Brian O'Connor: Remaking GM

To take the deal or not to take the deal: That is the question

Brian O'Connor

S hould you take the deal?

That's the question on the minds of GM and Delphi hourly workers who can now get anywhere from $35,000 to $140,000 to hop off the payrolls at beleaguered GM and its ne'er-do-well sister, Delphi.

As parting gifts go, this is a doozy. But it still pays to sit down, run the numbers and put together a plan before you grab a tempting pile of dough.

There are three deals on the table, so let's take it one at a time.

Retirement/early retirement: Workers with 30 years of service can get $35,000 to take a full retirement. Not a bad deal, if you were planning on retiring in the near future, or if you're near the normal retirement age of 65.

In this case, GM and Delphi give you a $35,000 bonus to do what you were already planning.

(This same deal is offered to workers older than 50 with 10 years of service, and in a phased-in plan for workers with at least 27 years of service, but less than 30 years. It's also available to workers at certain plants who have at least 26 years of credited service.)

On the other hand, it's quite possible that a number of workers can claim 30 years of service and barely be 50 years old. That means you may still have kids in school, be paying a mortgage, caring for elderly parents and just starting to get serious about saving your own money for retirement. In this case, $35,000 isn't enough to put your finances in shape to retire.

Your options are to take retirement and find another job, or take your chances and stay on the job.

In the first case, you can look at the retirement income as a base that will take up the slack of any other lower-paying job you might get. You may want to temporarily cut expenses while looking for what is essentially a second job that will put your total income back up to your GM/Delphi level.

This may be a chance to join a family business, or turn a hobby or other talent into your own business. If you can squeeze the family budget and add in that $35,000, you also could consider relocating or heading back to school, with income from any new job added on top of your pension payments.

Lump-sum buyout: In this case, workers receive either a $140,000 or $70,000 lump sum to leave and give up all benefits except what's vested in their pension.

If you've been itching to make a change, have a plan and your finances in order, this is the time to make your move and GM will provide the money.

On the other hand, if you just hope to take the payout and make some kind of fresh start, you'll need to do a lot of planning first.

Sure, that kind of payout can be a life-changing amount of money -- if it's invested the right way.

If education to change careers is your choice, thoroughly research your desired new field of employment. Where are the jobs, who gets them and how much do they pay? If you're used to making $60,000, will you have to start over making $30,000 or less as a beginner in your new field?

If you plan to relocate, you'll need to do your homework, too. What's the job market like, how much do jobs pay there, what's the cost of living, quality of schools, lifestyle and more.

In addition, you need to sock away as much of that lump sum as you can in a retirement account.

"They're going to need that money because their new career is not going to provide them with a pension," said Beth Allen, a certified financial planner with Action Financial Management Inc. in Utica.

Staying put: If you can't afford to quit working, you need to decide how much of a risk you're running by staying on the GM/Delphi payroll. If too few of your union brethren and sistren take the incentives to leave, your job could be cut and you'd end up in the jobs bank.

That covers your base pay and benefits but your quality of life will definitely suffer, unless you like watching History channel reruns. What becomes of the jobs bank after the contract expires in 2007 is an open question, too.

And unless the prospects for GM/Delphi change drastically in the near future, it's unlikely that any future round of incentives to leave or retire will be as generous as the ones being offered now.

"You can't just assume there's going to be another buyout or retirement incentive a year from now," warned Patricia Nemeth, managing partner of the labor law firm Nemeth Burwell P.C. in Detroit. "I don't think people can bank on that happening."

How to decide: For Ted Lakkides, a certified financial planner and director of the Michigan Council on Economic Education, it's a matter of simple math.

"If the numbers work out, then it's a good decision. If not, then don't take the buyout."

Simple, but not easy. Besides surveying your personal budget and balance sheet, you'll need to have a lot of honest, and possibly tense, talk around the kitchen table. More than money, you'll have to consider the needs and wants of your spouse, kids, extended family and yourself.

Whatever you decide will involve risk, since nobody has a crystal ball. Make your best decision and if things change -- and they will -- be ready to adapt.

In the end, the right answer to the question at the top of this column -- Should you take the deal? -- is simply the answer that looks best for you now.

You can reach Brian O'Connor at (313) 222-2145 or boconnor@ detnews.com.