90000 ford white collar retirees lump sum pensions

[bobbyd]

Todays paper claims Ford will start lump sum pension distributions later this year to all white collar retirees. I called the NESC and they are waiting for direction and letters will be sent out! ?Anyone know how this will work?

[FordBuyer]

Todays paper claims Ford will start lump sum pension distributions later this year to all white collar retirees. I called the NESC and they are waiting for direction and letters will be sent out! ?Anyone know how this will work?

 

Ford is offering lump sum pension payment in lieu of defined benefit plan. You don't have to take it; you can remain in Ford's pension payment fund if you wish. Ford is hoping enough take it to lessen its unfunded pension liability. I personally wouldn't advise any retiree to take it unless they sincerely think Ford won't make it long term. I know I get a defined pension benefit from state government, and I would never accept lump sum payout in lieu of my monthly check plus health, dental, and eye coverage. I know my fund has over $50 billion in it, but $17 billion is unfunded future liability. If state tries to take it from me, I will be out in streets with everyone else fighting for what I worked for.

[rkisler]

Todays paper claims Ford will start lump sum pension distributions later this year to all white collar retirees. I called the NESC and they are waiting for direction and letters will be sent out! ?Anyone know how this will work?

 

It will be a lump sum option on the GRP only and only for salaried employees. Any other supplemental benefits you might receive on a monthly basis are not covered. You should wait until you receive a package in the mail (as a retiree, I know when any envelope arrives with a Ford logo, it's probably not good news, but it will probably start with the line "we've improved your benefits.").

 

As the time approaches, if there is any information above and beyond the info that Ford provides that I believe might be useful in the analysis, I'll share it.

[theoldwizard]

...as a retiree, I know when any envelope arrives with a Ford logo, it's probably not good news, but it will probably start with the line "we've improved your benefits.".

Thanks. I needed a chuckle !

 

BTW, I agree 100 % !!

[FordBuyer]

Ford is offering lump sum pension payment in lieu of defined benefit plan. You don't have to take it; you can remain in Ford's pension payment fund if you wish. Ford is hoping enough take it to lessen its unfunded pension liability. I personally wouldn't advise any retiree to take it unless they sincerely think Ford won't make it long term. I know I get a defined pension benefit from state government, and I would never accept lump sum payout in lieu of my monthly check plus health, dental, and eye coverage. I know my fund has over $50 billion in it, but $17 billion is unfunded future liability. If state tries to take it from me, I will be out in streets with everyone else fighting for what I worked for.

 

Question: Are there steps I can take before I talk to a financial planner or the company's human resources department?

 

Answer: Yes. First, calculate how much income you'll need. Create a budget that estimates all the expenses you'll face in retirement. Most financial institutions with which you already have invested will have an online planning program. To the extent you can, divide your expenses into two broad areas: necessities and discretionary spending.

Q: Are there ways I can reinvest a lump sum that allow me to continue receiving monthly payments ?

 

A: You can take the lump sum and purchase an annuity. But if the payments from the annuity are less than what you would receive under your pension, clearly, you tell your employer, no thanks. Keep in mind that the quote you get for an income or immediate annuity generally will change week to week as interest rates fluctuate.

Q: Will the company be in sound financial condition for the duration of my expected life span?

 

A: In Ford's case, everything looks solid today. Still, as evidenced in recent years, the auto industry has been on some harrowing roller-coaster rides in its history.

Q: If I can retire at 62 with a lump sum of $200,000, or regular monthly payments of $1,400, which is better?

 

A: That depends on your larger retirement savings. Do you have separate 401(k)s? Do you have a spouse with a defined benefit or defined contribution retirement fund? Do you plan on finding another job or starting a business? Getting a monthly check as long as you live may sound ideal, but that income stream is rarely adjusted for inflation (at least with corporate pensions), and monthly payments could put you at a disadvantage should you need access to a large amount of cash later.

 

I guess it really comes down to whether you feel comfortable investing $200,000 to $500,000 lump sum payment from Ford pension fund into something that will give you about $1500/month with risk or have Ford do it for you and be responsible for the risk with littlle worry to you. I would imagine that most salaried Ford retirees do have investments outside of Ford that give them income and chance for upside which is supplemented by known, consistennt entity like a defined pension and Social Security. I know I do and couldn't live adequately without all three sources of income.

[jpd80]

Any time Ford comes to its retirees and says, this is the new plan, you can be sure it will benefit the company.

Their main intention these days is to rid themselves of pension liabilities the most cost effective way they can.

