Allison is offering the 2008 Window Program to about 370 salaried workers. The plans will be offered to employees with 30 years of service, those between age 55 and 64 that have at least 10 years of service, or those employees who are at least age 65 and have completed 5 years of service. The decision to accept any retirement program will require careful analysis and planning on the part of each employee considering a retirement program.For those evaluating the program, there are important factors to consider:

• Am I financially ready to retire?

• Have I developed a comprehensive Retirement Income Plan?
• How will a buyout offer impact my retirement plan?
• Are my investments allocated appropriately for this life event?
• What should I do with the assets in my SERSP?
• Which distribution method for pension benefits is best suited for my personal situation?

Mainstay Capital Management, a fee-only, independent investment advisor, provides investment and retirement planning advice for thousands of active and retired automotive industry employees. Mainstay has counseled many employees and executives on buyout offers. We can provide you with a comprehensive Retirement Income Analysis, help you evaluate “what-if” scenarios, and assist you in making an informed decision concerning the 2008 Window Program.

Call Mainstay Capital Management toll-free at 1-866-444-6246 to discuss your personal situation with a Retirement Planning Specialist.
 

Links to Articles of Interest:

"Consider financial future before accepting buyout" - Chicago Tribune

"How to Value the Buyout Offer" - The Wall Street Journal

"Buying in to a buyout" - The Flint Journal

"4 things to consider before accepting buyout" - MarketWatch

"Getting Personal: Financial Planning Before The Buyout" - The Wall Street Journal

ABC News Video: "Automotive workers seek advice on buyouts"

2008 Window Program Checklist

After being offered a 2008 Window Program, the list below details the suggested steps employees complete:

• Review all retirement package materials provided by Allison. (Available from Mainstay Capital Management upon request)
• Contact Mainstay Capital Management to discuss your personal situation and the Retirement Package.
• For a more detailed analysis of your situation, request a Retirement Income Plan Questionnaire from Mainstay Capital Management.
• Start gathering personal financial information for your consultation with a Mainstay Capital Management Retirement Specialist. To prepare for the Retirement Income Plan, candidates should obtain the following materials:

  • Social Security Estimates

  • Severance Package Information
  • Outside Brokerage Statements (i.e. non Mainstay Capital Management accounts)
  • Other Income (e.g. rental property)
  • Mortgage Expenses
  • Living Expenses, such as Food, Utilities, Insurance, Taxes, Car Loans, Fuel, Travel, etc.
  • Other Expenses, such as Life Insurance, Health Care, Long Term Care, etc.

• Submit your Retirement Income Plan Questionnaire to Mainstay Capital Management
• Review and discuss your Retirement Income Plan with a Mainstay Capital Management Retirement Specialist.
• Notify Allison of decision to accept or decline the offer.
• If you accept the Window Program, the effective date of retirement is January 1, 2009.

     2008 Salaried Window Retirement Program

Eligibility (any of the following)

1. Employed by Allison on December 31, 2008 and you will have a designated retirement date of January 1, 2009 and

2. Employee is “retirement eligible” under the Allison Transmission Salaried Retirement Plan as of October 23, 2008. Persons who meet the following criteria are “retirement eligible”:
   • “Length of service date” is before 1/1/88
   • Active participant accruing a benefit under the GM Retirement Program for Salaried Employees immediately prior to August 7, 2007
   • Became a salaried employee of Allison on August 7, 2007 due to the dale by GM of the Allison Transmission Inc
   • Currently a salaried employee

   And you meet any one of the following 4 criteria:

• Employees have 45 calendar days to apply for the Window Program
• Form must be turned in no earlier than November 17, 2008, and no later than December 8, 2008
• Company approval/denial will be determined within 7 days of receiving the form by the company
• Retire as of January 1, 2008 unless otherwise determined by Allison leadership

Seven Key Risks For Those Considering A Buyout

While a buyout offer can be very tempting, employees must step back and carefully analyze how this impacts their long-term financial plan. Employees that are expecting to continue their working career elsewhere, should have a good sense of their available opportunities, considering compensation, benefits, and location. For those who enter full retirement, Mainstay Capital Management sees seven key risks facing retirees today. Anyone considering a buyout offer should consider these seven risks very carefully before making a final decision to leave their employer.

Longevity/Life Expectancy – People today are living longer and healthier lives. In fact, during the last century, life expectance has nearly doubled. Those accepting a buyout and retiring in their 50’s and early 60’s, may find themselves spending more time in retirement than they did in the work force. An American male who has reached age 65 in good health, for example, has a 50% chance of living to age 85 and a 25% chance of living to age 92. A 65-year-old woman has a 50% chance of reaching age 88 and a 25% chance of living to age 94.

Inflation – Our cost of living continues to increase. Any retirement income plan must consider the impact of inflation on expenses. The likelihood of continued inflation increases the importance of ensuring that investors maintain an appropriate allocation to stocks that have the potential to beat inflation. Assuming the long-term historical 3% rate of inflation, if a retiree needs $50,000 per year to live today, that person will need nearly three times that amount in 35 years just to maintain the same lifestyle. And that assumes future inflation rates will match the historical average. In recent decades, inflation has been much higher, reaching 5% in the 80’s and 7% in the 70’s.

Pension – Yet another challenge facing retirees is the decline of traditional pension plans. Additionally, it is widely known, that pensions that do exist are at risk. Companies offering pension plans are collectively underfunded by tens of billions of dollars. As pension plans have declined, 401(k) and 403(b) plans have grown in importance. However, the success of a retiree’s 401(k) or 403(b) plan is determined by their contribution level and management of the assets in the account.

Social Security – Originally intended to provide only supplemental retirement income for a minority of Americans, Social Security has become the primary retirement income source for the majority. And Social Security has grown into more than just a retirement program, adding benefits for widows, disabled workers, and children. The Social Security Administration projects that the program will pay out more than it takes in by 2018. Without significant changes to the program, benefits may run out altogether by 2042.
 
Health Care Expenses – Rising medical costs, declining retiree medical coverage by private employers, and possible shortfalls for Medicare and Medicaid all add up to make health care costs a critical retiree challenge. By current estimates, a couple retiring at age 60 should plan on paying $210,000 out-of-pocket for health care expenses throughout retirement (this does not include any long-term care expenses).

Portfolio Management – Mismanaging retirement savings is one of the biggest risks retirees face. If their savings are too concentrated in stocks when a significant market decline occurs, their portfolio can suffer serious damage. On the other hand, fear of getting caught in a market downturn causes many retirees to become overly cautious. Some believe their only option is fixed income investments, such as bonds, CDs, or cash. The risk here is insufficient growth of their investments to provide the desired income stream throughout retirement. Unfortunately, individual investor portfolio management results have been disappointing. According to a Dalbar study, from 1985 to 2004, the S&P 500 posted an average annual return of about 13%, while the average mutual fund investor’s return over this same period averaged less than 4% per year.

Withdrawal Rate – Before retirees can start tapping their personal retirement savings, they need to consider how much they can withdraw each year (a critical part of the retirement income planning process). Some retirees have unrealistic expectations of how much they will be able to draw from savings to supplement their pension and Social Security income.