Why is 30 years so “magical?” Say the GR8 is a mechanical engineer making say $100k per year.
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I agree with most of what's been written. A word to the wise - when doing your calculations, set aside a large chunk of $$$ for medical insurance costs. Two years after being SRD'd (back in 2019), we were unexpectedly told the company was no longer paying for our medical. Didn't expect that and would have made different arrangements had I known their ultimate plan was to dump retiree medical coverage.
The supplement pension payout goes away for your spouse if you die. Also it is not guaranteed and could be adjusted accordingly in the fine print of the pension agreement.
I took the lump at age 56 and only have to worry about Ford being able to fund the pre HRA and post 65 healthcare costs.
Understand rule of 55 and what is a 72t if you are near or under the age of 55. Both allow access to retirement money without penalty.
Use the pension projection tool and model every month. The lump sum interest rates are locked with the aug2022 values till December 1 then will change to aug2023 rates. You can estimate the lump sum difference by comparing the aug2021 to aug2022 rates and knowing that was around a 20% hit.
My friends at GM are jumping ship.
I agree with the most recent comment about losing control if you take the Ford provided annuity. That's why I took the limp sum. If you have a spouse, he/she can be the beniciary if you pass away, however if he/she also doesn't live much longer the payments stop. Alternatively, if you take the lump sum you dedicate some or all to an annuity that can be passed on to your children. You can use some or all in a diversified portfolio of stocks, bond, mutual funds, t bills, whatever you want. This seems to make much more sense, but everyone has to evaluate their own situation. Just my two cents but I wanted control over my funds and not worry about any possible future insolvency or not being able to pass it to children. Thx
It is very important to study all options when you’re close to making a decision. All the comments are accurate. You should model all options.
Last year choice was a no-brainer. 2021 IRS segment rates was very favorable to lump sum. Those retirees are enjoying high interest rates now (and income) with very low risk. 4-5 years from now, things could change. No one knows which way the wind will turn!
There is also another factor that you must consider. If you take the monthly annuity, then you have less control over your taxes. If you elect to go with the lump sum, you’ll have full control on how much to withdraw which then it translates into which tax bracket you fall under. Also do you think Ford will be around in its current structure 20 years from now to pay the monthly annuity? When 2035 hits and most of the states do not allow selling new ICE vehicles, would Ford spin-out the Ford Blue like they did with Visteon? No one knows.
Just another clarification, 30 years, no matter what your your age is, gets you the early retirement supplement which is payable until you are 62.
Just one clarification, you are also eligible to retire if age 55 with 10 or Mr years of service This also qualifies you for the retirement medical insurance allocation.
There is no magical years of service + age = 85. That hasn't been a factor for years. 30 years allows you to collect your pension even if you aren't 55. It also gets you the health care benefits. If you are 55, 30 years gets you the early retirement supplement which is payable until you are 62. This is an increased payment over the interim supplement which is payable at 55 and less than 30 years. If you are 62, the difference between 29 and 30 years is no different than 28 and 29.
"Why is 30 years so “magical?"
The entire document with details of all calculations for the General Retirement Plan is available online (Ford Internal site).
The magical "30 years of service" or alternately if "years-of-service+age =85" ... before you reach one of these milestones, your pension is significantly reduced. This may not be the exact correct explanation, but it's the gist.
Don’t know but I do know what an LL5 lump sum with barely 20 years above 55 got last year when they were still using the old 0% discount rate - $1,200,000. That dropped by $250,000 after November. And with the fed funds rates over doubling since the last pension calculation in August, another drop of ~$300,000.
Pray Ford doesn’t freeze the pension now ladies-n-gents.
I tucked the $1.2M into 5% Treasury Bills (state tax free) nets a cool $5000/month in retirement. About $800 more than the Ford monthly pension payment.
If you are a Ford employee, you can model the difference online yourself.