DETROIT – Ford employees who are eligible for retirement were warned and advised to retire this year to increase the lump sum pension payment.
The company confirmed Wednesday that approximately 1,000 employees had opted to retire by the Dec. 1 deadline.
“If you are considering retirement and choose the lump sum option, it is important to understand the impact of higher interest rates on your individual lump sum if you retire after December 1, 2022,” said Ford’s memo, which also included a brief research to help the company plan for employee retirement.
The warning – sent to employees in an email in September titled “Important information about your pension” – made it clear that anyone considering retirement and opting for a lump sum payment should look at the numbers.
Rate rise in 2022 will cause a significant drop in potential payout for those who choose the lump sum pension option next year.
How much will pensions decrease in 2023?
The 2023 lump sum, according to Ford’s memo, will decrease by roughly 20% to 25% from the lump sum values Ford employees would receive if they took it in 2022.
For example, if someone seeks a lump sum payment of $500,000 in 2022, the loss in 2023 could be in the range of $100,000 to $125,000.
Retirees who choose the traditional monthly pension will not see a change based on higher interest rates or inflation. Many pensions do not include cost-of-living adjustments that would increase the monthly pension check based on inflation, as Social Security does.
What was downloaded in 2022? Your complete database of all downloads, from food to cars.
Choosing a lump sum payment is an option, not a requirement.
Will Ford cut jobs next year?
These retirements are independent of the company’s recent actions, which have included job cuts in parts of the company that focus on traditional vehicles with internal combustion engines. While CEO Jim Farley split the company into Ford Model e (electric) and Ford Blue (non-electric) units, it is Ford Blue Trucks That Generate Revenue needed to transform the Dearborn automaker.
However, Farley pointed out that additional job cuts may be on the horizon in an effort to be more competitive in terms of company operating costs.
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Ford has approximately 176,000 employees worldwide. The latest retirements will bring the total number of salaried workers to 28,000 in the U.S., Ford spokeswoman Marissa Bradley told the Detroit Free Press, part of the USA Today Network.
There is no department affected by the retirements, she said. The company does not disclose specific details related to the retirees, including how many of them are receiving one-time buyouts.
The financial analyst intervenes
Sam Hushcho, a chartered financial analyst in Southfield, Mich., said Wednesday that his firm has had many discussions with Ford customers about retiring in 2022 and taking the lump sum option.
“The main group of people who decided to take the lump sum offer were planning to retire in 2023 or 2024 anyway,” he said. “And that was enough to push them over the edge to pull the trigger on retirement.”
In some cases, he said, people feel anxious that they are making a major life decision that will affect the next 30 years of their lives, but only have two months to decide what to do — while still having to work.
Many times, he said, Ford customers who were within three to five years of retirement decided not to retire after all, knowing they would be giving up their paychecks much sooner than expected. Often, Huszczo said, those customers who have decided to stay express more faith in Ford’s long-term direction.
This article originally appeared in the Detroit Free Press: 1,000 Ford workers to retire amid rate hike and pension loss warning