People in the United States need to be aware of changes made by both Chevron and the IRS, especially as they approach their 50s and 60s. Although the world seems to become more volatile and uncertain each day, there are a few key constants that can help you keep your retirement plan on track, no matter where you're starting from. Here are some important updates for 2026:
Tax Code Changes 2026
- Standard deduction. Under the One Big Beautiful Bill Act (signed July 4, 2025), the standard deduction was made permanent and further increased for 2026: $16,100 for single filers and married filing separately, $32,200 for married filing jointly, and $24,150 for heads of household.
- Additional deduction. Taxpayers who are over the age of 65 or blind receive an additional standard deduction of $2,050 if filing as single or head of household, or $1,650 per qualifying person if married filing jointly or married filing separately.
- Cash contributions to charity. The special $300/$600 deduction for non-itemizer cash charitable contributions expired after 2021. However, the One Big Beautiful Bill Act created a new above-the-line charitable deduction for non-itemizers starting in 2026: up to $1,000 for single filers and $2,000 for married couples filing jointly. The OBBBA non-itemizer charitable deduction is limited to cash gifts to public charities. Contributions to donor-advised funds, supporting organizations, and private non-operating foundations do not qualify.
Note: Remote workers employed by Chevron might face double taxation on state taxes. Thanks to the advent of remote work during the COVID-19 pandemic, many employees moved away from core cities. Notably, these movements could have taken them outside the state where they were employed. Some states established temporary relief provisions to avoid double taxation of income, but many of those provisions may have expired. There are only six states that currently have a "special convenience of employer" rule: Connecticut, Delaware, Nebraska, New Jersey, New York, and Pennsylvania. If you work remotely for Chevron, and if you don't currently reside in those states, consult with your tax advisor to determine if there are other ways to mitigate the potential for double taxation.
Child Tax Credit Updates for 2026
Many of our clients who are interested in reducing their tax burdens as much as possible are excited to learn about the Child Tax Credit. Although it only applies to individuals with children under the age of 18, it can be relevant to those who are approaching retirement if they have minor children, or if their children have children!
Here are the 2026 updates:
- Maximum credit per qualifying child: $2,200 per qualifying child under the age of 17.
- Child Tax Credit eligibility. As a parent or guardian, you are eligible for the Child Tax Credit if your adjusted gross income is less than $200,000, or $400,000 if married filing jointly.
- Partial refundability. If your Child Tax Credit is greater than your tax, you can receive up to $1,700 as a cash refund.
Optimize your retirement contributions
Contributing to Chevron's 401k plan can cut this year's tax bill significantly. With the right planning, these benefits can be compounded over time. In 2026, the amount you can save increased:
- 2026 limit. Individuals can contribute $24,500 to their 401k plans in 2026.
- Catch-up contributions. Employees age 50 and over can contribute an extra $8,000, bringing their total limit to $32,500. For those who turn 60 - 63 years of age during calendar year 2026, their catch up contribution is $11,250, for a combined total of $35,750.
- A major opportunity. Lowering your taxable income by up to $35,750 means less of your money is immediately taxed. As shown in the table below, this could save you thousands on your current tax bill.
Many investors choose to invest the money they save in taxes for the year. This bonus nest egg then has the opportunity to grow in the market, which can help pay the deferred tax when they make withdrawals from their accounts later in life.
The One Big Beautiful Bill Act also created a new $6,000 above-the-line deduction for taxpayers age 65 and older (available 2025 through 2028), which reduces taxable income and may lower the portion of Social Security benefits subject to federal income tax for many retirees.
Dealing with Inflation
Inflation, we're all too familiar with it. Inflation degrades purchasing power over time, meaning the same things cost more year after year. While inflation is difficult to deal with as a working adult, managing it becomes harder in retirement.
To maintain the same standard of living in retirement, you need to factor rising costs into your plan. While the Federal Reserve targets 2% inflation each year, the scorching inflation of the early 2020s reminded us that Fed targets are anything but a guarantee.
When nearing retirement, it's important to keep track of the rate of inflation, especially in specific areas like health care. While prices as a whole have risen dramatically, increases in particular categories can outpace inflation, which can lead to unpleasant surprises down the road if you're not prepared. Speak with a qualified financial advisor when constructing your holistic plan to help plan for the impacts of future inflation.
