Seeking Opinions Regarding Pension

I'm not sure if this is the proper place to post this. I was going to put it up on an off topic forum, but I couldn't spot on that seemed to be a good fit. So here I am.

The reason for this post is that I am hoping to get some opinions and perhaps advice regarding the situation in which I currently find myself. I have been unemployed for the last few months, but I start a new job tomorrow. I spent most of 2009 out of work as well, but was able to get into a contract position for the early portion of this year. In order to get by, my wife and I had to depend on using a credit card in order to pay rent and a few other expenses. We don't spend a lot of money, so we've been able to avoid heavy debt. Now we find ourselves a bit in the red on the credit card, and we have a car loan as well.

I am sharing that because I was recently made aware of some money which I can obtain, should I feel compelled to do so. That money is the pension which I'd earned at the job I was in prior to my first period of unemployment. I worked there for just over ten years, so the funds available are substantial.

This is where I am seeking input. Given the state of the economy right now, and the uncertain future we face in the USA, my wife and I have been discussing the option of taking a one time lump sum payment of the pension money. Doing so would allow us to wipe out the recent debt we've accumulated and deal with a decent portion of the car loan. The downside to taking the money early is that there is a 10% penalty and it would be taxed as well. The fellow I spoke to about it stated that it would likely be taxed at around 25%.

What would you do in our situation? Take the money and throw it at debt? Let it remain where it is so that it's there about 30 years from now when I will be eligible for monthly pension payments? Or perhaps something else?

My biggest concern with not taking it now is that if the economy continues to get worse, it will essentially be lost, either due to bank issues or something else. I have no idea what kind of legal obligation there is on the part of the banking system to make sure that that money remains available, regardless of the state of the economy, but I am very wary of the whole banking system. My gut tells me to take the money now and plan accordingly for the future, but I'd really appreciate any input any of you may have on this type of situation. If any of you have gone through this sort of thing before, please share your thoughts.

ask an accountant or financial advisor with such important matters , tbh pensions are long term ,if you have one stick with it would be my advice as the penalties for leaving are often so harsh as to make it to expensive to be worth leaving

Ih ear bp stocks are cheap at the moment for the short term seller......... as a US citizenI woud like to try for some payback.....just a thought....ducks for cover lololol

reply to post by John_Q_Llama


I am not qualified to give real financial advice.


The key points to look at are
Are you able to effectively handle the debt repayments in your new financial situation without drawing from your pension?

Which amount is greater?
The interest you will pay in total if you continue to pay your debts off over time?
Or the tax you will pay on the lump sum payment in addition to any fees you may incur for taking a lump sum and paying the debts in full?

reply to post by gambon


BP stocks. That's funny. If the economy wasn't crap, I might consider that.

As far as a financial advisor goes, I'll pass. Maybe that sounds stupid, but in my opinion it's just another person who is going to want their hands on my money. Legitimate suggestion though.

reply to post by mumma in pyjamas


I do believe that we can make it without taking the money. The only potential hurdle will be a rent payment next month. After that we're good to go, assuming some unforeseen issue arises.

The amount of money we'd save on interest would be substantial. That's another thing that has me feeling that the lump sum grab is the way to go.

I guess I should add that I am not looking for financial advice, although I appreciate that which has been posted. My hope had been to get some insight into whether or not the economy can be relied upon enough to keep that pension money where it's at. If there is a chance that the ship is gonna sink, and the banking institutions (and my money as well) as we know them will bite the dust, then does it make sense to take the funds now? Or are they under legal obligation to pay it, regardless of what happens in the economy between now and then?

reply to post by John_Q_Llama

As a guy who recently retired keep the money and pay attention to it. You need to make 3% a year to accommodate for inflation. You need to be willing to risk some in the markets. Find funds that manage "choppy" markets.
You can be stupid, you can be greedy but not both.
It takes a lot to have a nut. (Oh, the entendres!) You should think of this fund as sacred treasure. It took you ten years to put this aside, do you think you can replace it in the future? Including all the earnings you lost on those investments while you rebuild it?
Unless circumstances dictate, be cautious in divesting yourself in order to pay off credit cards and car loans. You may have to curb your appetites but it's about impossible to replicate that which you have done. No #!
Good luck.

Just giving my crystal ball a dusting!

I read that there is no such thing as a mistake or bad decision - just negative feedback. Unfourtunately this comes too late to change the course of events.

All I can say is that if 21/12/2012 isn't all that is cracked up to be, pension wise I'm screwed! Good luck in whatever you decide.

reply to post by John_Q_Llama


My Opinion (not to be taken as firm financial advice) is Get the Money NOW! While you still can and it is worth something.

Why? Well they want our retirement money to fund future treasury debt and are looking for ways to steal it (oops, I mean protect your retirement with guaranteed retirement annuities... wink wink) which requires the government taking your retirements under their wing OR what do you think the tax rate on that nest-egg will be in 30 years?

Impossible to predict but what if the lefties get their dream and the tax rate is 90% when you decide to cash it in later?

Just a couple of things to ponder.

reply to post by John_Q_Llama


the banks are taking it from all possible directions. They take it from our taxes through bail out funds at far from the interests they charge their own clients. more than just double standards, the system is "fixed" or "broke" depending upon how you look at it.

if you are linear minded, pick a side of the fence and stick to it. Do you believe in the system as is, and trust it is going to be better 30 years from now, or do you continue to try to play by the rules when you don't know how many rules to the game their are, nor what they mean when held in context with eachother.

I AM NOT A FINANCIAL ADVISOR

If you take the money, invest at least part of it into your future, do not throw it all at the debt.

