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Rate Watch 2018 – April

Welcome to another edition of Rate Watch as we track the interest rate that is vital to the grandfathered pension at Southern California Edison. If you’ve missed any of our previous articles, you can find them here:

Rate Watch 2017 – March
Rate Watch 2017 – February
Rate Watch 2018 – January

Rate Watch 2017 – August

The third rate of 2018 begins to paint a new picture of where rates have the potential to go in the fall of 2018. The latest comes after increased Fed conversations on future rate hikes and an increase in March. Let’s take a look at the most recent numbers:

*These are not current plan rates for Southern California Edison’s pension plan, they are minimum present value third segment rates from the IRS. Official plan rates are derived from the minimum present value segment rates table (https://www.irs.gov/retirement-plans/minimum-present-value-segment-rates) . Plan rate changes are made by Southern California Edison on an annual basis.

*These are not current plan rates for Southern California Edison’s pension plan, they are minimum present value third segment rates from the IRS. Official plan rates are derived from the minimum present value segment rates table (https://www.irs.gov/retirement-plans/minimum-present-value-segment-rates) . Plan rate changes are made by Southern California Edison on an annual basis.

March’s value of 4.43 gives us the first reading higher than the current official plan rate of 4.36, a 0.07% change. With the Fed announcing an increase in rates by 0.25% to a range of 1.50-1.75%, the sixth rate hike since 2015, is said to be one of many by the Fed in 2018. They continue to point to strong economic outlooks and labor conditions as reasons to pencil in future hikes, but we will have to see how the market reacts.

This also brings some new thinking for grandfathered pension holders because this could produce a situation where the following year’s interest rate will be higher than the current value, and increases in interest rates will produce a smaller lump sum payout for grandfathered pension holders. The inverse is true for rate decreases; however, it looks like that could be a less likely scenario should this trend continue.

Remember, if you are planning on retiring as a grandfathered pension holder, then you have a choice on when you want to set your commencement date and pick which rate produces a more favorable outcome.

I think we’ve become a broken record at this point by saying this, but it is still a tad early to make any huge decisions, but the fall will soon be upon us. As always, this is only one metric to look at as you think about retirement, but it is an important one.

Developing a financial plan on how to approach retirement and maximize your benefits is important, so make sure you are working with someone who is familiar with Edison’s benefits and knows how they work.

Worried about your retirement plans? Concerned with how to handle your pension or 401(k)? Maybe you’re just unsure on how the transition to retirement works. We’ve helped countless Southern California Edison employees plan for retirement. Contact us for a free retirement planning session or portfolio analysis.


Joe OcchipintiJoe Occhipinti
Wealth Advisor
Warren Street Wealth Advisors

 

 

 

 

Joe Occhipinti is an Investment Advisor Representative of Warren Street Wealth Advisors, a Registered Investment Advisor. Information contained herein does not involve the rendering of personalized investment advice, but is limited to the dissemination of general information. A professioanl advisor should be consulted before implementing any of the strategies or options presented.

Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Past performance may not be indicative of future results. All investment strategies have the potential for profit or loss. Changes in investment strategies, contributions or withdrawals may materially alter the performance, strategy, and results of your portfolio.Historical performance results for investment indexes and/or categories, generally do not reflect the deduction of transaction and/or custodial charges or the deduction of an investment-management fee, the incurrence of which would have the effect of decreasing historical performance results.Economic factors, market conditions, and investment strategies will affect the performance of any portfolio and there are no assurances that it will match or outperform any particular benchmark. Nothing in this commentary is a solicitation to buy, or sell, any securities, or an attempt to furnish personal investment advice. We may hold securities referenced in the blog and due to the static nature of content, those securities held may change over time and trades may be contrary to outdated posts.