*Source: IRS.gov, Yahoo, Bankrate, Forbes
Blogs You May Enjoy:
Source: Is it Worth the Money to Hire a Financial Advisor?, The Balance, 2021
Why start investing early?
Starting to save as early as possible matters. Time on your side means compounding can have significant impacts on your future savings. Once you’ve started, continuing to increase and maximize your contributions for your retirement plan is key.
Understanding the Chevron Pension Plan
Chevron Pension Eligibility and Participation Requirements
- Eligibility: You are eligible for benefits if you vested when employment ends, meaning you have five years of service or you reach age 65.
- Participation: To participate in the Chevron Retirement Plan, you must either have an undistributed benefit in the plan or be an eligible employee.
Legacy Plans and Their Differences
The Chevron Pension Plan incorporates several legacy plans from previously merged companies, including Texaco, Caltex, and Unocal. Understanding which legacy plan applies to you is critical, as each has unique calculation rules.
Chevron Legacy Plan Benefit Determination
Your benefit calculation depends on whether or not you were an eligible employee after your legacy plan's merger date:
- If you were not an eligible employee after your legacy plan’s merger date, the applicable formula depends on the legacy plan in which you participated.
- If you were an eligible employee after your legacy plan’s merger date, then benefits are based on Monthly Age-65 Life Annuity.
Chevron Pension Benefit Calculation Basics
Regardless of your eligibility status or your legacy plan, Chevron Pension Plan benefits are calculated as a monthly Single Life Annuity. The specific formula to calculate your benefits depends on your eligibility after your legacy plan's merger date, which we explained above.
For purposes of calculation, your Highest Average Earnings are the monthly average of your regular earnings for the 36 consecutive months in which they’re the highest. In most cases, this will be the sum of your last 36 months of employment divided by 36.
The Applicable Interest Rate is a separate average of each of the three segment rates for the fifth, fourth, and third months preceding your annuity start date. These segment rates are calculated by the IRS under the Pension Protection Act of 2006 and reflect the yields of short-, mid-, and long-term corporate bonds.
Next, we will cover plan-specific calculations, depending on which legacy pension plan you are a part of.
1. Legacy Chevron & Caltex Retirement Plans
2. Legacy Texaco Retirement Plan
3. Legacy Unocal Retirement Plan
Note: If you are an active or former hourly employee at the Questa facility covered by the provisions of subsection 14.5 and Appendix F of the Unocal Retirement Plan (URP) before it was merged into the CRP on July 1, 2006, you automatically became a Participant of Supplement VV of the CRP on July 1, 2006 (described in a separate SPD).
Additional Benefits by Legacy Plan
Depending on your Legacy Plan, you may be afforded additional benefits. Consult the following graphic to find out what you're potentially eligible for.
The Social Security Offset & The Risk of Mistakes
The Social Security offset is a reduction applied to your Chevron Pension Plan benefit to account for the portion of your retirement income that is expected to come from Social Security payments. This offset is intended to ensure that combined retirement benefit payouts remain equitable across participants.
The Social Security offset is calculated as follows:
However, note that companies can and do make mistakes when it comes to Social Security offset projections. To protect your pension benefits, keep in mind the following points:
- If Chevron over-projects the offset: Send in your Social Security statement and have it corrected; this can lead to a larger company annuity / lump-sum benefit.
- If Chevron under-projects the offset: Keep the larger benefit.
Be careful about sending in your Social Security statement without first consulting a Chevron-focused advisor. If you're interested in speaking with a financial advisor well-versed in the intricacies of the Chevron Pension Plan, reach out today and schedule an introductory meeting.
Considering Your Chevron Pension Plan Payout Options
The Chevron Pension Plan offers a number of payout options, each with its own benefits and drawbacks. Before electing your own payout option, be sure you fully understand all of your options.
Single Life Annuity
- The monthly Single Life Annuity (SLA) is the benefit from which all of the optional forms of payment under the Chevron Pension Plan are derived.
- The SLA pays a fixed amount each month for your lifetime.
- A death benefit may be payable to your beneficiary, if the plan is vested and you die before employment ends or before you start receiving benefits.
Lump-Sum Option (most oil companies offer a lump sum)
- Instead of receiving a monthly payment, you can elect to receive a lump sum.
