Section 1: 2024 Tax Changes & Inflation

Section 2: Planning Your Retirement

Section 3: Your Pension Plan

Section 4: Your 401(k) Plan

Section 5: Your Benefits

Section 6: Divorce

Section 7: Survivor Checklist

Section 8: Life After Your Career

Section 9: Sources

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Retirement planning is a verb. And regardless of age, you have to act consistently.

The majority of Americans actually don't know how much money they should save or how much income they'll require.

Regardless of your age or where you are in the preparation process, we hope this guide will provide you with a clear understanding of the actions to take and resources to make your transition from your employer to retirement as easy as possible while maximizing your benefits.

You don't have the time or experience to determine whether you're accumulating retirement funds that will endure after leaving your job, even though you know you should be saving and investing because time is on your side the sooner you start.

'A separate study by Russell Investments, a large money management firm, came  to a similar conclusion .  Russell estimates a  good  financial advisor can  increase investor returns by 3.75 percent.'

Choosing to invest in your company's retirement plan can result in a 79% potential increase in wealth at age 65 over a 20-year timeframe.

*Source: Bridging the Gap Between 401(k) Sponsors and Participants, T.Rowe Price, 2020

Our recommendations for retirement savings always take into account your particular financial status and aspirations. Nonetheless, during your 30s and 40s, think about setting aside at least 10% of your income for retirement funds. Maximizing your company's contribution match should be a goal, provided that your unique situation permits.

You're ideally in your prime earning years as you approach your 50s and 60s, with some of your biggest expenses—like a mortgage or raising children—either behind you or about to go. Now could be a good time to see whether you can increase your retirement savings target to 20% or higher of your income. This may be the last chance that many individuals have to put money down.

Employees fifty years of age or over have the option to contribute a maximum of $23,000 to their retirement 401(k) in 2024. After they reach this amount, they can make extra $7,500 in catch-up contributions. Every year, these caps are revised to account for inflation.

If you’re a Chevron employee over 50, you may be eligible to use a catch-up contribution within your IRA.

Why are 401(k)s and matching contributions so popular?

You have the opportunity to benefit from these retirement savings vehicles in three key ways:

• Growth prospects that compound (as seen above)

• Prospects for reducing taxes

• Comparing contributions

It might be challenging to decide what to do with your hard-earned retirement savings, whether you're moving jobs or retiring from your employer. The bulk of your retirement assets may be in a company-sponsored plan, such a 401(k) or pension, but how much do you actually know about the plan's operation?
 
There are several regulations that differ between retirement plans; these include early withdrawal penalties, interest rate effects, age restrictions, and intricate tax implications.

The secret to a successful retirement plan spending strategy is to increase your investment balance while lowering taxes. The Retirement Group can assist you in making the most out of your company's 401(k) plan and comprehending how it fits into your entire financial plan.

Employees are significantly more likely to get their income from their workplace's defined contribution (DC) retirement plans.

'Getting help and leveraging the financial planning tools and resources your company

makes available can help you understand whether you are on track, or need to

make adjustments to meet your long-term retirement goals...'

Source: Schwab 401(k) Survey Finds Savings Goals and Stress Levels on the Rise

Lump-Sum vs. Annuity

Retirees who are eligible for a pension are frequently given the option of taking the pension payments for life or receiving a lump-sum dollar amount for the "equivalent" value of the pension - with the expectation that you will then take the money (rolling it over to an IRA), invest it, and generate your own cash flows by taking systematic withdrawals from your company throughout retirement.

The benefit of preserving the pension is that the payments are guaranteed to continue indefinitely (as long as the pension plan is in effect, viable, and does not default). Thus, whether you survive 10, 20, or 30 (or more!) years after leaving your company, you will not be concerned about outliving your money.


In contrast, choosing the lump-sum option allows you to invest, earn higher growth, and perhaps produce even more retirement income flow. Furthermore, if something happens to you, any unused account balance will be available to your surviving spouse or heirs. However, if you fail to invest the funds for sufficient development, the money may run out entirely, and you may regret not taking advantage of the pension's "income for life" guarantee.

Finally, the "risk" assessment that should be performed to determine whether you should choose the lump amount or the guaranteed lifetime payments that your business pension provides is determined by the type of return that must be created on that lump sum in order to match the annuity payments. After all, if it only takes a 1% to 2% return on the lump-sum to generate the same pension cash flows for a lifetime, there is little chance that you will outlive the lump-sum after leaving your firm, even if you withdraw it for life(10). However, if the pension payments can only be replaced with a higher and more risky rate of return, there is a bigger danger that those gains will not materialize and you would run out of funds.

