Of those workers who have received an offer from GM to retire before the scheduled plant closure in the summer of 2010, many have been given up to 16 choices as to what they may do for retirement options, a staggering number of choices indeed.

Regardless of the number of choices given each member must evaluate each choice to ensure they have complete unbiased understanding of the results of each choice available. Each choice is different and although some may seem silly, each has special consideration and must be reviewed...that's why they are there.

your choices for retirement explained

  1. Take the GM pension offered, along with the car voucher, severance package and benefits package offered.
  2. Take a lump sum value GM has calculated is the value of the pension you would receive (within this there are three more choices). The car voucher is not available with this choice, benefits and severance is conditional each can be different.
    1. Move the lump sum to a (LIRA) a locked in RRSP or a (LIF) a locked in RRIF.
    2. Move the lump sum to a new pension plan with another employer.
    3. Move the money to a life insurance company for life time payments.

Each of the options will allow these four options too. The big issue is what to do or more importantly what does all this mean.

While we cannot give advice on this page, and you should not take advise based upon an internet page, we can offer information and ammunition to help you learn more and make the right decision for you.

1. Take the GM pension.

This is usually the first option and it may be an option you may wish to consider. With this you would receive the severance package, the promised benefits and the car voucher, a package worth over $160,000- that's a lot of money, too much to just ignore.

The problem though is a large number of economists, GM workers and other officials are very concerned that GM cannot pay the promised amounts they state they will. If GM can pay all is fine, but if they cannot pay, it will be the retirees who will suffer, reduced pensions, loss of benefits and perhaps even a loss of the severance package.

As Rick Laporte has stated many times, "We don't know from one day to the next whether or not the company is going to survive".

2. Lump Sum Value

GM has shown and offered to most who have received a package the possibility to receiving a lump sum instead of a pension from GM, but there are a number of stipulations.

  1. you give up severance in some cases
  2. you give up the car voucher
  3. you give up benefits or benefits are reduced

This can amount to over $160,000 a large sum of money - please consider this before you jump in. Don't be swayed by a big number, it may not work the way you hope it does.

As well if you consider the lump sum, you will have a very large tax bill - over $150,000 in some cases, thus your losses could top $250,000 before you even think of receiving a pension.

Lately many GM employees have been convinced to take a lump sum and invest the balance after the taxes are paid and the severance is gone into a variety of investments, but beware- when you invest, you take on the investment risk, nobody else does- there is not free lunch even with segregated mutual funds, (seg funds) or guaranteed funds or any other type of investment.

In the case of seg funds, the only things you will be guaranteed are...

Move the lump sum to a new pension plan with another employer

This lump sum option is available for those who would be able to find another job at another company which would pay roughly the same salary and have a similar Defined Benefit Pension Plan and would allow credit to their plan for the years you have at the GM plan. Therefore if you had 27 years at the GM plan, then the new plan would have to give you 27 years of credit for the lump sum available for those years.

In most cases this is not an option as high paying employment with high level pension plans and to find one which would accept your years for service would be difficult if not impossible to find- but it could occur.

Also, there is the possibility that a taxable amount would also be required to be taken into income for the 2009 taxation year.

Move the money to a life insurance company for life time payments

The last option for your lump sum is to transfer the lump sum to an insurance company for the purpose of purchase of a life annuity.

If this option is chosen, the payments cannot be materially different from that which would have been payable from the pension plan- meaning that the payments from the annuity must be virtually exact to what you would have received from the pension plan.

When you investigate this option insure that you understand how the insurance company offers plans such as these and that you understand the guarantees on life annuities. In general life companies guarantee these products, but in the event they too have bankruptcy issues, then the backup system Assuris is important to you. Basically like CDIC insurance for bank accounts, it guarantees payments up to $2000 per month, or 85% or the benefit payable, whichever is higher.

An life annuity will pay you the amount you are entitled to until age 65 then a basic pension for life with a survivor benefit for you spouse, just like the GM was supposed to.

These can be very complicated so be sure you get all the information you need to properly assess this option.