Aramco Expats

Retirement Income Plan Pay Out Rate

1. Community
2. Current Aramco Employees

Author: Don Reilly
Released 20 July 2003

How much should the Retirement Income Plan Payout Rate influence my decision to retire from Aramco?

One question I often get from Aramcons is “now that the RIP rate is low, should I retire?”

The problem with this question is that it puts the cart before the horse. There are a number of other factors that have to be considered first. Let’s start with the primary question that you must ask yourself. Am I ready to retire, financially and mentally? Even within this question a number of other issues arise. If I retire now, do I have adequate funds to accomplish my financial life goals? Am I mentally ready to leave my job and the security of a steady paycheck? The answer to the second question may depend on the first one.

Once you have determined that you are really ready to retire, financially and mentally, then you should look at the RIP payout rate and consider the outcome. For example, if you have decided that you will retire at the end of 2003, the most favorable time based on the RIP rate is to receive your payout in October 2003, when the rate is 2.37% (see table below). At this point, it appears that if the first 10-days of July are indicative of how the RIP rate will move for the remainder of the month, the rate could be approximately 1/3 % to ½% higher; making the rate about 2.62% to 2.87%. By running the Ripper Report on the Vanguard website setup for Aramcons, you can determine how that would negatively affect your payout at retirement.

If you’re not planning to retire during the next 12 months, regardless of the reason, current RIP rates should not dictate changing your plans. During those 12 months, you and Aramco, on your behalf, will be investing more money in the Savings Plan. You’ll also be a year older, which influences the RIP payout in your favor and reduces the timeframe during which you will draw on your retirement funds for living expenses.

So if you have carefully weighed your options and have decided that you’re ready to retire, go for it--- but plan wisely. This is what financial planning is all about---pulling all of your economic information together and looking at the different scenarios so that you can make informed decisions to reach your financial life goals. We at Reilly Financial Advisors pride ourselves in helping our clients plan for retirement by looking at their available options.

In summary, the bottom line is that if you plan to retire in 2003, October 2003 looks to be the best time to maximize your RIP payout at this point.