Interest rates are heading in the wrong direction for Kimberly-Clark employees who are considering the lump sum option on their pension payment. Interest rates hit a record low for individuals that commence their benefits in October of but have ticked up for those commencing their benefits in November. Over the last year, interest rates have dropped dramatically which has greatly increased many lump sum payments. However, if interest rates begin to climb many people's lump-sum payments could decrease. Should you desire to take your pension as a lump sum, Kimberly-Clark will use interest rates and your age to calculate your lump sum payment. When interest rates move up or down, your pension lump sum amount will move in an inverse relationship.

Your pension is calculated based on your last date of employment and benefit start date. The benefit calculation is a defined benefit based on your years of service and final average pay. These are used to determine your single life annuity. All other forms of pension payments are based on this figure.

Kimberly-Clark Pension Lump Sum Calculation:

When Kimberly-Clark employees elect the month they would like to begin their pension, Kimberly-Clark looks back two months to calculate the rate used for the pension disbursement.

For example, if you are planning to retire and start your pension in November , Kimberly-Clark would use the rates available in September (two months prior to your month of retirement). This table shows each month and their rates as they stand today:

Kimberly-Clark Segment Rates for December :

For a December pension commencement date, you will use the October segmented rates.

For lump-sum conversions, the annuity is discounted to a present value using the first segment rate for the first five years of expected payments, the second segment rate for the next 15 years of expected payments and the third segment rate for all years of expected payments over 20.

Because the annuity is discounted based on mortality as well as interest rates, the present value of each monthly payment reduces as the probability of living to receive each payment reduces. The older you are when you commence your pension benefit, the fewer the number of years that will be valued using the third segment rate (20+ years) and, conversely, the younger you are, the greater the number of years that will be valued using the third segment rate.

This methodology essentially means that there will be a unique monthly interest rate (lump-sum
conversion factor) for each year and month of birth.

How Do Rate Changes Affect Your Kimberly-Clark Pension?

Because pension pricing is based on interest calculations, making a slight adjustment in your retirement date may have a significant financial impact on your pension due to changing rates each month.

Everything else held equal, a lower interest rate will produce a higher lump sum. The exact changes depend on your specific age, but on average a 1% change in rates can equate to an 8% to 12% change in lump sums. So, on average, a 1% change could increase or decrease your pension lump sum by roughly 10%.

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The changes from just June to September may account for a 1% - 3% increase in lump sums. However, if you look at where rates were in September , they have come down quite a bit. For September , the blended rates were 2.13 / 3.07 / 3.65. That is a drop of 0.76% in the 2nd segment which tends to have the strongest effect. A drop of 0.76% from September to September may have caused your pension to rise by 7% - 9%. For someone with a $500,000 lump sum, that could mean a move of as much as $45,000. For a $1,000,000 lump sum, it would be roughly $70,000 to $90,000. Going forward, if rates start to move back up, you could see your pension lump sum start to drop. The rates are updated monthly, so you have month to month options to commence your pension once you have retired. You do not have to commence your pension as soon as you retire. You have the option to defer it. That may be beneficial if rates are dropping and/or you are under 60 years old. If you take your pension prior to age 60 there are age penalties and you will not receive 100% of your pension benefit.

Given the current interest rate environment, it is highly suggested you discuss your options with
The Retirement Group and allow us to monitor the rates and keep you up to date on the monthly
changes. We can provide a complimentary cash flow analysis to show you how various retirement
dates may play out.

It is important to remember the pension annuity may be a better fit no matter how attractive the
pension lump sum may be. Every situation is unique, and a cash flow analysis will allow you to
compare all pension options.

The pension decision in front of you becomes clearer when you understand the full scope of what Kimberly-Clark offers. It is important to note that Kimberly-Clark maintains a defined benefit pension plan that has been frozen to new benefit accruals -- meaning the plan no longer accumulates future benefits for most employees, but those who were already vested may still be entitled to receive the pension benefit they accrued prior to the freeze, subject to the vesting requirements described in their plan documents - this means the plan no longer accumulates future benefits for most employees, but those who were already vested may still be entitled to receive the pension benefit they accrued prior to the freeze, subject to the vesting requirements described in their plan documents, meaning the plan no longer accumulates future benefits for most employees, but those who were already vested may still be entitled to receive the pension benefit they accrued prior to the freeze, subject to the vesting requirements described in their plan documents. Kimberly-Clark also offers retiree healthcare benefits to eligible employees, which can provide meaningful coverage for those who retire before reaching Medicare eligibility at age 65. Evaluating each Kimberly-Clark benefit as part of a broader retirement strategy ensures no important detail is left unexamined.