Lump Sum Pension vs. Annuity Options: What’s Best for You? - WealthVisory

As you approach retirement or separation from ExxonMobil, one of the key decisions you’ll face is how to handle your pension benefits. Whether you’re a legacy Mobil Oil employee or a current ExxonMobil team member, you have two main options: the Lump Sum Pension or the Monthly Annuity. Each choice has its own advantages and considerations, so let’s break them down to help you decide which might be best for you.

Your Pension Options

Option One: Lump Sum Pension

Choosing the lump sum pension means you receive the entire value of your pension in one payment. This amount is calculated based on your final average pensionable pay, years of service, and a discount rate published by the IRS. This lump sum is often rolled into a Traditional IRA where it can be invested according to your preferences.

Here’s how the lump sum is calculated:

• 1.6% of your final average pensionable pay
• Multiplied by the number of years of service
• Minus a Social Security offset
• Discounted by IRS-published rates

This option gives you full control over your funds, allowing you to invest and manage them as you see fit. However, it requires you to either manage the investments yourself or hire a financial advisor to guide you.

Pros of the Lump Sum Option:

• Control over investment choices
• Potential for growth if invested wisely
• Flexibility in how you use the funds

Cons of the Lump Sum Option:

• Responsibility for investment decisions
• Possible tax implications if not managed properly
• Risk of early withdrawal penalties if accessed before age 59.5

Option 2: Monthly Annuity

The monthly annuity provides a steady income stream for life or for a set period. It can be structured to include survivor benefits or a guaranteed payout period. This option might be suitable if you prefer the security of regular income and want to avoid managing investments yourself.

Pros of the Monthly Annuity Option:

• Guaranteed regular payments for life or a specified term
• Simplicity, as no investment management is required
• Built-in survivor benefits to protect your loved ones

Cons of the Monthly Annuity Option:

• Less flexibility; you cannot transfer or withdraw funds
• Monthly payments may not keep pace with inflation
• Limited control over how the funds are used

Making the Decision

Your choice between a lump sum and a monthly annuity depends on your financial situation, investment comfort level, and retirement goals. If you value control and potentially higher returns, the lump sum might be appealing. However, if you prefer stability and predictability in your retirement income, the monthly annuity could be the better choice.

Important Steps:

• Contact ExxonMobil’s Benefit Service Center: For detailed information about your benefits, call 1-800-682-2847 or use the intranet tool to access your pension projection.
• Plan Ahead: Make sure to start the process between 90 and 120 days before you want your benefits to begin. This timing helps ensure everything is in place for a smooth transition.

Ultimately, it’s crucial to evaluate your personal financial situation and retirement plans carefully before making a decision. If needed, consult with a financial advisor at WealthVisory to help determine which option aligns best with your goals and needs.