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GM offer leaves hard choices A Key Issue Is Health Benefits GM and Delphi workers weighing incentive options

For Delphi Corp. worker Sam Turco, the possibility of being offered a $35,000 buyout by General Motors sounded enticing, but it also raised a lot of questions.

"I was planning to retire within the next year," said Turco, 52, a 33-year Delphi veteran who learned about the buyouts Wednesday after he got home from working the night shift at the Upper Mountain Road auto parts plant. "That lump sum could be an incentive."

But he also wondered if the buyout was enough to push him into retirement. "What about health benefits? I was going to bed, but now I'll be making phone calls," he said.

Turco's not alone. The buyout offers, ranging from $35,000 to as much as $140,000 for all GM workers and incentives of $35,000 for 13,000 Delphi workers, left workers scrambling to rethink retirement plans and take a closer look at their finances.

While each worker's debt load, retirement savings and other circumstances will affect whether the buyouts is a good deal, the decision is complicated by uncertainty over GM's ability to keep paying for retiree health benefits and even its promised pension benefits, local financial planners said.

"The big scare is losing part of the health or pension benefits if GM files for bankruptcy," said John M. Lunghino, a financial adviser who works closely with members of Local 686 of the United Auto Workers union at Delphi.

That kind of draconian change could throw even the most thorough retirement plan out of whack. It's also why Lunghino, managing partner of Reliance Financial Group, a retirement planning firm that has an office in the union hall, recommends that any worker considering a buyout first review a worst case scenario with reduced pension benefits and no company-paid health benefits.

>Burden could grow

GM, which for decades had paid for retiree health insurance in full, last year reached a deal with the UAW to have the auto maker's hourly retirees pay up to $752 annually for families and $370 for individuals for their health care.
Financial planners said that burden could grow. "They should count on paying, perhaps, 50 percent of their health care benefits at some point in the future," said Anthony J. Ogorek, who runs Ogorek Wealth Management in Williamsville. "If you can just barely retire now, you're probably going to be unhappy down the road as premiums and co-pays and deductibles increase."

For Jeff Zimmerman, 53, a tool setter at GM's Town of Tonawanda Engine Plant, a $35,000 retirement incentive sounded enticing. "If they offer $35,000 and I can keep my pension and health insurance, then I'm outta here," said Zimmerman, who hopes to pursue a second career as a professional blues musician once he retires.

But Ogorek warned that the buyouts won't be as lucrative as they seem, once state, federal and Social Security taxes are deducted. That will cut the $35,000 buyout, with continued retiree health benefits, available to GM and select Delphi workers to about $21,000 after taxes.

Town of Lewiston resident Terry Dennis, 49, a 28-year Delphi veteran, was home sick Wednesday, but his wife, Kathy, dismissed the $35,000 buyout offer as inadequate. "After taxes, that sure won't get us through retirement," she said.

The $140,000 buyout available to GM workers with more than 10 years of seniority who agree to give up their retiree health insurance and other benefits will be cut to about $83,000 after taxes. The $70,000 buyout for workers with less than 10 years experience who give up their post-retirement benefits will be worth about $42,000 after taxes.

>Living longer

"These cash payments are not the equivalent of winning the lottery," said Richard K. Schroeder, a Williamsville certified financial planner, who recommends investing part of the payment to cover future health care expenses. "They should not see visions of vacations and new cars and lounging around the pool."

Workers contemplating retirement also need to consider that, with people living longer, their money will have to last into their 80s or even their 90s. "The concept that I've put in my 30 years and I don't have to work anymore after 52 or 53 or 55 may be outdated," Ogorek said.

"You get this, but where do you go from here?" Lunghino asked. "Do you have to get another job, and how much would it pay?"

For workers who already were contemplating retirement in a year or two, the buyouts could be a nice sweetener, Schroeder said. "If you're 60 and you're that close to retirement anyway and you can live off the pension, you should look at this strongly," he said. "Getting the cash is a sure thing."

Ronald Bernard, a 49-year-old Lockport resident who has worked at Delphi for 29 years, said he expected to be offered a $35,000 buyout. "I get a lump sum and I get to keep all my benefits. I couldn't be happier," he said.

Once he retires, Bernard, a widower with an 11-year-old son, plans to become a blackjack dealer and work in one of the area's casinos.

For younger workers, the choices are more complicated. While workers with more than 10 years of experience can get the biggest buyouts -- $140,000 -- that's not enough to live off for a prolonged period.

Ogorek said those workers should view their incentives as money that can be used to pay for college or other training that will allow them to launch a new career. "They haven't called this a retraining option, but those are the people it would appeal to the most," he said.

>'A pretty spooky thing'

Those considerations also apply to the least-experienced GM workers, who are eligible for a $70,000 buyout. "You're giving up the health insurance" and a job that pays above-average wages, Ogorek said. "But what are the odds, if you have 10 years of service, that you're going to be able to last another 20 years?"

Craig Rose, who has worked at the Town of Tonawanda plant for 28 years, said he believes a lot of his younger co-workers will jump at the $140,000 offer.

"Personally, I think an offer like that is going to get a lot of people out of here," he said. "I just hope they think it out. Not having any medical insurance? That's a pretty spooky thing."

News staff reporter Maki Becker contributed to this story.

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