navigate company channels to maximize their understanding of benefits available to them.

Contacting Occidental Petroleum for Assistance: Employees can manage their retirement plan and address inquiries through the Oxy Retirement Service Center and the oxy.voya.com platform. Best practices for ensuring prompt responses include using the appropriate online tools and staying informed about plan updates and changes​(Occidental_Petroleum_Co…).

What are the tax implications of distributions from the Occidental Petroleum Corporation Retirement Plan, and how can employees plan accordingly to minimize their tax burden during retirement? Having a comprehensive understanding of how taxes will impact withdrawals is crucial for employees as they strategize their retirement income, and these tax considerations can play a significant role in long-term financial planning.

Tax Implications of Distributions: Distributions from the Occidental Petroleum Retirement Plan are subject to standard federal and state taxes, including required minimum distributions (RMDs) starting at age 72. Employees should consider consulting a tax advisor to minimize tax burdens and maximize retirement income by understanding the specific tax consequences of various distribution options​(Occidental_Petroleum_Co…).

How does Occidental Petroleum Corporation's retirement plan structure address the needs of employees transitioning from active service to retirement, particularly in terms of investment performance and management of existing accounts? As employees consider retirement, they should be well-informed about how the company manages contributions already made, ensuring that their investment strategy aligns with their anticipated retirement lifestyle and goals.

Transition from Active Service to Retirement: Occidental Petroleum supports employees transitioning to retirement by continuing contributions and offering a range of investment options that align with long-term financial goals. This structure allows employees to manage their investments effectively during retirement, ensuring that the plan remains aligned with their financial objectives​(Occidental_Petroleum_Co…).

With the current political climate we are in it is important to keep up with current news and remain knowledgeable about your benefits.
Occidental Petroleum offers both a traditional defined benefit pension plan and a defined contribution 401(k) plan. The defined benefit plan includes a cash balance component, where benefits grow based on years of service and compensation, with interest credits added annually. The 401(k) plan features company matching contributions and various investment options, including target-date funds and mutual funds. Occidental Petroleum provides financial planning resources and tools to help employees manage their retirement savings.
Operational Changes: Occidental Petroleum is restructuring its business to focus more on its core oil and gas segments, leading to layoffs affecting around 1,200 employees (Source: Reuters). Strategic Initiatives: The company aims to enhance operational efficiency and reduce costs. Financial Performance: Occidental reported a 15% increase in net sales for Q3 2023, driven by strong demand for its oil and gas products (Source: Occidental Petroleum).
Occidental Petroleum includes RSUs in its compensation packages, vesting over a specific period and converting into shares. Stock options are also provided, enabling employees to buy shares at a predetermined price.
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For more information you can reach the plan administrator for Occidental Petroleum at 5 greenway plaza Houston, TX 77046-0506; or by calling them at 713-215-7000.

https://www.oxy.com/documents/pension-plan-2022.pdf - Page 5, https://www.oxy.com/documents/pension-plan-2023.pdf - Page 12, https://www.oxy.com/documents/pension-plan-2024.pdf - Page 15, https://www.oxy.com/documents/401k-plan-2022.pdf - Page 8, https://www.oxy.com/documents/401k-plan-2023.pdf - Page 22, https://www.oxy.com/documents/401k-plan-2024.pdf - Page 28, https://www.oxy.com/documents/rsu-plan-2022.pdf - Page 20, https://www.oxy.com/documents/rsu-plan-2023.pdf - Page 14, https://www.oxy.com/documents/rsu-plan-2024.pdf - Page 17, https://www.oxy.com/documents/healthcare-plan-2022.pdf - Page 23

*Please see disclaimer for more information

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