Got severance package yesterday. I am a software engineer with HTHD in GDIA. Have to decide between lump sum or monthly pension. Has anyone taken monthly? I know my previous boss took lump sum worried about company’s future might affect pension. Like to know what others are choosing and their reasoning.
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Frankly Ford does not care which option you take. If you read the annual report, you will see that Ford makes money from you giving you a pension. This is exactly why insurance companies offer annuity. Don't buy the last BS comment.
The company wants you to take the lum sum. It's a better deal for FoMoCo. That is the only reason they offer it. They are not looking after your best interests.
@OP. If you are bad with money, monthly pension. So you cannot spend it all, and always you'll get something, no matter how little.
If you are financially responsible, and I am not talking a market guru, just someone that lives below their means and is able to adjust to a budget, then lump sum.
Think about this. Ford will pass your lump sum to another company (for an annuity). This financial company will not do this for free and the salvation of their souls, but to pocket the difference between what you get and what they can make with the lump sum.
So even if you do it yourself, but have the discipline for it, you'll get more money from your lump sum than the annuity. I don't see Ford escaping bankruptcy, or even less Ford caring for the pension. So any long term planning should account for that.
If you get the lump sum and buy low and sell high= no problem. If you buy high and sell low= problem.
Lump sum it you're d-mb.
Folks the PBGC table show the MAXIMUM payout. It cannot exceed the plan payout - which in the example mentioned was $6000. In any case, each person has different needs, it is whatever make the person sleep well at night!
@g7+1jhjwyvyh - yeah, you're right. I was looking at the second row instead of the first.
The table does get updated every year, but once a person starts receiving the monthly payment, then it is set, there is no inflation adjustment.
OP is asking what we did and why, presumably to make his/her own decision and not be told what to do.
I took the lump sum for the following reasons:
- I want control of my pension and to invest it how I want to.
- I don't want my pension affected by company changes (bankruptcy, pension discharge/changes).
- I want to leave an inheritance (or at least try to).
- I have access to a significant amount of money for emergency.
- Have a chance to protect against inflation (monthly payment is not indexed for inflation).
Unfortunately, the interest rates have increased since 2022, which means lump sum payouts have gone down.
Sorry you are going through this. I went through this a few years ago.
Take the lump sum and invest well instead of worrying about PBGC and the changes if any going forward. I took lump sum and I am very happy with my decision. Good luck with whatever decision you make.
you are using the table wrong.
If you retire at 59 and the company files for bankruptcy when you are 59, then you would get max of $4,533 (straight annuity) or $4,080 (joint/ survivor annuity).
If the company files for bankruptcy when you are 63 and you retired at 59, then you would get max of $6,391 (straight annuity) or $5,752 (joint/ survivor annuity).
Likewise, ff the company files for bankruptcy when you are 65 and you retired at 59, then you would get max of $7,431 (straight annuity) or $6,688 (joint/ survivor annuity).
The PBGC numbers get adjusted up yearly.
The roll of the dice is how far along you get before the company files for bankruptcy.
A coworker retired in 2018 and took the pension option $5300 per month. He thought it was a great deal at the time. He told me he had about $1500 left over every month the first year. Then COVID hit and inflation went crazy. We met for coffee last Thanksgiving. He told me they are selling the house and moving to a smaller place. Now the $5300 covers on average only 60% of total monthly expenses. Inflation eats up pensions for breakfast.
People on this site unknowingly give bad information. See the PBGC maximum payout table. Think about this one example. Say your pension is $6000 a month when you retire in Feb-1 2025 and you are 59 years old at the time you retire.
If Ford files for bankruptcy anytime in the future. Using the table, you will start getting payment of $4,080.07 from PGBC.
Make sure you understand the section “What age do I use to find my maximum guarantee amount?”
https://www.pbgc.gov/wr/benefits/guaranteed-benefits/maximum-guarantee
@f3+1jhjwyvyh - Stop it with fear mongering. You picked the worth possible investment scenario to get your point (13.1 years Large Growth). The other poster suggested 70/30% scenario which makes sense.
People who allocated 50%-70% in equity, the recovery max was 4.3 years. Here is the full table from Morningstar: https://www.morningstar.com/portfolios/how-long-will-it-take-market-recover
There is risk with everything. OP should not get advise from this site. Too many variables to consider. I can name few: kids inherit money, heath condition of pensioner, single/married, Roth conversion options, "Tax Torpedo", IRMAA, etc. etc.