- The lump-sum payment is actuarially equivalent to the total annuity you would have received as a Single Life Annuity during your lifetime.
- The payment is calculated using actuarial factors based on your age and the interest rate in effect on your annuity starting date.
- No death benefits are payable under the lump-sum option.
NOTE: When choosing between a lump-sum vs. an annuity, remember: Your lump-sum payout will increase as interest rates decrease. That means lump sums tend to be most favorable in low interest rate environments.
Life & Term-Certain Annuity Option
- Lower than the Single Life Annuity, the Life & Term-Certain Annuity option offers a guaranteed payment period.
- Receive certain payments for a 5, 10, or 15 year period. If you pass away before this period is over, your designated beneficiary will receive payments during this period.
- If you have multiple beneficiaries or if your beneficiary is your estate or trust, remaining payments will be converted actuarially to a lump sum.
- After the designated period, payments will continue for the remainder of your lifetime.
- No death benefits are payable after your death, assuming you live past the guaranteed payment period.
Looking for a second opinion? Click here to speak to a Chevron-focused financial advisor today, or call (800) 900-5867.
Joint & Survivor Annuity
- Offers a monthly benefit for your lifetime.
- Upon your death, a percentage of your monthly benefit is paid to your joint annuitant for the rest of their lifetime.
Note that your monthly benefit will be reduced to account for the payments your joint annuitant will receive after your death. Additional reduction factors will be applied to your benefit if:
- You elect a Joint and Survivor Annuity with a continuation percentage of > 53%.
- Your joint annuitant is someone other than your spouse and is more than 10 years younger than you.
Death of Joint Annuitant: Note that there is a possible increase in payments if the joint annuitant dies within five years of the start date. Consult the following table to calculate the potential increase.
Uniform Income
- Designed to provide a consistent income level before and after receiving Social Security Benefits.
- Before age 62, beneficiaries receive a larger monthly annuity from the plan.
- After age 62, when Social Security benefits become available, beneficiaries receive a smaller monthly annuity from the plan.
- Every company treats Uniform Income differently. Review Chevron's SPD or talk to a Chevron-focused advisor to find out the rules for your specific plan.
If you elect to start your pension payments early, refer to your Chevron SPD for the Immediate Commencement Discount Factor Table.
Are you in your 50s or 60s and choosing between a lump sum or an annuity? Discuss your options with an experienced advisor to determine what's best for you and your family.
You should routinely use the tools and resources found in The Retirement Group's eBook library, such as the Retirekit, to model your pension benefit in retirement and the pension payment options that will be available to you.
You can also contact a Chevron-focused advisor at The Retirement Group at (800)-900-5867. We will review your pension options with you to help you start the retirement process on the right foot.
Note: We recommend you read the Chevron Summary Plan Description. The Retirement Group is not affiliated with Chevron.
Lump-Sum vs. Annuity: How to decide?
Chevron employees in your state who are eligible for a pension are often given the choice to either receive pension payments for life or take a lump-sum dollar amount upfront for the “equivalent” value of the pension. The idea for those who choose a lump sum is that you could take the money, roll it over to an individual retirement account (IRA), invest it, and generate your own cash flows that enable you to take systematic withdrawals following your retirement from Chevron.
On the plus side, a lump sum payment gives complete flexibility over the funds, potentially allowing you to generate a greater retirement cash flow than you would receive with an annuity. Additionally, if something happens to you, any unused account balance will be available to a surviving spouse or heirs. However, if you fail to invest the funds for sufficient growth, there’s a danger that the money could run out during your lifetime, and you may regret not having held onto the pension’s “income for life” guarantee.
For its part, a pension annuity provides you with a steady stream of income throughout your lifetime, as long as the pension plan itself remains solvent and doesn’t default. So whether you live 10, 20, or 30 (or more!) years after leaving Chevron, you don’t have to worry about the risk of outliving your money.
However, taking an annuity also comes with some drawbacks. Once you annuitize your pension, you can no longer access the lump sum. Additionally, unlike Social Security benefits, not all company pensions contain a cost of living allowance (COLA). That means the dollar amount of your monthly pension will remain the same throughout your retirement, losing its purchasing power in the face of inflation.
