I’m curious, anyone here is thinking about retiring this year? It seems HR is not as active with email and “webinars” like they did last year. Lump sum down 8% for 2024 is not bad and we could see a rebound in 2025 and lump sum will grow again.
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@cneh+1pnTbh3w - You're correct. For example, GM has outsourced the pensions to Prudential Insurance. Retires get their monthly check from Prudential not GM.
The monthly payment (annuity) will never change but purchasing power will decrease every year. That's how Insurance companies make their money.
@2pgg Although there are some survivorship options, think of a pension as a fixed monthly payment for the rest of your life (Ford literally buys an annuity that pays you a monthly benefit). For the lump sum option, Ford basically takes the August IRS motality tables and the August IRS interest rate segments and calculates how much money you would need to replace the monthly payments. If the interest rates are high, the presumption is that you'll earn more interest over your remaining years so you'll need less money to start with.
Guys pay attention IBM is now doing one of the cost saving actions that BCG recommended and was put on future Ford HR road map. They didn’t want to be the first large US company to do it.
Basically they convert 401k to a Retirement Benefit Account that the company controls and can in effect write IOU to like they did with pensions.
https://www.theregister.com/2023/11/02/ibm_401k_changes/?td=rt-4a
There are of course benefits to the Executives as their $ amount is not capped like it is with 401k. So the company would place 5% of exec salary in the Retirement Benefit Account just like it did for lowly GSRs. But 5k for GSR is very different than 1.6 million for a CEO
Around 2012/2013, some employees retired due to upcoming negative impact on their lump sum. The same happened in 2022. Don't expect the interest cycle to move quickly. No one knows.
Good question. There are a lot of articles on the web. Here is one…
https://www.cnbc.com/2022/05/12/retiring-soon-with-a-pension-how-interest-rates-affect-your-benefits.html
Serious question for the financially illiterate, how and why does the inflation rates affect lump sum payouts.
I too agree about the lump sum impact to interest rate. If OP can hang on, then good for him/her, but no one is greatened to be around. Those who retired in 2022 are super lucky. Not only they got the maximum lump sum, but they also were able to invest and get 5-6% in CDs and increase their lump sum.
Also, even if the interest rate goes down by August 2024 (to set the lump sum rate for 2025), the rate is expected to go down just a bit as inflation will continue to be a problem. So any bump in lump sum will be offset by inflation. My financial advisor told me it is a no win saturation.
Finally, there is no guarantee that Ford will not freeze the pension just GM, GE, and others have done.
Lack of retirements will mean an even bigger involuntary. Brace for it
@gtc+1pnTbh3w I agree. And maybe we are not too far from interest rate reduction. Canada is right now in a mild recession. Many economists are predicting a recession here for next year. The Fed didn't raise the rates in September, and some believe they won't do it in November.
The problem is that I am not sure Ford can survive a recession, nor that the Ford employees may have jobs until rates are lower again.
HR has been a little busy lately. Some contract thing was going on, it was mentioned in the media.
Ford can’t afford another max exodus. But then again they can send retired jobs to LCC
The only possible rebound would be an interest rate reduction.