 

Rate Watch 2018 – March

Welcome to another edition of Rate Watch as we track the interest rate that is vital to the grandfathered pension at Southern California Edison. If you’ve missed any of our previous articles, you can find them here:

Rate Watch 2017 – February
Rate Watch 2018 – January

Rate Watch 2017 – August
Rate Watch 2017 – July

The second rate of 2018 is an interesting one as it comes a couple days before the Fed’s announcement to raise interest rates 0.25% on March 21st, 2018,  but let’s take a look at the most recent numbers:

March 2018

*These are not current plan rates for Southern California Edison’s pension plan, they are minimum present value third segment rates from the IRS. Official plan rates are derived from the minimum present value segment rates table (https://www.irs.gov/retirement-plans/minimum-present-value-segment-rates) . Plan rate changes are made by Southern California Edison on an annual basis.

February’s reading takes us closer to the current grandfathered rate for 2018, 4.36. This would bring very little change to your lump sum grandfathered pension value as of right now, but it could be an indicator of where rates could end up in the fall. Again, we can’t emphasize enough, it is still early in the year and rates could go anywhere as the months continue.

One of the most interesting factors for following months will be if the Fed increasing interest rates will have any impact on minimum present value segment rates, which are the rates used to determine the official grandfathered rate in the fall.

Remember, your grandfathered pension is just one of many factors that you should examine when thinking about retirement. There are many moving parts that extend further than interest rates and lump sum payout values.

Unsure if you are on the right track for retirement? Concerned about your 401(k) or other retirement investments? Contact us for a free retirement goals session or portfolio analysis.


Joe OcchipintiJoe Occhipinti
Wealth Advisor
Warren Street Wealth Advisors

 

 

 

 

Joe Occhipinti is an Investment Advisor Representative of Warren Street Wealth Advisors, a Registered Investment Advisor. Information contained herein does not involve the rendering of personalized investment advice, but is limited to the dissemination of general information. A professioanl advisor should be consulted before implementing any of the strategies or options presented.

Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Past performance may not be indicative of future results. All investment strategies have the potential for profit or loss. Changes in investment strategies, contributions or withdrawals may materially alter the performance, strategy, and results of your portfolio.Historical performance results for investment indexes and/or categories, generally do not reflect the deduction of transaction and/or custodial charges or the deduction of an investment-management fee, the incurrence of which would have the effect of decreasing historical performance results.Economic factors, market conditions, and investment strategies will affect the performance of any portfolio and there are no assurances that it will match or outperform any particular benchmark. Nothing in this commentary is a solicitation to buy, or sell, any securities, or an attempt to furnish personal investment advice. We may hold securities referenced in the blog and due to the static nature of content, those securities held may change over time and trades may be contrary to outdated posts.

 

Rate Watch 2018 -February

Welcome to another edition of Rate Watch as we track the interest rate that is vital to the grandfathered pension at Southern California Edison. If you’ve missed any of our previous articles, you can find them here:

Rate Watch 2018 – January
Rate Watch 2017 – August
Rate Watch 2017 – July
Rate Watch 2017 – June

As our first rate for 2018, we feel that this could be a good indicator on the range of possibilities we might see as we approach the end of 2018. The official rate for the grandfathered pension plan in 2018 is 4.36, derived from the August 2017’s third segment minimum present value rate, but it is important to determine what you options could look like as we approach the official announcement. Let’s take a look at the most recent posted rates:

February 2018 Chart

*These are not current plan rates for Southern California Edison’s pension plan, they are minimum present value third segment rates from the IRS. Official plan rates are derived from the minimum present value segment rates table (https://www.irs.gov/retirement-plans/minimum-present-value-segment-rates) . Plan rate changes are made by Southern California Edison on an annual basis.

There has been a small uptick from December 2017’s 4.11, but insignificant in the short-term. However, as we say each month, when rates decrease the value of your lump sum payout goes up and vice-versa. The most recent rate is still below the official 2018 rate, but again, it is very early in the year and there is plenty of time for rates to move from now until the fall.

What is more important to note is the continued conversation of rising interest rates in the U.S., and how the Fed continues to look to raise rates in the long-term. The Fed and how the market reacts to these interest rate changes will be one of, if not the biggest, influence on rates this year.