Ultimately, your decision will depend on what return must be generated on that lump sum to replicate the payments of the annuity. After all, if a return of only 1% to 2% on your lump sum can create the same lifetime cash flows you'd see with an annuity, you're at less risk of outliving the lump sum after leaving Chevron, even if you withdraw from it for life. However, if the annuity payments can only be matched by earning a much higher and possibly riskier rate of return, there is a greater risk those returns won’t manifest and you could run out of money.
Interest Rates and Life Expectancy
In determining whether a lump sum payment or annuity from your Chevron pension plan is right for you, current and future retirees in the United States should consider several factors.
It's important to begin by understanding how your pension is calculated. As we explained earlier in this guide, your pension is based on your last date of employment and your benefit commencement date. The benefit calculation itself is based on your years of service and final average pay. These, along with a Social Security offset, determine your single life annuity. All other forms of pension payments are based on this figure.
If you decide to take your pension as a lump sum, Chevron will use interest rates and your age to calculate your lump sum payment. After you select the month you would like to begin your pension, Chevron looks back three months to calculate the interest rate used for the pension disbursement. For example, if you plan to retire and start your pension in September 2026, Chevron would use the blended rate available from June to August 2026 (three months prior to your month of retirement).
Additionally, 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 years.
Because pension pricing is based on interest calculations, a slight adjustment in your retirement date could have a significant financial impact on your pension. That's because interest rates change each month. For example, while interest rates dropped dramatically in 2020, they've more recently reached some of their highest rates in recent memory.
When interest rates move up or down, your pension lump sum amount will move in an inverse relationship. All else equal, a higher interest rate will produce a lower lump sum. The exact changes depends on your specific age but, on average, a 1% change in interest rates can equate to an 8% to 12% change in lump sum value in the opposite direction.
Given the current complex interest rate environment, we strongly suggest discussing your options with The Retirement Group. We monitor rates on a daily basis and keep you updated on the monthly changes. We can provide a complimentary Cash Flow Analysis to show you how various retirement dates may play out.
It's important to remember that the annuity option may be a better fit no matter how attractive the lump sum may be. Every situation is unique, and a Cash Flow Analysis will allow you to compare all pension options to make an informed choice.
Getting help with your 401k
Over half of plan participants in the United States admit they don’t have the time, interest, or knowledge needed to manage their 401k portfolio. But the benefits of getting help go beyond convenience.
A Charles Schwab study found several positive outcomes common to those using independent professional advice. They include:
- Improved savings rates – 70% of participants who obtained 401k advice increased their contributions.
- Increased diversification – Participants who managed their own portfolios invested in an average of just under four asset classes, while participants in advice-based portfolios invested in a minimum of eight asset classes.
- Increased likelihood of staying the course – Getting advice raised the odds of participants staying true to their investment objectives, making them less reactive during volatile market conditions and more likely to remain in their original 401k investments during a downturn.
Don't try to do it alone. Get help with your company's 401k plan investments. Your nest egg will thank you.
It’s important to know that certain withdrawals are subject to regular federal income tax and you may also be subject to an additional 10% penalty tax depending on your age.
You can determine if you’re eligible for a withdrawal, and request one, online or by calling the Chevron Benefits Center in the United States. Your plan summary outlines more information and possible restrictions on rollovers and withdrawals.
You should also know that the plan administrator reserves the right to modify the rules regarding withdrawals at any time, and may further restrict or limit the availability of withdrawals for administrative or other reasons. All plan participants will be advised of any such restrictions, which apply equally to all Chevron employees.
Net Unrealized Appreciation (NUA)
When you qualify for a distribution from your 401k plan, you have three options:
- Roll over your qualified plan to an IRA and continue deferring taxes.
- Take a distribution and pay ordinary income tax on the full amount.
- Take advantage of NUA and reap the benefits of a more favorable tax structure on gains.
So how does Net Unrealized Appreciation actually work?
First, you must be eligible for a distribution from your qualified company-sponsored plan, which typically happens at retirement age. Generally, you would take a lump sum distribution from the plan, distributing all assets from the plan during a one-year period. The portion of the plan that is made up of mutual funds and other investments can be rolled into an IRA for further tax deferral. The highly appreciated company stock is then transferred to a non-retirement account.
