ExxonMobil Pension Update: Q1 2025

An Update on Segment Rates and Their Effect on Your Pension Benefit

As we move into late 2024, a shift in interest rates is beginning to impact ExxonMobil Pension Plan lump sum values. While higher rates over the past few years have reduced lump sum payouts, recent decreases in rates are creating new opportunities for employees planning their retirement.

Our team continues to assist ExxonMobil employees in evaluating how these changes affect their retirement strategies. If you’ve elected to stay with the company throughout the rate increases over the last few years, now is the time to understand how recent trends could influence your pension and how to act strategically to maximize your benefits.

Q1 2025 Rates Published: A Downward Shift Increases Lump Sums

As we’ve noted previously, each quarter’s rates are calculated by averaging the rates from the 4th and 5th months prior to the beginning of the quarter, as published by the IRS. For Q1 2025, this means the average of August and September 2024 rates determines the segment rates applied to pension lump sums for employees retiring in Q1.

As we transition from Q4 2024 to Q1 2025 rates, segment rates have decreased slightly. As highlighted in our previous articles on the Pension Plan, the lump sum value of your pension represents the “Present Value” of all expected future cash flows and maintains an inverse relationship with segment interest rates.

For individuals planning to retire soon, this downward shift in segment rates will lead to a modest increase in lump sum values for those with a benefit commencement date (BCD) in Q1 2025.

Where are rates headed in the future?

After peaking around 6% in October 2023, interest rates have started to decline, impacting the ExxonMobil pension plan’s segment rates. These rates, which remained stable between 4.5% and 5.5% through late 2022 and early 2023, rose sharply throughout 2023 but have decreased due to the Federal Reserve’s initial rate cuts. However, the 10-year Treasury yield has been on the rise recently, signaling the possibility of higher segment rates as we progress through 2025.

While inflation reports have been exhibiting annualized rates in the 2.5% to 3% range, the Federal Reserve has reiterated its commitment to achieving its 2% inflation target. This may require maintaining relatively elevated rates for some time to come. Additionally, potential policy shifts following the election could influence inflation and monetary policy, creating further uncertainty around future rate trends.

For ExxonMobil employees nearing retirement, the current environment presents an opportunity to maximize lump sum values relative to recent history. With lower segment rates in effect for Q1 2025, taking your pension lump sum early in the year could be a strategic move if November and December see a reacceleration in effective rates. Careful planning now can help you take full advantage of these favorable conditions.

What does this mean for the ExxonMobil employee planning to retire today?

The recent decrease in segment rates for Q1 2025 means a retiree’s pension lump sum value could be higher than it has been in recent quarters. This shift provides a window of opportunity to lock in a favorable lump sum payout. However, it’s essential to act strategically. Employees should carefully evaluate their financial plans and consider setting a Benefit Commencement Date (BCD) in Q1 2025 to take full advantage of the current rate environment.

To maximize the benefit of retiring now, ExxonMobil employees should also develop a robust reinvestment strategy for their lump sum payout. The RGWM Investment team is available to help employees considering a Q1 2025 retirement consider their options. While equities appear to be responding positively to a potentially lower corporate tax environment and reduced regulatory burden, bond yields remain attractive, and a balanced approach may be most prudent. Careful, forward-looking planning is critical to ensuring these favorable conditions align with long-term retirement goals.