Kaiser Permanente pensions lose value as interest rates and inflation rise

Kaiser Permanente employees are seeing a significant reduction in the value of their retirement packages as interest rates jumped again this month. Interest rates were released for Kaiser Permanente employees, and there was a 0.36% increase for the second segment (which is the most impactful), in just 30 days. When interest rates rise or fall, an employee’s pension lump sum moves in the opposite direction. Usually, a 1% increase in interest rates means a 10% decrease in lump sum value. Thus, since the rates have increased by 0.36%, the packages will lose in value by 3 to 4%. That means an employee with a $1,000,000 lump sum could lose about $36,000 by starting benefits in May, as opposed to April.

When Kaiser Permanente employees choose the month in which they want to start receiving their pension, Kaiser Permanente uses two months to calculate their pension payment. Interest rates have fallen dramatically during the pandemic, causing the value of lump sum payments to rise. However, since then the rates have increased significantly, reducing lump sum values ​​for current employees.


Video link: https://www.youtube.com/embed/P7jnGQcnzDQ

The Retirement Group is now offering free cash flow analysis to Kaiser Permanente employees to help them determine their preferred retirement date. The Retirement Group is not affiliated with or endorsed by Kaiser Permanente. The goal for Kaiser Permanente employees who receive a cash flow analysis is to avoid making big pension mistakes and potentially increasing the value of their lump sum pension. With a cash flow analysis, Kaiser Permanente employees will get a clear picture of how rising interest rates will affect their retirement.

The Retirement Group also offers a series of webinars for Kaiser Permanente employees that discuss rising inflation and interest rates. Inflation can be detrimental to both retirement options. Inflation often causes interest rates to rise which, as we saw earlier, reduces lump sum values. Inflation can also reduce the value of an employee’s annuity payments. The annuity is a fixed payment, which means it is not adjusted upwards for inflation. Therefore, if inflation were to increase by 10%, a fixed annuity payment would lose 10% in value.

With interest rates having risen significantly in recent months, The Retirement Group suggests Kaiser Permanente employees discuss their options with an advisor. These advisors monitor interest rates and can keep employees informed of any changes that may affect their retirement plans.

The Retirement Group states on its website that no matter how attractive the lump-sum pension is, it’s important to remember that the annuity option may suit some people better. Each situation is unique and a cash flow analysis will allow employees to compare all retirement options.

Disclosure:

The Retirement Group is an independent financial advisory group focused on transition planning and lump sum distribution. Neither The Retirement Group nor FSC Securities provides tax or legal advice. Please call the office at 800-900-5867 for additional questions or for assistance with the retirement planning process. The Retirement Group is not affiliated with or endorsed by Kaiser Permanente. *** Where reference is made to ‘pension’ in the title, we are referring to the lump sum payment option.

Securities offered by FINRA/SIPC, member of FSC Securities Corporation (FSC). Investment advisory services offered by The Retirement Group, LLC. FSC is a separate property and other entities and/or trade names, products or services referenced herein are independent of FSC. Office of Supervisory Jurisdiction: 5414 Oberlin Dr #220, San Diego CA 92121. Kaiser Permanente is not affiliated with or endorsed by The Retirement Group or FSC Securities.

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City: San Diego
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