QUESTION: You’re approaching a major city and there is a road sign that reads: I-10 Business Loop – 2 miles ahead. What do you do? Stay the course or opt for the Loop?
ANSWER: It Depends
Most drivers unfamiliar with the area will take a quick look and keep on driving. On the other hand, local drivers familiar with the area and alternative routes probably won’t hesitate to veer off if they see or hear an opportunity to avoid trouble or slowdowns. Why? They possess a deep knowledge and understanding of their surroundings, which greatly validates their decision.
Basically, Ford and GM constructed a “Business Loop,” posted “exit ramps” which now force participants to make a critical and time-sensitive decision. Retirees may choose the “exit” (take the buy-out) or remain on your current course (continue the annuity).
Here are a few factors to consider:
- Remaining on the annuity provides a degree of certainty in your financial route in life – your coordinates are calculated, outcomes understood, and you’ll potentially have minimal detours to navigate. There may be some bumps in the road but this path offers less options; therefore, less choices to be made along the way.
- Opting for the exit strategy (taking the lump sum) requires a great deal of knowledge, understanding and clarity surrounding your personal financial journey. The advantages and efficiencies exist, but you must be very familiar with your coordinates - that is your current financial position and destination.
- Like any business loop – sooner or later you must merge back on to your original path. Do not discount these upcoming decisions and plan for them in advance. Mistakes in building an alternative investment route may cause the greatest disparity in your plans success.
To further complicate matters, you will likely encounter a sales and marketing blitz equivalent to a three-way road sign at an intersection all pointing in opposite directions. In fact, I wouldn’t be surprised to see a dancing gorilla holding a sign that said, “Hot and Ready Roll Over Seminar Today.”
Three Buyout Guidelines to Consider
- Understand your current location, your desired destination, and don’t be afraid to ask for directions.
- In the end, each lump sum strategy will loop back to your similar financial retirement path – PLAN FOR THE HOW
- Avoid the dancing gorilla. Too many professional are selling Hot and Ready solutions that discount the magnitude of your decision.
Right about now, Ford and GM retirees are up to their eyeballs in “advice” coming from every angle. Ford and GM buyouts are equivalent to an expressway business loop. You may rarely access the loop, but if you know what you are doing it can be a wise path.
Annuities involve market risk and should be considered long term investments. Withdrawals are subject to income taxes and may be subject to a penalty if withdrawn before age 59 ½. Guarantees are based upon the claims paying ability of the insurer. The information contained in this report does not purport to be a complete description of the securities, markets or developments referred to in this material. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.