The tax benefit comes when you transfer the company stock from a tax-deferred account to a taxable account. At this time, you apply NUA and you incur an ordinary income tax liability on only the cost basis of your stock. The appreciated value of the stock above its basis is not taxed as ordinary income tax rates but at long-term capital gains rates of 0%, 15%, or 20%, depending on your taxable income. The 3.8% Net Investment Income Tax under §1411 may also apply if your income is above $200,000 (single) or $250,000 (MFJ). This could mean a potential savings of over 30%.
Example: Net Unrealized Appreciation (NUA) Tax Savings
As a Chevron employee in the United States, you may be interested in understanding NUA from a financial advisor. Reach out today to schedule a complimentary meeting.
IRA Withdrawal
Your retirement assets may be spread across several retirement accounts: IRAs, 401ks, taxable accounts, and others.
What is the most efficient way to take your retirement income after leaving Chevron?
This question relates to something called withdrawal sequencing, and it's a problem we're well-equipped to handle at The Retirement Group.
You may want to consider meeting your income needs in retirement by first drawing down taxable accounts rather than tax-deferred accounts. This may help your retirement assets with your company last longer as they continue to potentially grow tax deferred.
You will also need to plan to take required minimum distributions (RMDs) from any company-sponsored retirement plans and traditional or rollover IRA accounts. Under SECURE 2.0, the RMD age is 73 for those born between 1951 and 1959, and 75 for those born in 1960 or later.
Two flexible distribution options for your IRA
When you need to draw on your IRA for income or to take your RMDs, you have a few choices. Regardless of what you choose, IRA distributions are subject to income taxes and may be subject to penalties and other conditions if you’re under 59½.
Option 1. Partial withdrawals: Withdraw any amount from your IRA at any time. If you’re 73 or over, you’ll have to take at least enough from one or more IRAs to meet your annual RMD.
Option 2. Systematic withdrawal plans: Structure regular, automatic withdrawals from your IRA by choosing the amount and frequency to meet your income needs after retiring from Chevron. If you’re under 59½, you may be subject to a 10% early withdrawal penalty (unless your withdrawal plan meets Code Section 72(t) rules).
Your tax advisor can help you understand distribution options, determine RMD requirements, calculate RMDs, and set up a systematic withdrawal plan.
Chevron Health Care in Retirement
Even after retirement, your Chevron health plan can still cover part of your medical expenses. The plans you are eligible for depend on whether you are over or under age 65.
Health Care Options for Retirees Under Age 65
Prior to turning 65, you may continue to participate in Chevron’s group medical coverage. Under this coverage, you and your spouse/domestic partner have coverage options, including:
- Medical PPO Plan
- High Deductible Plan
- Medical HMO Plan
Coverage rates depend on your age and years of service.
Health Care Options for Retirees Age 65 or Older
Once you become eligible for Medicare at age 65, Chevron employees and their dependents become eligible for a health care private exchange called OneExchange.
Although your primary health care coverage will be through Medicare, OneExchange can replace the coverage under Medicare Part A and Part B. You may also be able to add Part D coverage.
With OneExchange, you can choose from a few different coverage rates and many insurance companies based on your preferences.
OneExchange services are funded through reimbursements to a Health Retirement Account (HRA). These funds have a deadline for use and are not as flexible as funds in a Health Savings Account (HSA), which we explain in more detail below. HRA funds also earn no additional interest on the money in the account, unlike an HSA, where funds can grow inside the account. If you have both an HRA and HSA, consider using the funds in the HRA for reimbursement before using any HSA funds.
Chevron Health Care Company Covered Premiums
In retirement, part of your health care premiums may be covered by Chevron. To determine how much of your premiums are covered, Chevron considers your current age, your age at retirement, and your eligible years of service.
80 Point Formula. If you retired before January 1, 2005, and were age 50 or older with 10 years of service, you would be eligible for the 80-point formula, which gives you points based on the following formula:
Age + Years of eligible service = Points
90 Point Formula. If you retired after January 1, 2005, or did not qualify for the 80-point formula, you fall under the 90-point formula, which is based on the same formula:
Age + Years of eligible service = Points
Chevron Benefits Annual Enrollment
As stated in your Chevron SPD, annual enrollment for your Chevron benefits typically takes place from late October through mid-November each year. Before it begins, enrollment materials and an upfront confirmation statement reflecting your benefits coverage will be mailed to the address on file. You’ll find enrollment instructions and information about your benefit options and contribution amounts. You will have the option to keep the benefit coverage shown on your upfront confirmation statement or select benefits that better support your needs. If you'd prefer to receive this information via email, you can enroll in eBenefits.
