Mainstay Capital Management, LLC

Chrysler has offered several Retirement Programs to U.S. Non-Bargaining-Unit Salaried employees. The plans will be offered to a range of employees, starting with those that have less than ten years and extending through those who are age 62+ with ten or more 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 SESP?
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 U.S. Non-Bargaining-Unit Programs.

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"

"How to Value the Buyout Offer"

"Buying in to a buyout"

"4 things to consider before accepting buyout"

"Getting Personal: Financial Planning Before The Buyout"

New Year, new tier

ABC News Video: "Automotive workers want to know what they should do with their buyouts"

2008 SIP, SEP, and VTIP Employee Buyout Checklist

After being offered a SIP, SEP or VTIP program, the list below details the suggested steps employees complete by November 26, 2008:

Review all SIP, SEP or VTIP materials.
Contact Mainstay Capital Management to discuss your personal situation and the SIP, SEP or VTIP Program.
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 Chrysler of decision to accept or decline the offer.
If you accept the SIP, SEP or VTIP package, the effective date of retirement is November 30, 2008.

U.S. Non-Bargaining-Unit (NBU) Programs

Separation Incentive Program (SIP)

Eligibility:

All NBU salaried employees age 62+ with 10 or more years of service as of November 30, 2008. In addition, employees age 60 and 61 with 10 or more years of service will be eligible for either the SIP or SER program.

Terms:

Offers made by November 5, 2008 and returned by November 26, 2008
All retirements effective November 30, 2008
$50,000 cash, with the ability to deposit on pre-tax basis a portion of this into a Retiree Health Care Account
Vehicle voucher valued up to $25,000
100% Retiree Choice credits prior to age 65
100% Credits in the Health Care Retirement Account, beginning at age 65

Special Early Retirement (SER)

Eligibility:

All non-highly compensated NBU salaried employees, age 51 to 62 with 10 or more years of service. Eligibility requirements must be satisfied by November 30, 2008

Terms:

Offers made by November 5, 2008 and returned by November 26, 2008
All retirements effective November 30, 2008
Retirement benefits will not be reduced for age
100% Retiree Choice credits prior to age 65
100% Credits in the Health Care Retirement Account, beginning at age 65

Voluntary Termination Incentive Program (VTIP) – A

Eligibility:

All employees with less than 10 years of service as of November 30, 2008

Terms:

$50,000 in cash
Vehicle voucher valued up to $25,000
Up to 6 months health care coverage
All voluntary retirements are effective November 30, 2008

Voluntary Termination Incentive Program (VTIP) – B

Eligibility:

All employees with more than 10 years of service but not eligible for the current SIP or SER program

Terms:

$75,000 in cash
Vehicle voucher valued up to $25,000
Up to 6 months health care coverage
All voluntary retirements are effective November 30, 2008

Voluntary Termination Incentive Program (VTIP) – C

Eligibility:

Employees that have 30 years of pension credited service and are VTIP eligible

Terms:

Receive VTIP payment in December
Begin receiving Early at Employee Option pension benefits (basic pension & supplemental benefits reduced for age) under the Chrysler Pension Plan (CPP) beginning 18 months after your VTIP termination date
Basic pension benefits are recalculated at age 62 and one month, without age reduction factors applied
Eligible for health care benefits under the Retiree Choice Program in effect at that time upon retirement under the CPP

* Involuntary Separations, Effective December 31, 2008 *

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 1987 to 2007, the S&P 500 posted an average annual return of 11.5%, while the average equity mutual fund investor earned an average annual return of 4.48%.

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.