As the fall approaches, it will be vital for SCE employees to examine the new official rate in comparison to the 2018 number of 4.36. Additionally, as employees plan for retirement, their pension should not be the only metric that they look at. Assets, debts, and income needs should all be analyzed prior to making a decision on retirement. Again, this metric is important to track for those prepared to make the plunge into retirement, but you should not base your decision off of rate changes or you pension alone.


Joe OcchipintiJoe Occhipinti
Wealth Advisor
Warren Street Wealth Advisors

 

 

 

 

Joe Occhipinti is an Investment Advisor Representative of Warren Street Wealth Advisors, a Registered Investment Advisor. Information contained herein does not involve the rendering of personalized investment advice, but is limited to the dissemination of general information. A professioanl advisor should be consulted before implementing any of the strategies or options presented.

Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Past performance may not be indicative of future results. All investment strategies have the potential for profit or loss. Changes in investment strategies, contributions or withdrawals may materially alter the performance, strategy, and results of your portfolio.Historical performance results for investment indexes and/or categories, generally do not reflect the deduction of transaction and/or custodial charges or the deduction of an investment-management fee, the incurrence of which would have the effect of decreasing historical performance results.Economic factors, market conditions, and investment strategies will affect the performance of any portfolio and there are no assurances that it will match or outperform any particular benchmark. Nothing in this commentary is a solicitation to buy, or sell, any securities, or an attempt to furnish personal investment advice. We may hold securities referenced in the blog and due to the static nature of content, those securities held may change over time and trades may be contrary to outdated posts.

 

Rate Watch 2018 – January

If you followed along with us last year, you may remember our Rate Watch 2017 articles where we tracked the interest rate used for the Southern California Edison grandfathered pension.

Rate Watch 2017 – August
Rate Watch 2017 – July
Rate Watch 2017 – June
Rate Watch 2017 – May

Since our last Rate Watch post in September 2017, we wanted to write a quick recap article of the last few months of interest rate changes as we look towards the official announcement in the fall.

Edison uses the minimum present value third segment rate for the grandfathered pension plan. The August rate is the one that is specifically used for the plan’s lump sum value calculation, and the official announcement is made by SCE to its employees in late September or early October.

Rate Watch January 2018 Chart

The rule of thumb with the pension is: when interest rates decrease, the value of your lump sum payout increases and vice versa.

Since August, we have seen the rate fall from 4.36 down to 4.11. While it is still very early in the year, and this number does not directly impact lump sum values for the pension, we find it important to keep track of where the number is at and where it could be heading towards the fall.

If you think that retirement is on the horizon and want to make sure you maximize your pension benefit, then schedule a free consultation to learn what we do for SCE employees and how we have helped 100’s of them retire with confidence.

*These are not current plan rates for Southern California Edison’s pension plan, they are minimum present value third segment rates from the IRS. Official plan rates are derived from the minimum present value segment rates table (https://www.irs.gov/retirement-plans/minimum-present-value-segment-rates) . Plan rate changes are made by Southern California Edison on an annual basis.


Joe OcchipintiJoe Occhipinti
Wealth Advisor
Warren Street Wealth Advisors

 

 

 

 

Joe Occhipinti is an Investment Advisor Representative of Warren Street Wealth Advisors, a Registered Investment Advisor. The information posted here represents his opinions and is not meant as personal or actionable advice to any individual, corporation, or other entity. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Past performance may not be indicative of future results. All investment strategies have the potential for profit or loss. Changes in investment strategies, contributions or withdrawals may materially alter the performance, strategy, and results of your portfolio.Historical performance results for investment indexes and/or categories, generally do not reflect the deduction of transaction and/or custodial charges or the deduction of an investment-management fee, the incurrence of which would have the effect of decreasing historical performance results.Economic factors, market conditions, and investment strategies will affect the performance of any portfolio and there are no assurances that it will match or outperform any particular benchmark. Nothing in this commentary is a solicitation to buy, or sell, any securities, or an attempt to furnish personal investment advice. We may hold securities referenced in the blog and due to the static nature of content, those securities held may change over time and trades may be contrary to outdated posts.