Chevron Short-Term & Long-Term Disability Coverage
- Short-Term: Depending on your plan, you may have access to short-term disability (STD) benefits through Chevron.
- Long-Term: Your plan's long-term disability (LTD) benefits are designed to provide you with income if you are absent from employment for six consecutive months or longer due to an eligible illness or injury.
Next Steps:
- Watch for your annual enrollment information in the September/November timeframe.
- Review your benefits information and use the tools and resources available on the Chevron Benefits Center website.
- Enroll in eBenefits.
Things to keep in mind:
- 47% of Americans cite health care as their greatest economic concern.
- Medical bills are the #1 cause of bankruptcy in the United States.
- For older Americans, health care costs represent the second largest expense, behind housing.
Using an HSA for Retirement Health Care
Health care costs are increasing drastically. According to the Centers for Medicare & Medicaid Services, health care in 2025 accounted for over 17% of the United States' GDP, which amounted to $4.5 trillion.
This raises the question: How will you be paying for health care in retirement?
Health Savings Accounts (HSAs) are tax-advantaged accounts designed for individuals with high-deductible insurance plans. For 2026, the IRS defines high-deductible plans as those with a minimum deductible of $1,700 for individuals, or $3,400 for families.
HSAs are often celebrated for their utility in managing health care expenses in a tax-smart way, with three primary benefits:
- HSAs allow contributions to be made pre-tax.
- Investments within HSAs grow tax-free.
- Withdrawals are tax-free for qualified medical expenses.
Thanks to this triple tax advantage, HSAs are a potent retirement savings vehicle, especially after you've maxed out the employer match to your Chevron 401k in the United States.
HSA Contribution Limits & Retirement Strategy
In 2026, individuals can contribute $4,400 to an HSA, and families can contribute $8,750. Those aged 55 and older can contribute an additional $1,000.
When it comes to its place in your retirement toolbelt, HSAs really shine after you reach your employer's maximum match in 401k contributions. While 401ks offer tax-deductible contributions and tax-deferred growth, their withdrawals are taxable. HSAs bypass the withdrawal tax for qualified medical expenses, which are a significant (and increasing!) portion of retirement costs.
However, after age 65, the HSA flexes its muscles even more. After this age, funds can be withdrawn for any purpose, and subject to only regular income tax if used for non-medical expenses. This flexibility offers the benefits of traditional retirement accounts, but with the added advantage of tax-free withdrawals for qualified medical costs.
Further, HSAs do not have required minimum distributions (RMD) rules like 401ks and traditional IRAs do, offering more control over tax planning in retirement. This makes HSAs particularly relevant for those who don't anticipate needing all of their funds right away in retirement, or who want to reduce their taxable income, perhaps as a part of a deferred compensation strategy.
HSA Investment Strategy Insights: Initially, conservative investment within an HSA is prudent. Early on, it's important to focus on maintaining sufficient liquid funds to cover near-term deductibles and out-of-pocket medical expenses. However, once you've established a solid financial cushion, treating an HSA like a retirement account by investing in a diversified mix of assets can significantly boost long-term opportunity and flexibility.
What can an HSA cover?
In retirement, HSAs can cover a range of expenses:
- Medical expenses. You can use HSA funds tax-free for qualified medical expenses, which include most doctor visits, prescriptions, and dental or vision care.
- Medicare premiums. HSA funds can pay for Medicare Part B, Part D, and Medicare Advantage premiums.
- Long-term care. HSA funds can cover some amount of qualified long-term care insurance premiums or services.
- Non-medical expenses. After age 65, you can withdraw HSA funds for non-medical expenses without penalty, although these withdrawals will be taxed as regular income.
HSAs are a powerful retirement tool, with unique advantages that can augment your Chevron health care benefits. By making strategic contributions and considerate withdrawals, you can optimize your financial health in retirement, while also prioritizing your physical health.
Claiming Social Security is one thing; understanding how your claim works is something else entirely. Understanding Social Security is a difficult but crucial step in assessing your retirement paycheck. For many Americans, Social Security benefits are core to their retirement income strategy. However, when and why you claim them depends on your overall withdrawal strategy.
