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Thread: Take out pension now?

  1. #11
    Well I just started receiving my pension. Because of being disabled, my pension can be payed early. It is taxed state and federal as normal income. Not sure how Canada works but I would take the lump sum and invest it into something that can produce an income stream. I did't have the option to take a lump sum so I will be paid monthly and dollar cost average it into something that if needed I can pull say 5% off of.
    $40k can go fast and be gone thats why I say look into something that can generate an income stream. Talk to a financial advisor it might not be as rewarding as paying off a lump sum bill but it might help in the long run.

  2. #12
    Can you meet your bills without the $40k? Don't blow through those funds!

    Save it, Girl. Add to your assets each month by socking away money in a separate savings account if you don't already have one. There may come a time when you need both accounts for true essentials.

    As for your car, unless it has significant issues and is unsafe to drive, use it until the wheels fall off. An older car may not be as stylish, but having money in the bank is a comfort new wheels cannot match. Keep the tires on your car in good condition and have the oil changed as recommended. You'll be surprised at the mileage your car can handle. When it is time for a new to you car, don't buy new. It's a waste of money as a newly purchased car depreciates the moment you drive it off the lot. When your current car is on its last, buy a less than new car in excellent condition with very low miles. These gems exist. Hunt for it when you actually need to replace your current car. Take care of your cars throughout your life and they will take care of getting you where you need to go.

    Have you ever kept a one month accounting of every cent you bring in and spend? It can be an eye opener. (Check mint.com for an easy, free, legit way to easily track your finances.) You may find ways you can adjust your spending and pay off any debt without touching the pension. What interest rate are you paying and what do you owe in total? What type of debt? CC? Home equity? Whatever you do, pay more than the minimum each month. Debt is expensive money and it doesn't take long for the amount borrowed to cost you more than you could have fathomed.

    Looking at finances as though you won't be around in your 60s is a dangerous game to play. Leave the pension alone. Pay off your debt with your monthly income by making adjustments in your spending. Save what you can each month. Appliances break. Cars need repairs. HOAs can increase.

    There is not much that feels as good as having a financial cushion. Financial security feels even better. You are smart and can make what you have work better for you. Do it!

  3. #13
    Quote Originally Posted by cfx View Post
    Well I just started receiving my pension. Because of being disabled, my pension can be payed early. It is taxed state and federal as normal income. Not sure how Canada works but I would take the lump sum and invest it into something that can produce an income stream. I did't have the option to take a lump sum so I will be paid monthly and dollar cost average it into something that if needed I can pull say 5% off of.
    $40k can go fast and be gone thats why I say look into something that can generate an income stream. Talk to a financial advisor it might not be as rewarding as paying off a lump sum bill but it might help in the long run.
    With taking a lump sum one would likely be paying a fee to a broker to set up investments? The deferred compensation in 457 or 401k, I believe, are already in investments with an investment firm, producing an income that's reinvested into the person's plan. In short, there is already an income stream prior to any lump sum transfer of funds to employee upon their leaving. The money is not just sitting there, it's in investments. Don't know if there are changes that are in effect since I retired years ago.

  4. #14
    Quote Originally Posted by triumph View Post
    With taking a lump sum one would likely be paying a fee to a broker to set up investments? The deferred compensation in 457 or 401k, I believe, are already in investments with an investment firm, producing an income that's reinvested into the person's plan. In short, there is already an income stream prior to any lump sum transfer of funds to employee upon their leaving. The money is not just sitting there, it's in investments. Don't know if there are changes that are in effect since I retired years ago.
    Yes fees will apply with any investment nothing is for free. I'm sure the pension is paying a fee to a brokerage firm to maintain and operate that plan. This takes away from the bottom line. Some plans are very good and others suck. So the fee issue isn't really an issue its just more obvious when its under your control. I agree its not just sitting there well some pension plans with crappy investments like CD's It just might be ha! That gets back to my point and brings the control to you.

    As far as an income stream. I think we are not talking about the same thing. An Income stream would be Lynnifer is already pulling from her pension. My pension I had only two options from my plan. One was to pull a monthly payment now at X amount until I die or wait till I'm at retirement age and pull a slightly higher amount monthly till I die. Because I'm disabled I have the option to pull money now. I do not have the option to lump sum it. So I'm stuck and my choice is made.
    My statement before was that she could take the money invest it and pull an income stream from the principle. Hopefully with the right investments and not taking too much. she has the ability to grow her principal while taking money. Again this is with the guidance of a good Financial adviser who has a strong background with this.

    Again I'm not familiar with Canada's laws on tax shelter retirement plans and this is my suggestion if she doesn't NEED the money now. If in the future she NEEDS the money she has the option to cash in.

  5. #15

  6. #16
    Quote Originally Posted by ancientgimp View Post
    If you can pay on your debt with your current income I would consider letting the compound interest do some compounding on the 40,000.00. You would need an investment that keeps up with and exceeds inflation without undue risk.
    With a 5% annual return (good luck finding that these days with no risk) in 20 years that is about 108K. You can be sure that inflation will take a bite out of that so let's say generously in today's dollars that is 80K (or 4% inflation adjusted return). I don't know if that helps but those are the numbers.

  7. #17
    Senior Member TomRL's Avatar
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    You might just surprise yourself on how long you have to go. I never thought as a C4 teenager I'd make it to retirement, but here I am 67 and retired. In any event I definitely agree with those who suggest seeking competent financial advice before acting.....Good Luck.
    Tom

    "Blessed are the pessimists, for they hath made backups." Exasperated 20:12

  8. #18
    I don't know Canadian laws. But I'm assuming your pension is protected from creditors. I would leave the money in the pension and see if you can file bankruptcy.

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