Ford those who are retirement age
The lump sum is not nearly as attractive as in past year due to higher interest rate. Good info in "Where's Bill Ford" thread.
IPBGC insurance protects pension regardless of Ford's future
7 replies (most recent on top)
As mentioned: TAKE THE LUMP SUM!
I know friends who didn't & opted for a monthly pension. They worked at other companies who were "sold", get what they lost - their monthly payment?
Didn't affect the lump sum folks.
Would also suggest investigating the Rule of 55. Depending on your circumstances you may find some creative ways to tap your 401k as a bridge. Read carefully the IRS rules.
PBGC will pay my complete Ford Pension in about 5 years (I am in my 50's). I have over $700k in 401k that needs to be converted to Roth. I will do this over 10-12 years. Besides my pension I have about $600k outside my 401k. I have $220k after tax. I went with the pension.
As stated before, everyone's situation is different. I talked with my financial advisor and he said that the return on the monthly pension cannot be beat. However, given the following factors, he recommended taking the lump sum.
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Not affected by company changes (bankruptcy, pension discharge/changes)
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In control of money
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Can leave an inheritance
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Early death
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Access to large sum of money for emergency
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Chance to protect against inflation
Realize though that PBGC won’t pay anywhere near what the pension would pay. You’d see a big cut if Ford goes under.
Right - everyone's financial/health/life expectancy/personal spending control is different.
I took the lump last November (PRP) which had a more favorable interest rate than 2019. I wanted the flexibility to control my income for tax purposes, the ability to at least keep pace with inflation (annuity does not - assume 3% per year - do the math - not the greatest) and have the opportunity to leave money for our children when we pass. I am using a very qualified wealth management planner to manage the lump and provide tax efficient direction for Roth conversions, withdraws, etc. I have other funds to use so I am not pulling from the lump for some time and can afford to wait out the current market craziness ups/downs.
It is a dice roll on life expectancy - and I know there is pension insurance (how robust is their funding??) - but this is a different world now, things have happened that no one ever expected before. Everyone's situation is different and any financial planner can run the numbers for you.
By biggest concern is that Ford will modify the salary retiree benefits down the road as conditions worsen.
Either way - I am very fortunate to have had a pension and I truly thank Ford for providing that!!
Good post