To help you make an informed decision, let's explore three main steps you should follow to solidify your Social Security strategy at Chevron:
Step 1. Decide when to claim your Social Security benefits
Social Security benefits can be significant, but at the end of the day, they're just one part of your overall financial picture. When considering the timing of your claim, keep this general principle in mind: The later you begin receiving benefits, the larger those benefits will be.
The full monthly Social Security retirement benefit is based on applying at the Full Retirement Age (FRA), which is age 67 for those born 1960 or later. For every year you wait after you reach the FRA, your benefit amount increases 8%. It reaches a maximum at age 70. If we do the math, we can determine that, if you start claiming at age 70, your monthly benefit will be 124% the full benefit.
However, you can also apply before you reach FRA, as early as age 62. You will receive a reduced benefit if you do so, but this option could make sense for those who want to start claiming their benefit earlier for longevity reasons.
Step 2. Understand the tax implications
For all but the lowest-income retirees, Social Security benefits are actually taxable. Only individuals with provisional income under $25,000, or $32,000 if married filing jointly, receive their benefits tax-free. Otherwise, up to 85% of your benefits will be treated as taxable income.
Furthermore, depending on where you live, your Social Security benefits may even be taxed at the state level. If you plan to move for retirement, the tax regime in the state you're moving to can be a relevant consideration.
Step 3. Start preparing today
Even if your retirement is right around the corner, you can make decisions today that will impact you for years, or decades, to come. For instance, delaying your Social Security claiming date even a year or two can snowball into a significant benefit. To bridge the gap between their retirement date and their claiming date, some people create a "slush fund" while they're working to take the place of the Social Security benefits they would receive from claiming at FRA. Whether these funds come from a 401k, IRA, or brokerage account, integrating a bit of extra padding in your planning can pay off in the long run.
Always remember, your Social Security benefit is just one part of your overall financial picture. And when you start to consider tax implications, withdrawal sequencing, and effective diversification (beyond just the asset class), the picture can start to get complicated. That's what we're here to help with. At The Retirement Group, we've been assisting Chevron employees to and through retirement for years. If you're interested in speaking with an experienced advisor who's been through the process before, reach out today.
Chevron Medicare Coverage for Retirees
Are you eligible for Medicare or will be soon? If you or your dependents are eligible after you leave Chevron, Medicare generally becomes the primary coverage for you or any of your dependents as soon as they are eligible for Medicare. This will affect your company-provided medical benefits.
It's your responsibility to enroll in Medicare Parts A and B when you first become eligible, and you must stay enrolled to have coverage for Medicare-eligible expenses. This applies to your Medicare-eligible dependents as well.
The Reality of Medical Costs in Retirement
Divorce and Retirement Benefits Explained
Social Security Benefits. Divorce can significantly impact retirement benefits, including Social Security. Understanding how divorce affects Social Security is essential for retirement planning, especially if you were married for a long time. In some cases, divorced individuals may be eligible to claim benefits based on their former spouse's work record.
You can apply for a divorced spouse’s benefit if the following criteria are met:
- You’re at least 62 years of age.
- You were married for at least 10 years prior to the divorce.
- You are currently unmarried.
- Your ex-spouse is entitled to Social Security benefits.
- Your own Social Security benefit amount is less than your spousal benefit amount, which is equal to one-half of what your ex’s full benefit amount would be if claimed at Full Retirement Age (FRA).
Unlike a married couple, your ex-spouse doesn’t have to have filed for Social Security before you can apply for your divorced spouse’s benefit. However, this caveat only applies if you’ve been divorced for at least two years, and your ex is at least 62 years of age. If the divorce was less than two years ago, your ex must already be receiving benefits before you can file as a divorced spouse.
Social Security Survivor Benefits
Many people are surprised that divorce doesn't disqualify you from receiving survivor benefits if your spouse dies. You can claim a divorced spouse's survivor benefit if the following conditions are met:
- Your ex-spouse is deceased.
- You are at least 60 years old.
- You were married for at least 10 years.
- You are single or you remarried after age 60.
If you qualify for survivor benefits and your own Social Security benefits, you can choose to start with survivor benefits and switch to your own later, or vice versa, depending on which option gives you the highest payout over time. If this pertains to you, we recommend speaking to a qualified financial advisor, because planning your Social Security strategy in advance is critical to optimizing your outcomes.
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