Not the place to ask, but hoping to get some that have retired recently. With Ford’s future in doubt, it makes sense to go with the lump sum, but then the money will have to go into the market which you cannot trust.
I fell like I’m in lose-lose situation. If Ford was doing well like Toyota, the pension would have been a no-brainer.
This question is asked every few months. In few years most of the folks with pension will be retired, laid off or fired.
Most of us will never have this problem, as we have now been commoditized.
Hedge Fund managers buy their own stuff before you give them money to buy you after the prices went up. If they can't deliver 8+% annually, they rip you off as usual.
@dr 100% correct. It is a legal scam! I recommend for OP to only go to an advisor that charges by the hour. Normally, meeting 2-3 hours every 6 months should enough.
Be very careful about letting other people manage your money for a fee. You are taking 100% of the risk and they get paid no matter what.
Many of my prior co-workers have financial advisors who charge 1%-2.5% of assets under management. They don’t think about the compounding effect of those fees over time. Using 1,000,000 invested for 20 years at average of 7% return. The 1% fee costs you 670,000. The 2.5% fee costs you 1.4 million.
Here is a calculator so you don’t make the same mistake.
https://www.investright.org/tools-resources/calculators/investment-fee-calculator/
Yes financial advisors should get paid, you just need to understand what they are really charging you. Kinda like when you buy a car you should know the true total cost, not just know the monthly payment.
@ac+1k1vqca6h https://www.pbgc.gov/workers-retirees/learn/guaranteed-benefits/monthly-maximum
@OP you are wise to carefully consider this decision
are you or your spouse really bad with money? Then go with pension. I’ve watched ex-coworkers rapidly burn thru their lump sum - new truck, class A motorhome, vacation house, expensive vacations.
review the PBGC Maximum monthly guarantee tables on PBGC.gov. If your pension is greater than the limits for your age then go with lump sum. Pay careful attention if you are not at your official retirement age. Many airline workers who retired in their 50s lost half their pension when airlines filed for bankruptcy
if you anticipate a short life span, go with lump sum.
now look at your other investments. If you have a healthy 401k, Ira, savings balance you may want to take the pension and treat it as the Bond component of your investments and then just leave your other investments to grow for your heirs. If you are in this position then either choice is okay
if you take the lump sum you can post your particulars on bogleheads.org (search for investment review) and they will help you with suggested allocations. It’s easy to manage your retirement portfolio.
Before I retired at the end of 2022, there was an internal company forum you could join and get information on retirement options, so sorry I don't remember the exact name of it. I also discovered this site since others were in the same boat. In 2022, there was a huge incentive to retire given the change in the lump sum amount. With almost 35 years with the company and still in my 50's, it made a lot of sense for me to take the lump sum and retire. Things have changed a lot in the last three years and since everyone's situation is different, I strongly recommend you speak to a Financial Advisor. I know many retirees use a few groups in SE Michigan that are very familiar with Ford's programs so that is where I would start. Good luck and best wishes.
I was cut and had a pension but remember, that is pre tax money so it has to go into a pre-tax ira unless you're whatever age. Any money you contributed to the pension is post tax so you can use that or put it in a roth. I took the severance , put most of it in a 4% money market, to live off of, then for my estimated months 7 and 8, a 4.5 cd, then for months after that, the big indicies of SPY and QQQ. The pension, I'm giving to a fiduciary to handle, for the future. I know myself, I'd panic if anything big happens. You really have to know yourself and your temperment. good luck
If you have 5 years of cash to live on (either in savings or through another job), then the lump sum is probably the best option. If you need to live off your lump sum immediately, then this option is less attractive and carries a LOT of risk if the market turns south for a few years. A critical element to making this decision is figuring out how much money you need each year, with medical costs being a hue wildcard regardless of your current fitness/health status.
@ae If a Company is under sufficient stress it will qualify for bankruptcy protection, and management may choose bankruptcy on their own terms rather than being forced into bankruptcy by its creditors.
Ford’s 1956 IPO created a dual-class stock structure of Class A and Class B shares. Class B shares have 40% of the voting power regardless of the number or shares, and can only be owned by direct descendants of Henry Ford. Class B stock that falls into the hands of someone outside the Family, say through a divorce, becomes Class A stock. This gives the Family a lot of power to determine how Ford operates and spends its profits. If there were a bankruptcy the dual-class stock structure would surely be replaced with a more conventional stock structure, something the Family would likely resist. I presume this is the reason Ford resisted bankruptcy in 2009 by leveraging every asset it owns rather than Chapter 11 bankruptcy as GM did. In bankruptcy GM was able to break contracts that were underperforming which eliminated a lot of legacy costs.
