Ford Employees and Retirees

RIS provides advice to Ford executives and retirees. While we are located in Ann Arbor, Michigan, we actively help people thoughout southeastern Michigan, meeting in our offices, your office, your home or other place convenient for you. (See Frequently Asked Questions.) Your SSIP and DCP plans are similar to many 401k and deferred compensation plans that we write about on this web site. However, there are at least five issues that are unique to Ford employees and retirees that you should be concerned about.

FIRST, there are provisions in the SSIP that make it very disadvantageous for retirees to stay in the plan after they retire. If you are not careful, it can have a big impact on your heirs, and certain decisions could mean your heirs could get only 10% or 20% of what they might otherwise get. For example, if a couple dies with $500,000 in the SSIP, the SSIP will distribute the assets to the heirs (children) within 60 days, and they may have to pay up to $200,000 in income taxes. If this were handled properly, we could get those $500,000 in assets into an account that will grow tax-deferred and could distribute $2.5 million to $5 million to the heirs over their lifetimes. We can show you what this specifically could mean to your account. Do not ignore this issue. If you are a retiree with a family and are still in the SSIP, you need to set up an appointment with us as soon as possible.

SECOND, it may be advantageous for some of you to distribute your Ford shares in the SSIP directly to yourselves. If handled correctly, you can avoid any initial taxes on the distribution of the Ford shares until they are sold in the future. If they are sold, they would be subject to long-term capital gains taxes of 20% rather than ordinary income tax rates of up to 39%. If the "Net Unrealized Appreciation shares" are not sold, your heirs may get a stepped-up basis. You may also roll over just the "cost basis of the Ford shares" to an IRA and delay paying taxes on this portion of your Ford stock until you take a distribution from your IRA. The rules are complicated, but not hard to consider. Most Ford people and advisors are not aware of the ability to delay the tax on the "cost basis" of the shares.

We can help you determine whether you should take advantage of this opportunity. We will examine the costs and benefits. If you decide to distribute Ford shares, we will help you implement this approach in a tax effective manner. This may be a good strategy to use if you have "too much" Ford stock and need to diversify, you need extra cash for other needs, and/or you want to leave Ford stock to your heirs. But, you have to examine this before you roll over your SSIP to an IRA or otherwise liquidate your Ford Stock Fund holdings.

If you have held the Ford Stock Fund in your SSIP for a long time, please do not sell your Ford Stock Fund without talking to us first. This applies to existing employees and retirees. If you are retired, do not rollover the SSIP without talking to us first. There are important benefits that can be permanently lost if you take certain actions.

THIRD, we find many executives have a large portion of their net worth tied up in Ford stock in the form of (1) direct stock ownership, (2) ownership of the Ford Stock Fund in the SSIP and (3) indirect ownership of Ford through unrealized gains in Ford stock options. In some cases, Ford stock is too large a percentage of your family’s net worth. We help determine which of the three types of ownership should be sold first and whether it should be done very soon or over a longer timeframe.

FOURTH, the Ford pension that retirees will receive can be a very meaningful portion of their income during retirement. We show clients how this can and probably should have a significant impact on your mix of investments – the percentage you have in equities and fixed income. This mix, of course, is one of the most important parts of determining the future size of your retirement nest egg for your use or for your heirs.

FIFTH, because we have helped so many Ford people, we understand some of the pitfalls of retiring at Ford. We can help you avoid some of the mistakes that people can make. Some will become minor irritants while others can have a very negative or beneficial impact. Don’t allow "dumb luck" or serious mistakes to affect your retirement dreams negatively. We can help you take pro-active control of the issues that are important to you.

We are familiar with the Fidelity funds and choices that you have in the SSIP and DCP. As a result, we can help you determine which funds to select and which to avoid. We can also help you with exercising your Ford options. We are constantly watching the Ford stock for various stock option holders.

If you find the right financial advisor, the value of the advisor can be a multiple of the cost that the advisor charges. We try to make these complicated issues easy for you to understand and act upon. You have worked long and hard for the benefits you can enjoy in retirement. It is important for you to make sure you get all the benefits that you deserve and avoid costly mistakes in implementing your retirement decisions. After the initial meeting, we are happy to give references of Ford people who already use our services.

We have just discussed some of the issues that are unique to Ford employees and retirees. There are other issues that apply to all 401k participants (SSIP) and retirees that you can read about in Our Services and RIS 10 Steps to Wealth.

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Retirement Income Solutions, Inc. is an independent Registered Investment Advisor.