Interest Rates and Life Expectancy

Many defined benefit plans, such as the Chevron pension plan, offer current and future retirees a lump sum payment or a monthly pension benefit. Your pension is computed using your last date of employment and the benefit start or commencement date. The benefit computation is based on your years of employment and final average salary. These, combined with a social security offset, are used to calculate your single-life annuity. All other types of pension payments are based on this value.

If you want to withdraw your pension in one lump sum, Chevron will compute the amount based on interest rates and your age. When interest rates rise or fall, the amount of your pension lump sum changes in the opposite direction. After falling considerably in 2020, interest rates began to rise following Covid. When you choose the month to begin your pension, Chevron calculates the rate utilized for the pension disbursement based on the previous three months. For example, if you want to retire and begin receiving your pension in June 2024, Chevron will apply the blended rate available from January 2024 to March 2024 (three months before your retirement date). This example depicts three months' worth of rates and how they are used to calculate your rates for various pension segments.

For example, if you start your pension in May 2024, the blended rate is the average of the rates in December 2023, January 2024, and February 2024.

For lump-sum conversions, the annuity is discounted to present value using the first segment rate for the first 5 years of planned payments, the second segment rate for the next 15 years of expected payments, and the third segment rate for all years of expected payments after 20 years.

Because pension pricing is dependent on interest calculations, even little changes in your retirement date might have a large financial impact on your pension due to monthly rate fluctuations.

The blended rates for June 2024 are currently 4.95%, 5.18%, and 5.34%, compared to May 2024 rates of 4.96%, 5.16%, and 5.27%. You will note that these rates are practically the same.

Everything else being equal, a higher interest rate results in a lesser lump payment. The precise changes depend on your age, but on average, a 1% change in interest rates can result in an 8% to 12% shift in lump sum values in the other direction.  

For illustration, a 1% increase in interest rates may result in a 10% drop in your pension. Someone with a $500,000 lump sum may see their lump sum decrease by around $50,000. For a $1,000,000 lump amount, it would be approximately $100,000 less.

The rates are revised regularly, giving you month-to-month alternatives for starting your pension if you have retired. You are not required to begin your pension upon retirement. You have the option of deferring it. This could be advantageous if interest rates are falling and/or you are under the age of 60. If you draw your pension before the age of 60, you will incur age penalties and will not receive the full amount of your pension payment.

Given the current rising interest rate environment, it is strongly advised that you discuss your alternatives with The Retirement Group and allow us to monitor rates and keep you up to date on monthly changes. We can conduct a free Cash Flow Analysis to show you how different retirement dates might work out.

It is crucial to remember that a pension annuity may be a superior fit, regardless of how appealing the pension lump amount appears. Every circumstance is unique, and a Cash Flow Analysis enables you to assess various pension possibilities.

Non-Qualified Executive Compensation Plans

The Deferred Compensation Plan (DCP)

This plan enables executives with PSG 28 or higher to defer a portion of their salary throughout employment years. After retirement or separation, accrued amounts can be distributed as a lump sum or in annual payments (for up to ten years). Distributions are subject to regular income tax rates in the year they are received.

Retirement Restoration Plans (RRPs)

This plan is for executives with a PSG of 26 or above and provides an additional retirement benefit in the form of a lump amount or annual payments (for up to ten years). The decision on how to share the proceeds must be made during enrolling. The default payment method is a lump sum, which may not be the most tax-efficient. Distributions are subject to regular income tax rates in the year they are received. The RRP is distributed at least five quarters after retirement from service. The distribution can be adjusted at least twelve months before the first payment, but the payment is deferred for at least five years. The RRP amount also increases at the ten-year Treasury rate.

Take Action: If you are unsure about your pension planning, please call us at (800) 900-5867 and one of our Chevron-focused experts will speak with you.

When was the last time you evaluated or made changes to your company's 401(k) plan account?

If it's been a while, you are not alone. Every year, 73% of plan participants devote fewer than five hours to exploring their 401(k) investment options, and the situation is considerably worse when it comes to account changes.

If you have balances in your 401(k) plan at the time you retire, you will receive a Participant Distribution Notice via mail. This message will display the current value that you are eligible to receive from each plan and explain your distribution options. It will also explain what you must do to obtain your final allocation. For additional information, please call The Retirement Group at (800)-900-5867, and we will put you in touch with a specialist retirement-focused advisor.

