If all goes smoothly for Ford Motor and General Motors as they transfer some of their pension risk from their books to pensioners and insurance companies, more companies are going to jump on that bandwagon.
This week, National Cash Register announced that it was following suit. I read their press release with personal interest because both my grandfather and my father worked for NCR and got pensions. Pop died in his 70s, but Grandma continued to receive his pension until her death at 94. My father died in his early 60s, but my stepmother lived to be 90, and his pension was important to her, too.
Both of these women saw inflation reduce the value of their late husbands' pensions, but if either were alive today, I'm sure they'd tell you that having a regular check was hugely important. You might argue that times have changed and taking a lump sum and investing it in a sophisticated way is a better retirement planning deal and more secure if safeguards fail. But it's also clear that even financially savvy people have had bad luck in this brave new world, and those who aren't very savvy have found managing big sums of money to be way too much to handle.
For instance, this week, the workers are roofing the house we're having built. It was hot yesterday and I dropped off some cold drinks and talked to one of the guys who was clearly feeling the heat more than his younger colleagues. He told me he had taken a GM buyout at 50 from his job as a computer analyst.
He opted for the lump as opposed to the promise of a pension in retirement. He used some of it to start a business, but when the economy soured, his business failed. His marriage crumbled under the pressure and he got a divorce. His ex-wife was awarded the last of his lump. Now, at 57, he's the oldest of the crew putting on shingles -- because that's the best-paying job he can find and one that he did in high school and college so he knows how.
If you're given a choice -- pension or lump -- think hard. You don't want to be in that guy's shoes.