Normally in a bankruptcy GM would have repaid debt owed the banks first, then with whatever was left pennies on the dollar to bond holders. Pensioners and shareholders would get nothing. But, in the GM Bankruptcy the judge protected the pensioners at the expense of banks and bond holders. This was an unusual outcome, and a reason to take a lump sum payout from Ford if you have any qualms about Ford’s future.
@ae Gaga was creative director at Polaroid… I like some of her songs, but what the f*** did she know about cameras?
@ae+1k1vqca6h I am no expert on the subject, but if Ford files for bankruptcy, the 2 tier stock is gone, and the Ford family losses its hold over the company. Last time I check, the Ford family holds 2% of the shares, but has over 40% of the voting power.
My 1st suggestion is to get a Financial Advisor to help you assess your individual situation, as others have said.
I retired at 55, and went lump sum for 2 reasons:
1) While the monthly pension seems nice now, I think it will be insufficient in 20-30 years, and wanted to have an investment that would grow with inflation.
2) Survivorship - if I die tomorrow, my family gets 100% with no penalty today.
There are low risk alternatives to 'putting everything into the market.' A FA can create models and projections to help you make an informed swag :)
I've been pleased with OWLPWA in Bloomfield Hills, fwiw.
Good luck!
@ad apparently they are unable to file for bankruptcy according to another thread comment. I’m not sure why they can’t file tho
Back when Polaroid filed in like 2003 or some sh-t you couldn’t get film for your camera
Imagine that sh-t with cars
Fellas, is buying a ford car a safe bet on future economics? Will you be able to get “film” for your “camera”?
If ford genuinely can’t file for bankruptcy, what happens? Whats the next option for them. To get acquired? Merger wouldn’t happen, they’d get swallowed. What if nobody acquires? What happens then? Is the too big to fall in play? I have so many questions. Interested in hearing thoughts because what happens to all these people with ford cars over the world? Crazy
Ford is making incredibly d-mb decisions with the EV market and canceling vehicles. It would not surprise me if they file, then any monthly check will drop like a rock, probably in half.
Get with a financial advisor.
I took the lump sum in 2022 when the payoff was excellent. Projections look good for me at this point. Health insurance is extremely high (0bamacare) And that is a worry going forward no matter what you do.
@a7 how did you determine the amount for PBGC? How old were you when you retired? I've always assumed lump sum was the way to go to just in case Ford is not around in my later years
My thought on this topic:
I retired in 2022 when lump sum was good. The market has done very well in the 2.5 years. I went 65/35 stocks / bonds. Never time the market. Don’t get too greedy or too conservative. And don’t listen to the fear mongers.
If I was retiring now, I may consider a pension option if we can get inflation to 2%. The biggest pension ki-ler is inflation (some gov pensions have inflation protection COLA, but not Ford).
Also, you need to take into account any Roth conversation you may do and which tax bracket you’d like to stay under.
Too many factors to consider, there are few tools online that help you map it out for best outcome. Bolden is one of them. Best wishes.
I went monthly pension, but I'm older and already had a lot in 401k and PBGC for my age was more than my monthly pension. The way I see it, if I go lump sum and put it all in the market, then we'll be in a 10-year bear market. You're welcome for me saving us for that happening ;-)
@a2 - thank you for the links!
This is really scary times for Ford employees. A monthly payment for live is nice, but no COLA is worrisome.
There is no guarantee that Ford will be around in 10 years.
@a3 “guaranteed income” not at ford. They don’t lead young and naive starters on and have no intent on following through on it. Even worse, they rub it in and humiliate them after getting what they want
OP: Best to ask a trusted person with finance experience.
It depends on your situation, age, family and what your future plans are.
E.g. if you are fairly young and married a monthly payment would make more sense. You and your spouse will have a guaranteed income for hopefully a long time.
If you are very old and single a lump sum may be better.
Hope this helps.
https://www.usatoday.com/story/money/cars/2022/12/08/ford-workers-retire-pension-warning-interest-rates/10858144002/#:~:text=How%20much%20will%20pension%20payments,inflation%2C%20like%20Social%20Security%20does.
https://www.motorbiscuit.com/ford-employee-wanted-over-bo-b-threat/#:~:text=He%20apparently%20didn't%20get,threat%20follows%20past%20plant%20scares
https://www.cbsnews.com/news/fords-retiree-cashout-a-trap-for-the-unwary/#:~:text=(MoneyWatch)%20COMMENTARY%20Ford%20Motor%20(,month%20and%20took%20the%20cashout.
It’s important you asked. Ford is doing strange things to save money these past few years. Kudos to you on long term thinking… just don’t expect ford to have the same