Econ 301
GM Buyout

According to the life expectancy chart the average surplus age of a 65 year old man would roughly be an additional 16.8 years so that would be about to the age of approximately 81.8 years. If a retiree were to receive an average of $36,000 per year than just considering principle alone they would receive $604,800 in total with yearly installments as opposed to a lump sum $500,000 check at present value. This is a bit of a tricky situation because future inflation, discount rates organizational risk are all uncertain at this point, so I am just going to have to speculate on what I would do if I were in this position. Right now we are in a low inflation, low interest yield phase and if it were today I think I would take the money. Primarily because I do not feel very safe with a company that just got bailed out by the government a few years ago and in fact even if there were more of a financial incentive to let GM hold on to the money I think that I would still take the money and run. In my opinion, the risk factor alone outweighs any financial incentive that take precedence in the decision making process. I believe that the risk of debt and bankruptcy of GM are two very important factors for the company to take into consideration and they should not be ignored by any means. If the $500,000 were invested today with no money taken out for the entire length at the current compounded rate of 2.25% over a 16.8 year span it would amount to roughly $757,061 at the end of that term. If consider that more than likely the inflation rate will just about always be slightly under the discount rate let’s say about 1.5% of that 2.25% that there will be only around 0.75% of real growth in the long run per year which isn’t much of anything.
But since we throw in the fact that a retiree will need seriously liquidity during his retirement stage we will