Next Step:

• Receive your Participant Distribution Notice and Special Tax Notice for Plan Payments. These mailings will assist you understand your options and the potential federal tax implications for your vested account balance.
• "What has Worked in Investing" & "8 Tenets when picking a Mutual Fund" .
• To learn more about your distribution alternatives, call The Retirement Group at (800)-900-5867. More information on "Rollover Strategies for 401(k)s" is available in our e-book. If you need to amend your beneficiary designations, use the Online Beneficiary Designation tool.

More than half of plan participants say they lack the time, desire, or understanding required to manage their 401(k) portfolio. But the benefits of seeking assistance extend beyond convenience. According to Charles Schwab's research, plan participants who receive investment advice tend to have portfolios that perform better: The annual performance difference between those who receive assistance and those who do not is 3.32%, net of expenses. This suggests that a 45-year-old person may increase their wealth by 79% by the age of 65 simply by contacting an advisor. That's a significant difference.

HSA's

Health Savings Accounts (HSAs) are frequently praised for their effectiveness in managing healthcare costs, particularly for people with high-deductible health plans. However, their advantages go beyond medical cost management, establishing HSAs as a potentially superior retirement savings vehicle compared to typical retirement plans such as 401(k)s, particularly after employer matching contributions are exhausted.

Understanding HSAs

HSAs are tax-advantaged accounts intended for people who have high-deductible health insurance policies. For 2024, the IRS classifies high-deductible plans as having a minimum deductible of $1,600 for individuals and $3,200 for families. HSAs provide pre-tax contributions, tax-free investment growth, and tax-free withdrawals for qualified medical costs, making them a triple-tax-advantaged account.

HSAs' annual contribution limits in 2024 are $4,150 for individuals and $8,300 for families, with an additional $1,000 allowed for those 55 and older. Unlike Flexible Spending Accounts (FSAs), HSA funds do not expire at the end of the year; they grow and can be carried forward indefinitely.

Comparing HSAs versus 401(k)s after Matching

Once an employer's maximum 401(k) match is reached, additional contributions result in less immediate financial rewards. This is where HSAs can serve as a strategic complement. 401(k)s provide tax-deferred growth and tax-deductible contributions, but withdrawals are taxed. In contrast, HSAs allow for tax-free withdrawals for medical expenses, which account for a major amount of retirement costs.

HSA as a Retirement Tool.

After age 65, the HSA stretches its muscles as a powerful retirement tool. Funds can be withdrawn for any reason, subject only to standard income tax if spent for non-medical expenses. This flexibility is similar to that of regular retirement plans, but it also includes tax-free withdrawals for medical bills, which is a substantial benefit given escalating healthcare costs in retirement.

Furthermore, unlike 401(k)s and Traditional IRAs, HSAs have no Required Minimum Distributions (RMDs), giving you more flexibility over your tax planning in retirement. This makes HSAs especially appealing to those who may not need to access their funds immediately after retirement or who want to reduce their taxable income.

Investment Strategy for HSAs.

Initially, it is prudent to invest conservatively in an HSA, with an emphasis on ensuring that there are enough liquid assets to cover the near-term deductible and other out-of-pocket medical expenses. However, if a financial cushion has been formed, using the HSA as a retirement account and investing in a diverse mix of equities and bonds can considerably improve the account's long-term growth potential.

Utilizing HSAs in retirement

In retirement, HSAs can cover a variety of expenses:

• Healthcare Costs-Pre-Medicare: HSAs can cover healthcare costs to bridge you to Medicare.

• Healthcare Costs After Medicare: HSAs can be used to pay for Medicare premiums as well as out-of-pocket medical expenses such as dental and eye treatment, which are frequently not covered by Medicare.

• Long-term Care: Funds may be used for approved long-term care services and insurance payments.

• Non-medical Expenses: After age 65, HSA funds can be used for non-medical expenses without penalty, but withdrawals are subject to income tax.

What Happens If Your Employment with Your Company Ends?

Your life insurance coverage, as well as any optional coverage you acquire for your spouse/domestic partner and/or children, expires on the date your employment with your firm ends, unless it is due to disability. If you die within 31 days of your company's termination date, your beneficiary receives benefits for both your basic life insurance and any supplemental life insurance coverage you choose.

Note:

• You may be able to change your life insurance to an individual policy or choose portability for any optional coverage.

• If you cease paying additional contributions, your coverage will expire.

• If you are at least 65 years old and pay for additional life insurance, the insurance company should send you literature in the mail explaining your options.

• Make care to notify your beneficiaries. For more information, please refer to the Chevron SPD.

