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  • Take out pension now?

    I only made it halfway to a full pension .. but I've contributed about $40,000.

    I'm considering taking this out now for several reasons ...

    1) I need to pay off some debt I acquired ... I wasn't prepared to go off work when I did.
    2) I doubt I'll see 65 with my broken bladder, numerous wounds and while I'm currently infection-free, I doubt that will last.
    3) I went paralyzed at 12 and am now 41 .. might as well use it while I'm still able and no one to leave it to???
    4) If I reach 65, there's always Canada Pension Plan and Old Age Security. I'll own my condo then (still have about $100,000 in mortgage).
    5) Car is ten years old now .. though I don't use it much anymore, but seeing family requires 1-2hrs travel and medical 4hrs one way.

    Thoughts? I'd need a lawyer to get it out though.
    Roses are red. Tacos are enjoyable. Don't blame immigrants, because you're unemployable.

    T-11 Flaccid Paraplegic due to TM July 1985 @ age 12

  • #2
    You are young and could slam right through 40k. I don't know about a broken bladder or Canadian health, but if you have cash in the bank instead of tied up in a pension trust they might want all of it in an emergency.
    I have had periodic paralysis all my life. I lost my ability to walk in 2011 beginning with a spinal block, which was used for a hip fracture caused by periodic paralysis.

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    • #3
      This is tough thinking. idea of use while can, certainly 1 thought. I was in hospital forever. When I got home I had a ton of deft because my mother put me in a nursing home. Not remember details, but my 401k was eaten up paying nursing home. Hospitals I was in allowed me to pay them monthly. Deal with hospital is the monthly payment has no interest against it, so I did not care how long it took to pay them. Nursing home did want their money. Those people I was able to negotiat3e a 50% reduction in what I owed them Rest I owed them was paid with 401k. I still wonder if that made sense. My uncle is always telling me I better start saving. I always respond "I may as well use it while I can." If I had $1 million, maybe I think different.

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      • #4
        Originally posted by lynnifer View Post
        I only made it halfway to a full pension .. but I've contributed about $40,000.
        ...
        4) If I reach 65, there's always Canada Pension Plan and Old Age Security. I'll own my condo then (still have about $100,000 in mortgage).
        ...
        Thoughts? I'd need a lawyer to get it out though.
        I don't know Canadian law, but in the US the $40,000 would be taxed as regular income rates, so think you might only get $34,000 (15% x $40,000 = $6,000). Do you have an annuity option? Don't plan on dying before you are 65. You may not! I didn't, and I've been a SCI far longer than you.

        Are you certain that you will never work again?

        You may need a lawyer, but you certainly need a good financial planner who knows Canadian law.

        Good luck!

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        • #5
          I'd say if you are not planning on working again...might as well pay off whatever debt now and save the interest charges. Not sure how taxes are in Canada or if that was before or after tax contributed, but you know the drill, whichever way you end up with more $$ on hand.

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          • #6
            I would definitely pay off debt. I took approach pay off all the higher interest. If there is interest on debt and it is higher than what you achieve saving, you are actually going backward. I continually get credit card deal of extremely low interest. But in fine print get whacked with a % charge when transfer is executed. Now started getting deals where $0 charge for transfer. I have not done any. Am scared there is some charge I just cannot find in the fine print.

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            • #7
              I am not familiar with Canadian law, but in the US if you remove money from a retirement account before retirement age there is typically a penalty above the normal tax implications. You may be able to get that waived for health reasons but you should talk to an accountant. To be blunt you aren't going to retire on 40K, so if you can get it out without taking a burdensome tax hit I would do it and pay down debit.


              Originally posted by lynnifer View Post
              I only made it halfway to a full pension .. but I've contributed about $40,000.

              I'm considering taking this out now for several reasons ...

              1) I need to pay off some debt I acquired ... I wasn't prepared to go off work when I did.
              2) I doubt I'll see 65 with my broken bladder, numerous wounds and while I'm currently infection-free, I doubt that will last.
              3) I went paralyzed at 12 and am now 41 .. might as well use it while I'm still able and no one to leave it to???
              4) If I reach 65, there's always Canada Pension Plan and Old Age Security. I'll own my condo then (still have about $100,000 in mortgage).
              5) Car is ten years old now .. though I don't use it much anymore, but seeing family requires 1-2hrs travel and medical 4hrs one way.

              Thoughts? I'd need a lawyer to get it out though.

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              • #8
                Do it.

                or don't.
                Last edited by The Internet; 06-07-2014, 09:31 AM.

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                • #9
                  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.

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                  • #10
                    Just to clarify: In US I believe an employer-provided "pension" cannot be rolled-over into one's personal account - the employer distributes monthly check. In addition, if you have an individual retirement account (IRA) set up at work in which you alone contribute via automatic deduction from each salary check, it can be rolled over into your own bank upon leaving employer, with no taxes assessed - your bank sets it up as an IRA putting it into CD's etc. If you remove any amount from this source it's taxable. At age 70 1/2 one must start withdrawing an amount.
                    Definitely suggest you contact your bank to meet with a financial planner.

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                    • #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.

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                      • #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!

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                        • #13
                          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.

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                          • #14
                            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.

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                            • #15
                              Yes!

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