ConocoPhillips employees are at risk of substantial pension lump-sum losses. They will see a reduction in their pension due to rising interest rates. ConocoPhillips interest rates have increased for those who begin commencing their benefit in the second quarter of 2022. When interest rates move up or down, an employee’s pension lump-sum amount will move in an inverse relationship (except for Cash Balance Pension Lump Sum payouts). In the past when interest rates have risen they tend to rise quickly, therefore if this trend continues ConocoPhillips employees could see their pension amounts continue to drop over the next several quarters.
As it turns out, there are 8 different pension plans at ConocoPhillips, called Titles. Most employees fall under either the Phillips Retirement Income Plan (Title I), the Retirement Plan of Conoco (Title IV), The Burlington Resources Inc. Pension Plan (Title VI), or the ConocoPhillips Cash Balance Plan (Title II).
Considering how sensitive Titles I, IV, and VI are to interest rates, The Retirement Group puts an immense amount of effort into tracking these rates and educating employees on how they affect pension lump sums in an effort to help individuals potentially increase their pension benefit when they leave ConocoPhillips.
Update on Interest Rates for ConocoPhillips Employees:
Video Link: https://www.youtube.com/embed/kiib-v6BDR0
Due to the pandemic, interest rates dropped dramatically. This resulted in an increase in lump-sum payments, culminating in record highs for individuals who commenced their benefits in the second quarter of 2021. However, since then, rates have increased, causing a reduction in pension lump-sums.
The Retirement Group is now offering a webinar series for ConocoPhillips employees which helps tackle these issues. The goal of their new webinar series is to help ConocoPhillips employees avoid making big retirement mistakes. On their website, The Retirement Group states that one of the biggest mistakes ConocoPhillips employees make is retiring on the wrong day.
When a ConocoPhillips employee chooses their retirement date they need to be aware that the date they select can have a large impact on the value of their lump-sum. In fact, on average a 1% rise in interest rates can equate to an 8% to 12% reduction in a ConocoPhillips employee’s lump-sum. So, for someone with a $500,000 lump sum, that could mean a reduction of about $50,000. A $1,000,000 lump sum would drop by roughly $100,000. Conversely, if interest rates were to rise by 1% ConocoPhillips employees could expect to see an 8% to 12% increase in their lump-sum. While rates have not increased by 1% since the 2021 low quite yet, the 10 year Treasury Rate has soared. This is typically seen as an early indicator that rates will continue to rise.
In their webinar series, The Retirement Group also discusses how ConocoPhillips employees are impacted by rising inflation. Inflation can be detrimental to either pension option. Inflation can often cause a rise in interest rates which, as discussed earlier, reduces lump-sum values. Inflation can also reduce the value of an employee’s annuity. The annuity is a fixed payment, therefore if inflation increases by 10%, an employee’s annuity payment will become 10% less valuable.
Given the current interest rate environment, The Retirement Group suggests that ConocoPhillips employees discuss their options with an advisor who can monitor the interest rates and keep employees up to date on quarterly changes.
The Retirement Group states on their website that it is important to remember the annuity option may be a better fit no matter how attractive the pension lump sum looks. Every situation is unique, and a cash flow analysis will allow employees to compare all pension options. The Retirement Group can provide a complimentary cash flow analysis to show ConocoPhillips Employees how various retirement dates may play out.
Disclosure:
The Retirement Group is an independent financial advisory group that focuses on transition planning and lump sum distribution. Neither The Retirement Group or FSC Securities provide tax or legal advice. Please call the office at 800-900-5867 for additional questions or for help in the retirement planning process. The Retirement Group is not affiliated with, nor endorsed by ConocoPhillips.
Securities offered through FSC Securities Corporation (FSC) member FINRA/SIPC. Investment advisory services offered through The Retirement Group, LLC. FSC is separately owned and other entities and/or marketing names, products or services referenced here are independent of FSC. Office of Supervisory Jurisdiction: 5414 Oberlin Dr #220, San Diego CA 92121. ConocoPhillips is not affiliated nor endorsed by The Retirement Group or FSC Securities.
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Company Name: The Retirement Group
Contact Person: Tiffany Hill
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City: San Diego
State: CA
Country: United States
Website: https://www.theretirementgroup.com/