Insights

For Boeing professionals nearing retirement, one of the most critical decisions is whether to take your pension as a lump sum or an annuity. The math behind this decision is directly influenced by segment rates, which continue to fluctuate with interest rate and bond market trends.

Why Segment Rates Matter

Your lump sum benefit is calculated based on the prior November’s segment rates, which are essentially IRS-published corporate bond yields. Boeing uses these rates to calculate the lump sum: essentially, the amount of money you’d receive today that, if invested in high-quality bonds, should equal the value of your pension payments over your lifetime.

• Lower segment rates → Higher lump sum payout
• Higher segment rates → Lower lump sum payout

During the COVID years when rates dropped sharply, many Boeing professionals saw their lump sum values increase by $300,000 or more.

The Limitations of This Analysis

While segment rates drive the calculation, there are key limitations:

• Balanced Portfolios Matter – We advocate for a diversified portfolio including stocks, which though more volatile, have historically provided higher long-term returns.
• Longevity Unknowns – The annuity protects you if you live much longer than expected, while the lump sum puts longevity risk on you.
• Bond Returns Change Over Time – Today’s bond income doesn’t predict the future. Bond yields are far higher today than they were five years ago.

Timing Your Retirement Around Segment Rates

Because lump sums are set annually based on November’s rates, you have strategic flexibility:

• Retiring in December uses the prior year’s November rates, even though you won’t know the exact figure until it is published in late December or January.
• Deferring commencement until January locks in the new November rates, which can be higher or lower.

This small window has created meaningful differences in lump sums in past years.

Where We Are Today

• Rates remain elevated compared to their COVID lows and have hovered in a higher band since 2022.
• The most recent IRS segment rates (through June 2025) show the first segment at 4.43%, the second at 5.46%, and the third at 6.13%.
• Bond yields have recently trended down, and a potential Fed rate cut later this year could push segment rates lower.
• Looking ahead to 2026, inflation and economic uncertainty mean we could see a wide range of outcomes for segment rates.

Updated Chart: Segment Rates Over Time

Source: IRS “Minimum Present Value Segment Rates,” Nov 2008 – Jun 2025.

What This Means for Your Pension Decision

When deciding whether to take the lump sum and when to commence your pension (this must occur after your retirement date, though it does not have to be right away), consider:

Your personal situation. Your comfort with investment volatility and your family considerations (such as the importance of leaving a legacy with the lump sum) should guide your decision. The best choice is ultimately the one that fits your overall financial and personal goals.

How much your lump sum fluctuates year-to-year with segment rates, and what the segment rate is expected to be in November.

Your lump sum benefit relative to the annuity. Depending on your pension benefit amount, there are situations where the lump sum may offer better or worse value than the annuity. This comparison is a key factor when determining which option is best for you.

The Bottom Line

Segment rates play a central role in your lump sum value, but they’re just one piece of the puzzle. Your health, family needs, risk tolerance, and overall retirement plan all matter more than the math alone.

If you’re approaching retirement, now is the time to review your options. Whether it makes sense to lock in your lump sum this year, defer to next year, or take the annuity, the best choice is the one aligned with your overall goals and financial picture.

Take us up on a complimentary review of your retirement plan and pension decision. As fiduciary planners specializing in Boeing professionals, we’ll help you make the most informed and confident choice possible.t.

You may also want to read or article, How the Big Beautiful Bill Impacts Boeing Professionals

team@stablerwm.com | (425) 646-6327

No strategy assures success or protects against loss. Stabler Wealth Management and LPL Financial are not affiliated or endorsed by Boeing.

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