It sucks that just as Ford is about to burst at the seams with profits, the want to give retirees the old heave ho..

[FordBuyer]

Any time Ford comes to its retirees and says, this is the new plan, you can be sure it will benefit the company.

Their main intention these days is to rid themselves of pension liabilities the most cost effective way they can.

It sucks that just as Ford is about to burst at the seams with profits, the want to give retirees the old heave ho..

 

I believe Ford is hoping about 10% bite and take the lump sum. Probably those that really need the money for whatever. If about 10% bite, then Ford is hoping that the second rating agency will give them investment grade rating so that Ford can again borrow money without putting up assets as collateral. Many analysts say that second rating agency will not come through until they shore up their unfunded pension liabilities. It looks like only employees now getting defined benefit from Ford are UAW members and top executives. The rest get funky 401K packages that will never give them the monthly income a defined benefit plan would.

[jpd80]

Maybe they just give retirees an issue of Ford stock to top up the shortfall in the pension fund..

For the little bit of dilution, $15 billion in debt goes away..

[Noah Harbinger]

Any time Ford comes to its retirees and says, this is the new plan, you can be sure it will benefit the company.

Their main intention these days is to rid themselves of pension liabilities the most cost effective way they can.

It sucks that just as Ford is about to burst at the seams with profits, the want to give retirees the old heave ho..

 

As mentioned, the main benefit to Ford is risk avoidance. If you take a lump sum and the market crashes, well, you're out on your bee-hive - whereas if you stay on the pension, Ford's still on the hook for the cash instead of investing in product or returning money to investors. If the economy holds strong and you invest soundly, well, you could potentially do much better. But probably not - a pension plan (or annuity, or what not) can diversity in a way that makes sure they maintain cash flow while still keeping a large portion in high-voilatility investments; an individual investor with nothing else to fall on almost has to invest conservatively.

 

(That's part of the whole fallacy of the plan oft-proposed in the US of transitioning social security into personal investment accounts: When social security is your safety blanket, your returns probably won't be much better than social security offers anyway, because you have to invest conservatively to protect your income source. On the other hand, keeping social security well funded and secure allows individuals to be more venturesome with their additional savings. If I know my social security/medicare will at least keep me off the street, fed, and with medical care, I CAN consider putting some or all of that lump-sum payout into stock mutual funds instead of fixed-income bonds.)

[rkisler]

As mentioned, the main benefit to Ford is risk avoidance. If you take a lump sum and the market crashes, well, you're out on your bee-hive - whereas if you stay on the pension, Ford's still on the hook for the cash instead of investing in product or returning money to investors. If the economy holds strong and you invest soundly, well, you could potentially do much better. But probably not - a pension plan (or annuity, or what not) can diversity in a way that makes sure they maintain cash flow while still keeping a large portion in high-voilatility investments; an individual investor with nothing else to fall on almost has to invest conservatively.

 

(That's part of the whole fallacy of the plan oft-proposed in the US of transitioning social security into personal investment accounts: When social security is your safety blanket, your returns probably won't be much better than social security offers anyway, because you have to invest conservatively to protect your income source. On the other hand, keeping social security well funded and secure allows individuals to be more venturesome with their additional savings. If I know my social security/medicare will at least keep me off the street, fed, and with medical care, I CAN consider putting some or all of that lump-sum payout into stock mutual funds instead of fixed-income bonds.)

 

I agree with your coments.

 

I'm a Ford retiree and after doing a short analysis, I already have a number in mind that they would have to beat for me to even be intrerested. That's before understanding what the tax implications would be; once I have that sorted out, I can run it through my forward year cash flow model but I think I probably already know the answer even before getting the numbers.

 

There is a risk, of course, in staying with the Ford pension. Ford has to stay in business, although the pension would be partially backed up by PBGC (providing that PBGC itself wouldn't go belly up and not have any funding available).

 

Nevertheless, I agree with your argument. Ford has some pretty smart people investing the pension $; for that chunk of what I receive every year, I would just as soon have them do the investing and I can concentrate on my pre-tax and post-tax investments.

 

If Ford is able to reduce costs through this program then that means it's a bad deal, on average, for those accepting it. There is one case where I can think this might be a good deal. If you retired early and had always dreamed of getting into business and were willing use this payment for capital ilo borrowing the money, then maybe.

[Bored of Pisteon]

Hourly retirees or former employees vested to some capacity are next... bet on it. And you can speculate how many would jump on the opportunity too.