Many retirees struggle to comprehend and claim Social Security, but determining the best ways to claim Social Security is critical to your retirement income planning. Social Security benefits are not intended to be the primary source of retirement income, but rather to supplement your total withdrawal strategy.

Knowing the fundamentals of Social Security and applying that knowledge to your advantage will help you collect the most benefit.

It is your duty to enroll in Medicare Parts A and B when you first become eligible, and you must remain enrolled to receive coverage for Medicare-eligible expenses. This also applies to your dependents who are qualified for Medicare benefits.

You should understand how your retiree medical plan selections and Medicare eligibility affect your plan alternatives. Before you resign from your employer, contact the Social Security Administration at 800-772-1213, your local Social Security Office, or ssa.gov.

They can assist you in determining your eligibility, enrolling you and/or your eligible dependents in Medicare, and providing information about other government programs. Please call us if you need additional information about Social Security.

Before retiring from your company, check the status of your Social Security benefits. Contact the United States Social Security Administration, your local Social Security office, or go to ssa.gov.
 
Are you currently eligible for Medicare or will you be soon?

If you or your dependents become eligible after leaving your telecom industry company, Medicare normally takes over as your primary coverage as soon as they become eligible. This will have an impact on the medical benefits supplied by the firm.

When you initially become eligible for Medicare, you and your dependents must enroll in Parts A and B of the program. Medical and MH/SA benefits payable under the company-sponsored plan will be lowered by the sums Medicare Parts A and B would have paid, whether or not you enrolled in them.

For more information on benefit coordination, see your company's summary plan description.

If you or an eligible-dependant do not enroll in Medicare Parts A and B, your provider may bill you for amounts not covered by Medicare or your company's medical plan. This increases your out-of-pocket spending dramatically.

According to the Employee Benefit Research Institute (EBRI), Medicare only covers approximately 60% of an individual's medical expenses. This indicates that a 65-year-old couple with average prescription-drug expenses for their age will require $259,000 in savings to cover 90% of their healthcare costs. A single guy will need $124,000, whereas a single female, because to her longer life expectancy, will require $140,000.

28% of couples over the age of 53 will not experience happily ever after and until death do us part. Most couples save for decades, expecting they would retire together. Following a divorce, they must face the expenses of a pre- or post-retirement lifestyle while only having half of their savings.

If you're divorced or in the process of divorce, your ex-spouse(s) may be interested in a portion of your company's retirement benefits. Before you may begin your pension—and for each former spouse who may be interested—you must submit your firm with the necessary documentation:

• A copy of the court-filed Judgment of Dissolution or Judgment of Divorce, together with any Marital Settlement Agreement (MSA)

• A copy of the court's Qualified Domestic Relations Order (QDRO)

Divorce does not disqualify you for survivor benefits. You can claim a divorced spouse's survivor benefit if the following apply:

• Your ex-spouse has died.

• You are at least sixty years old.

• You were married for at least ten years before the divorce.

• You are single (or remarried after turning 60).

Are you going through a divorce?

If your divorce is not finalized by the time you retire from your company, you are still considered married. You have two choices:

• Retire from your company before your divorce is finalized and opt for a combined pension of at least 50% with your spouse — or obtain your spouse's signed, notarized approval to a different election or lump amount.

• Defer your retirement from your company until your divorce is finalized and you can supply the necessary divorce documentation*.

What your survivor needs do:

• Report your death. Your spouse, family member, or friend should contact your company's benefits service center as quickly as possible to report your death

• Receive life insurance benefits. To get life insurance benefits, your spouse or other designated beneficiary must contact your company's benefits service center.

Financial benefits of working

Make up for the reduced value of savings or assets. Low interest rates are ideal for lump sums but make it difficult to generate portfolio income. Some people continue to work to compensate for poor returns on their savings and investments.

Perhaps you accepted a job offer and left your firm earlier than you desired, with less retirement savings than you required. Instead of depleting your money, you may decide to work a bit longer to afford items you've previously denied yourself.

Meet the financial needs of daily living. Expenses can rise after your retirement from your employer, and working can be a practical and successful option. You may choose to continue working in order to maintain your insurance or other benefits; many firms provide free or low-cost health insurance to part-time employees.

Emotional benefits of job

You may discover highly appealing career opportunities just as you were about to leave the workforce.

Remaining active and involved. Retaining employment after leaving your prior job, even if it's only part-time, can be a terrific opportunity to put your abilities to use while also keeping in touch with friends and coworkers.

Enjoying yourself at work. Just because the government has established a retirement age through its Social Security program does not obligate you to organize your personal life accordingly. Many people really appreciate their professions and continue to work because it enriches their lives.