If at all possible, and you believe you and your family can enjoy it in 30 years, leave it where it is!!!!

When it comes to financial decisions that require you, do not let your wife make the decision to check out all the future funds. I don't care who your wife is, she should not decide totally how to get access to money intended for the family's future. Be cautious. Once that money is out, at least half of it could end up being hers, i think.

good luck,
et

Some advice from a total financial idiot for you....

If the interest you are earning from the retirement fund is greater than the interest on the credit cards, then do not take it out.

If the credit card interest is greater than the interest on the fund, then use it to pay off the cards.

At least that's how I'd look at it.

reply to post by Esoteric Teacher


You sort of touched on something that really bothers me about this situation. Let's assume that the economy continues it's decline and we go into something like the Great Depression, and that I let the money remain as it is currently. I just know that my money would no longer be available, and meanwhile the financial system sure won't overlook the fact that I had a loan still in need of payment. It really pisses me off. That's one reason why I feel compelled to take the money now. I'd much rather be able to tackle at least a portion of the debt AND know the fate of my hard earned funds, than to see it vanish because the actions of a bunch of self-serving bastards screwed the economy.

Default the credit cards until you get on your feet! Always take care of you before you take care of them because "they" are not human, they are corporations and they will not starve and they will not grow old!

Personally I would take the money and use it for buying supplies for the future; guns, ammo, food, shelter, those sort of things. The credit card companies are not people and your small amount of debt is nothing compared to the debt that is accumulating daily by our World Leaders! Not only that but the enormity of our "stimulus checks" that the banking industry took but refuses to lend out to the people where it was intended to be used!

You are People, take care of yourself you are so worth it! Don't put the money in the bank, just handle it as cash unless you can purchase silver for safe keeping. Gold is probably too risky now that all the tungsten bars are finally coming to light, jmho.

Originally posted by John_Q_Llama
I'd much rather be able to tackle at least a portion of the debt AND know the fate of my hard earned funds, than to see it vanish because the actions of a bunch of self-serving bastards screwed the economy.

the only thing really holding the economy together is peoples' fears, and fear to realize the economy has already failed due to either self-serving bastards, or bastards who as of yet refuse to disclose what it is they are serving.

how long has it taken you to build up the debt you want to throw this money at? and is it possible you may end up in worse debt within the next 30 years?

i honestly don't know what to tell you beyond what i have shared. and i can't answer the two question above for you and your family. debt will continue to grow in the future also, to throw all your savings at the debt you have acquired, and having it taxed/penalty at 25%, with that 25% helping to pay the bail out funds of which the banks are not paying 25% interest on to the tax payers is just conceding your funds to them in a different way.

either way, the banks are in it to make money, and the banks have enough money to influence the laws more so than the tax payers.

take it out now, lose a quarter of it, and your savings, and just accumilate more debt in the next 30 years with less saving towards retirement.

What would i do? i have never owned a credit card, so i don't know what i would do. i have no basis for comparison, and no experience with this kind of debt, to be honest.

but from friends and family members i share some concerns and problems they have had in similiar situations.

hope this might help,
et

I would leverage the money into a commercial investment property (apartment complex, or mobile home park) that produces a solid cash flow. I would make sure that from day one I had 20-40% equity built in. There are great deals all around that are producing great returns. After 5-7 years I would ether sell and roll over my profits using a 1031 exchange.You would not have to pay taxes on your capital gains and would be allowed to use all the profits to leverage a larger property. This in return helps build wealth and buy larger more profitable properties.You could also just pull some cash out and buy another one. Long term you would have monthly cash flow for years to come and build wealth with the equity/ value of the property. Rinse and repeat.

reply to post by John_Q_Llama


That amuses me because before I posted my reply I deleted the following lines

If you don't trust the company holding your pension to still be financially able to distribute the income when the time comes get the lump sum,I don't expect I will ever see the 9% of my yearly income that i am FORCED to use as super superannuation (retirement fund).

But I deleted it not wanting you to think I'm some crazed nut bar with crazy anti financial institution sentiments, but i am
.And you go and voice the same sentiment.
Take it, save interest, don't expect that company to still be babysitting that money for you when the time comes if you leave it in their 'care'

As you can see, there is a diversity in opinion on this issue.
Having recently encountered a very similar situation, my advise would be to ask yourself some questions:

How much angst do I have over the debt repayment?
What are my chances of remaining solvent without the infusion of cash?
Is there any chance of a partial lump sum distribution, could I use less money than "all?
What tax mitigation strategies are available to maximize my net-after-tax if I take the lump sum?
What difference does it make to get the money now, versus anytime up to "retirement age"?

My basic point is to look at how much it hurts now versus having an emergency reserve in the future.
If you have no income at all, cash is a must and tax doesn't matter much - but if there is income then you have some options to consider. Good luck.

gj

reply to post by John_Q_Llama


I am not a financial adviser. I am not qualified to give advise. I highly discourage getting advice on a conspiracy forum. Do not take me seriously.

It all depends on the interest on debt. If you only have credit card debts and it's above 8%, then I would knock out the Credit Card debts first, then divert your contribution to retirement. It doesn't make much sense to take money and try to earn a 5% return while you have money tied up in unsecured loans costing you 13%+ you know..

Mortgages, car loans etc are "good" debts.. it doesn't hurt you to have them, and trying to pay them off usually is counterproductive because right now interest rates are low.

After that's taken care of strive to never go into major credit card debt again.. they should be used for large purchases only that you intend to pay off within 6months (without rolling balances).