Should You Take the Pension Buyout?

From the Detroit Free Press
June 2, 2012

Advice on Lump Sum Offers

  • Know the specific time frames and deadlines for dealing with your lump-sum offer. Ford will be rolling out offers in 2012 and 2013. But there are very specific times to make a decision. About 65,000 salaried Ford retirees and surviving spouses will be facing the choice during different time slots in this year and next. Plus, another 35,000 former Ford workers who left the company before retirement but are due a pension will get a postcard to alert them of their time to make a choice, too.
  • General Motors will give about 42,000 U.S. salaried retirees the choice of taking their pensions in one lump-sum payment.
  • Understand upfront that everyone's situation is different -- so you simply cannot copy what your brother or sister who works at the same company decides to do. How's your health? What kind of bills do you have? What else do you have in savings? What does your tax situation look like?
  • GM retirees in particular will need to compare the lump sum being offered to the annuity option within the GM offer, said Leon LaBrecque, CEO of LJPR, a fee-only financial adviser in Troy.
  • When considering annuity options, investors need to carefully understand the fees and the rules involving a specific annuity product.
  • Listen to talks by various financial planners but make sure that you have your own specific situation reviewed by more than one or two professionals.
  • Research the tax implications for your family.
  • Understand the specific rules involving rolling over lump-sum money to an IRA (individual retirement account).
  • If you take a lump sum, you are taking on the risks and costs of managing your money. What happens if you live well into your 90s or we see an uptick in inflation? An investment strategy needs to consider such risks.
Folks, this is not something to consider lightly. Retirement income planning is our specialty.

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