I generally agree with the lump sum idea, but I also lived through the crash of 2000 and 2008 (really not that long ago) and it took about 13 years for the S&P to recover.
If you take the lump sum, put it in an IRA. 70% VTI, 30% Treasury Notes. The market will get a hit at some point, but it will recover. It will always will recover. When the market goes down, you still have 30% Treasury you can withdraw from for few years without losing a penny.
PBGC only guarantee a % - Check it out and you'll see for yourself how much you'll get. Just ask the Delphi folks! The monthly pension will never go up: i.e. your monthly $5k (or whatever the number is) will never go up. Your purchasing power will continue to decline.
A lot of articles on this topic. AARP website has a few.
Here are two example of a calculator you can try. Note, most of the calculators are geared for folks that have government pension so the chance of bankruptcy is not a factor, and in fact, some state and local gov pensions get cost of living adjustment every year (as the local government will tax the people more so there is always a golden goose). In those cases pension is awesome. (example: https://www.michigancapitolconfidential.com/seven-ann-arbor-retirees-getting-six-figure-pensions)
https://www.cornerstonecolumbia.com/pension-vs-lump-sum-payout-calculator
https://www.ameriprise.com/financial-news-research/financial-calculators/pension-vs-lump-sum-payout-calculator
Best Wishes in your next chapter.
How much notice did they give you that you were cut? Or was it immediate?
how can we start a class action lawsuit? (got a notice today)
@@d6+1jhjwyvyh, 2 were cut in Connected Vehicle in November 2024, that I know of. 15 in IT were told Monday they will be cut 1/31/25. More expected. If people banded together they could do a class action and sue Ford.
Seems odd that we are only hearing about one dismissal, though I am expecting it to be widespread in the next 4-6 weeks.
@OP ... were there other people let go or was it just you? Did they give a reason for your dismissal?
My father-in-law lost 40% of his pension during the 2008 downturn. If you can properly manage your money, take the lump sum. If not, choose the pension. Good luck on your new journey.
If you have a good/strong 401K and are in your early 60's I would take the annuity.
If you are close to 35 years and get approx $7000 a month for single life annuity pension, then PBGC would provide 100% by the time you are 65.
your 401K would be icing on top of your monthly pension.
Depends on how badly you need the guarantee of a monthly benefit. Everyone thinks they are financial masterminds who can grow their lump sump beyond what they what they would accumulate over a lifetime of monthly payments. However, sometime people blow through the money. My dad's employer ended their pension, leaving everyone with a lump sum payout. My dad invested with the intent of pulling out a fixed amount each month. During the great recession his account tanked. His expenses didnt go down so he still needed the same monthly withdrawal. He had to liquidate more shares to withdraw the same amount. When the market recovered, he had less shares so his recovery was minimal and the money was gone by 2015.
The monthly check is not as se-y as the lump sum but it does protect against market losses.
IDK but. this the info I have:
On Oct. 7, PBGC announced that the maximum guaranteed benefit at age 65 for terminating plans will rise to $85,295 in 2024 from $81,000 in 2023. This amount is determined using the Social Security “old law” contribution and benefit base (see Social Security and SSI amounts).
I took lump sum because I too had the same doubts about the future of the company. I think the downside of lump sum is if you invest in an IRA and the market tanks, then you are sc--wed. The downside of pension option is limited growth and the future of the company. Dont fall for "the government will cover my pension if the company goes bust" fallacy. The government will cover a part of it, but you will get pennies on the dollar not the full amount. I got lucky and my IRA is way up.
Take the lump sum, put it in an IRA, and invest it with your own finance advisor. Never plan on having to worry about Ford ever again. I know it doesn’t seem like it at the moment but you will see this is a “blessing” that you never saw coming. At least that is what it was for me and several others that were released in the past. There are better companies out their and actual good leaders to work for instead of Ford’s poor management. Best of luck to you!
pension
I looked at it and my would be guaranteed by the PBGC.
Care to let us know what team? I'm in GDIA as well :(
lump. it just bounced up 4% last december. also, push it out to the 180 days to take it. you get slightly more the closer to that 180
Take lump sum. Ford files bankruptcy them annuity is trashed. I think there is a Fed back up but much lower amount.
Sorry to hear. Sending well wishes. Out of curiosity, are you nearing retirement or did they restructure/collapse a team?
Take the lump sum. You can invest it yourself and make more money on this money than compared to the annuity that Ford is going to stick that money into.