Should I stay or should I go???

General Motors retirees, they will have until July 20, 2012, to make the big decision!

That’s the deadline, just a little over five weeks away, when more than 40,000 General Motors supervisory and white-collar retirees will be forced to make what could be the most important financial decision of their lives. Should they accept GM’s offer of a lump-sum “buy-out” of their monthly pension checks and thus possibly receive the biggest check they’ll ever get? Or should they continue to receive a monthly pension check when GM transfers their retirement plan to a private group annuity from Prudential?

You see, General Motors is terminating one of its pension plans. In August, Ford Motor Company will follow suit for almost 100,000 retirees, although we do not have the details of Ford’s plan at this time. If you are a retiree of GM or Ford and have to make this decision, or if you are getting close to retirement and your company allows you to choose between a lump sum and a monthly check (about 35% of employers will offer this option to its 2012 retirees), this might be the most important decision of your financial life.

There are pros and cons to both of these alternatives, everyone is different. The right choice for one retiree might not be the best choice for another. One size definitely does not fit all and a proper analysis of your situation needs to be done.

Among other considerations, you would need to know and understand the long term effects of both the monthly check offer and the amount of the lump sum. As well, gauge the strength and ability of your employer to continue your payments for 20, 30, or more years. How is your health, family situation, and other income streams? What is the probability that you may need access to some of your principal in the future? Do you have a desire to possibly pass some of your pension onto the next generation should you die too early in your retirement years?

Our job is to help provide you with the analysis needed to make the decision that meets your goals and objectives. Interestingly, many retirees, and soon-to-be retirees have heard that if they take their pension as a lump sum, they will immediately loose a third or more to income taxes. Nothing could be further from the truth PROVIDING their pension is properly rolled over into a properly set-up IRA.

So, if you, or someone you know has retired from General Motors, Ford, PSERS, SERS, etc., and has been notified that they need to make this major financial decision, or if you are getting ready to retire and your employer offers you the choice of receiving a lump sum or a monthly check, give us a call. We’ll help you with the analysis and the arrangements.

Note: We would advise that you do not attempt such an IRA Rollover without the guidance of a Financial Advisor properly trained in this kind of transaction. Over the years, we have seen too many mistakes that have caused nothing but heartaches. Once a mistake is made with Pensions and IRAs, it can rarely be undone.

Here’s a link to a short, 2 minute Video:

About Paul Nichols

Paul is the founder of Financial Abundance, a Registered Investor Advisory firm and EDI, an Estate Planning Firm with offices in State College and Lewisburg. He has been working with individuals, families and businesses for over twenty years, including many Fortune 500 companies. He has educated tens of thousands of people through seminars, workshops and various international speaking engagements where he shared the stage with many notable individuals such as Ronald Reagan, Robert Kiyosaki (author of Rich Dad, Poor Dad), Mike Ditka, General Schwarzkopf, and Newt Gingrich to name a few.

In 2000, after many years of traveling to consult companies and individuals, Paul decided to relocate from Colorado to State College, PA (his wife’s hometown) to develop a local advisory firm.

Paul operates under the core belief that education plus understanding leads to clarity and confidence; resulting in peace of mind. He is a proud father of three and devoted husband of 20 plus years.

Some of Paul’s accomplishments:
Regular contributor to the Centre Daily Times, via the “It’s Your Money” blog
Featured in the movie Navigating the Fog of Investing
Regular contributor to Town & Gown as the publications Investor Coach
Host of the weekly iTunes Podcast, It’s Your Money
Member of the Western PA Better Business Bureau
Member of the Centre County Chamber of Business and Industry