NOVI, Mich. — For weeks, John and Kathy Matthews have agonized over the choice: accept $818,000 in a lump sum from General Motors to buy out Mr. Matthews’s pension or keep collecting a check of $4,854 a month.
They have consulted nearly a dozen financial advisers, spent countless hours on the Internet, discussed scores of possible outcomes, and lost a ton of sleep. And with the deadline to decide on Friday, they still don’t know what they will do.
“It’s not an easy decision because we don’t know how long we’re going to live,” said Mr. Matthews, 63, in an interview with his wife at their airy condominium in this suburb west of Detroit.
G.M. has made similar offers to about 42,000 of its 118,000 former white-collar employees and surviving spouses. Those who decide to keep the monthly check will be switched to an annuity provided by Prudential Insurance. Those who take the lump sum will be saying goodbye to G.M.’s financial embrace forever.
G.M. said the change would eliminate $26 billion of its $134 billion in worldwide pension obligations. The automaker’s global pension plan is underfunded by about $25 billion, which has been a cloud over the company’s finances.
Some said the pension change was a cultural shift for an automaker whose hefty pay and benefits earned it the nickname Generous Motors.
“Those were the old days,” said David Cole, president emeritus of the Center for Automotive Research in Ann Arbor, Mich., whose father was a top G.M. executive. “Everybody is trying to run leaner now, and G.M. is not unique.”
The Ford Motor Companysaid it would make its own buyout offer to its 98,000 retired salaried workers later this summer. And G.M. has said it might discuss pension buyouts for its 400,000 hourly retirees and surviving spouses with their union, the United Automobile Workers.
For the auto companies, the financial impact is largely the same, whatever each retiree decides. The lump sums are calculated using a formula from the federal government that takes into account each retiree’s monthly pension and life expectancy.
But for the retirees, the choice has prompted deep, often uncomfortable, consideration of both their personal finances and their own mortality.
“I’ve got members who get two hours sleep, are crabby and being treated for ulcers,” Wayne Williamson, treasurer and secretary for the General Motors Retirees Association, said recently. “And it’s not just the annuity, but the short length of time they have to make a lifetime decision.”
Mr. Matthews, a former engineering manager at the Technical Center in Warren, Mich., who retired in 2008 after 41 years, meets weekly at a diner with a coterie of retired colleagues, and the pension choice has dominated recent conversation.
Mr. Matthews said most of his friends were leaning toward the monthly checks. But for him, the calculation was not so simple.
Although G.M. won’t put it quite so directly, by Mr. Matthews’s math, the company predicted that he would live for another 21 years and used that estimate to come up with the $818,000 offer.
In addition to his pension check, Mr. Matthews receives Social Security, and he also has an individual retirement account. Mrs. Matthews, 62, works part time at a hospital as a registered nurse, and has a home-based business selling nutritional products. When she retires at 66, she will not receive a pension.
The couple has no mortgage or car payments, although both of them have had surgery in the last year, incurring $6,000 in out-of-pocket costs.
They figured that if they earned a return of more than 4 percent a year from investing the lump sum, they would do better than the monthly pension check.
The bigger worry for them was their estate. Whereas funds from a lump sum could be left to their three children and two grandchildren, pensions cannot be inherited.
“We know that if we go down in a plane crash, the kids would get the lump sum,” Mr. Matthews said.
His wife brought to the dining table a framed photo of their children. “It’s just extremely difficult,” said Kathy Matthews. “When you look at this last recession , well, we don’t know what the future holds.”
Jim Shepherd, president of the retiree association, said some members were taking the pension changes personally. “People are saying they feel like G.M. is divorcing them,” he said.
Mr. Shepherd, who had been a G.M. fleet account executive in Northern California, said the average lump sum offer was about $500,000. He said he could not predict which option most members would choose, although he had decided to stick with his monthly check of about $4,000.
Dave Roman, a G.M. spokesman, declined to discuss how many people had already decided or what the tally for each option was so far.
In June, General Motors held 75 informational meetings attended by about 10,000 retiree club members across the country, he said. The manufacturer also held at least two conference calls with club presidents.
G.M. said that by default, retirees would continue to get monthly pension checks. If they opt for the lump sum by Friday’s deadline, they will have until Aug. 23 to change their choice.
Christopher Frayne, a portfolio manager for Sigma Investment Counselors in Southfield, Mich., said he had advised up to 80 percent of clients who were grappling with G.M.’s offer to continue their pension checks.
“To take that lump sum and recreate that income with interest rates this low, that’s hard to do,” he said.
But Don Tanner decided to take the plunge, exchanging monthly checks of close to $5,000 for a lump sum of about $1 million. “It’s the freedom of knowing I have the money, and that it’s my money and that I have control of it,” said Mr. Tanner, who moved to Atlanta after retiring in 2007 as an engineer in Warren.
He said he would invest a portion of the lump sum and put some in certificates of deposit. “I figured that in the market, I can get around 6 percent on investments,” said Mr. Tanner, 65. His wife, a human resources representative, will retire in three years with a 401(k) plan.
The prospect of passing something on to his two children and six grandchildren was key to his decision, said Mr. Tanner, who is in good health and will begin to draw Social Security this year.
For retirees who stick with the monthly check, the Prudentialannuity will not be guaranteed by the federal government’s Pension Benefit Guaranty Corporation, the way that G.M. pensions are. But Dylan Tyson, head of pension risk transfer at Prudential, said: “Prudential is exceptionally strong. We’re good at this.”
James Klein, president of the American Benefits Council, said what General Motors was doing was no surprise.
“Companies are going away from traditional defined-benefit plans,” Mr. Klein said. “This is just a different way of meeting obligations.”
New federal pension rules that went into effect this year make pension buyouts less costly to companies, so other companies may follow the lead of G.M. and Ford and offer lump sums. Chrysler, however, has said it has no plans to offer buyouts.
Among G.M. retirees, not everyone is going through the same kind of angst as the Matthews family. Janine Fruehan, who retired in 2009 as manager of communications for product quality and safety at G.M.’s Technical Center, said she planned to refuse the lump-sum offer.
“It seems like a lot of money at first, but I need stability,” said Ms. Fruehan, 58, who is single and has no heirs to worry about. “My biggest thing was outliving the money.”
Ms. Fruehan, who is a member of G.M.’s Retiree Advisory Council, which helps guide the company’s retiree initiatives, said she hoped to avoid using Social Security when she first became eligible and instead live off her pension payments and other investments. She also is an independent, home-based consultant for a high-end fashion firm.
“The lump sum is a big opportunity, but everybody’s different,” she said.