Author Topic: To commute or not to commute (your pension value)?  (Read 35742 times)

Joan-eh?

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Re: To commute or not to commute (your pension value)?
« Reply #50 on: January 25, 2015, 09:17:58 AM »
BPA,

1) I look forward to hearing what OTPP says, thanks!  But I'll find out about the health, I'm in a unique situation, I think.

2) oh dear, you have a lot on your plate!  The worries concerning your son's needs, the deaths, the union, the policies. And grrr the media's insensitivity, just to get a story. Its a bit much, given so many of the issues are beyond your control.

2b) Have you considered leaving the union steward position? Would it tAke you away from those frustrating issues on a daily basis?  I know someone who did that, and he just focused on his classroom work, he became a "new man"

3) the realization of the origins of stress: My daughter has a health issue and she said last weekend. "I feel normal and healthy today, I'm out of pain".  My reaction was revealing - a huge weight was lifted - even if just for 24 hours. I didn't realize how much it subconsciously affects me - I thought that I had just dealt with it as the new normal.  Of course, coping with chronic illness is up and down, so she is not "all better" - but it was a signal to me. - as I hear you saying too - to be able to recognize where the stress is, is half the challenge of dealing with it.  Indeed you would have underlying normalized worries.

Likewise, I can appreciate the desire to have the cv available to your son. I would make the same decision if I were in your shoes.  Absolutely.  Have a great day! Nice to have sun in January!

Joan-eh?

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Re: To commute or not to commute (your pension value)?
« Reply #51 on: January 25, 2015, 09:31:41 AM »


Joan-eh?:

For me, I used an inflation assumption of 2% and an investment return of only 4%. So a real return of just 2%. My inflation number may be low, but so is the investment return number. At least the Bank of Canada is trying to manage the economy to that inflation number.

BUT, I also ran a sensitivity analysis from 5% real return to -2% real return. My portfolio survived, however the model did not include a sequence of return risk analysis - that was performed separately. I'm personally more concerned with sequence of return risk than inflation, maybe that's just because my wife will have a fully indexed federal government pension (she is too old to take the CV now).

How bad does inflation have to be, and how long does it have to be sustained, to wipe you out?

How does that compare to taking the small(?) indexed pension? (i.e. just how much protection does it really provide you if you use the same inflation scenarios?)

How likely is it that there will be high inflation without high interest rates?

There is no right answer to this dilemma that applies to everyone - you can only find something that falls within your individual comfort zone. For everyone, that's driven by subjective assessments of risks.

I get the impression that your concern about future inflation is leaving you with no comfort zone for taking the CV. Maybe that is the right answer for you, but I think you should run some sensitivity analysis before finalizing your decision.

Al


Al

I have created a variety of scenarios using 3 to 5 % return and 2-3% inflation.  Glad to see someone else is using these conservative figures.  You are reminding me that it's the interval between return and inflation that matters.  Thanks for that!  And I do to have the other pension, (though not fully indexed).

Now, I think the question comes down to
1) control, the choice to withdraw when I want, or not.
2) as I age, do I want to spend my time still thinking about markets (I will have to anyway for other sources of income)
3) how much I trust the Ontario and Canadian government?


Al1961, what do you use to run the sensitivity analysis - is the the FIRECALC ?  Or cfiresim? I don't know the terms :-)

BPA

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Re: To commute or not to commute (your pension value)?
« Reply #52 on: January 26, 2015, 04:43:00 AM »
BPA,



2b) Have you considered leaving the union steward position? Would it tAke you away from those frustrating issues on a daily basis?  I know someone who did that, and he just focused on his classroom work, he became a "new man"

3) the realization of the origins of stress: My daughter has a health issue and she said last weekend. "I feel normal and healthy today, I'm out of pain".  My reaction was revealing - a huge weight was lifted - even if just for 24 hours. I didn't realize how much it subconsciously affects me - I thought that I had just dealt with it as the new normal.  Of course, coping with chronic illness is up and down, so she is not "all better" - but it was a signal to me. - as I hear you saying too - to be able to recognize where the stress is, is half the challenge of dealing with it.  Indeed you would have underlying normalized worries.

Likewise, I can appreciate the desire to have the cv available to your son. I would make the same decision if I were in your shoes.  Absolutely.  Have a great day! Nice to have sun in January!

So sorry about your daughter.  I do think as parents we often don't fully realize how much "normalized worry" we have. 

The paradox of the union position is that during the past 14 years, I did give it up for two because of stress, but then, having to shut up instead of taking a stand was stressing me out more.  As a rep, I am able to say things that might get me cited for insubordination otherwise.  We are considered equals to the principal when issues come up.  I do have a really good boss now, but sometimes the vps treat staff like garbage and that's when I have to step in.  Luckily, the other union rep is back next week and that will take a lot of responsibility from me.  He's been off for the last semester.  Someone was filling in for him and while she was well-meaning, she didn't know what she was doing and caused some extra stress. 

Yesterday's sun was a welcome change.  Hope you enjoyed it. 

Al1961

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Re: To commute or not to commute (your pension value)?
« Reply #53 on: January 26, 2015, 08:40:55 AM »
*snip*
Al1961, what do you use to run the sensitivity analysis - is the the FIRECALC ?  Or cfiresim? I don't know the terms :-)

I use both cFIREsim and spreadsheets

BPA

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Re: To commute or not to commute (your pension value)?
« Reply #54 on: January 26, 2015, 03:26:34 PM »
Joan:  Good news from the OTPP.

"For pension purposes when a member takes their commuted value, the portion of the funds that are transferred to a LIRA is locked-in until age 50."

:D

Joan-eh?

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Re: To commute or not to commute (your pension value)?
« Reply #55 on: January 26, 2015, 06:21:35 PM »
That's excellent news! So that goes into an RRSP, from my understanding.

Commuted value: 350, 000 for example
100,000 must stay in LIRA
100,000  50% can be  unlocked and moved  to RRSP (somewhat more flexible)
150,000 cash (-50,000 or more for taxes) = 100,000

Did I get that right?

Al1961

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Re: To commute or not to commute (your pension value)?
« Reply #56 on: January 26, 2015, 07:35:55 PM »
That's excellent news! So that goes into an RRSP, from my understanding.

Commuted value: 350, 000 for example
100,000 must stay in LIRA
100,000  50% can be  unlocked and moved  to RRSP (somewhat more flexible)
150,000 cash (-50,000 or more for taxes) = 100,000

Did I get that right?

Close. I think you should double check the Ontario rules.

In Alberta, and I think federally, the 50% unlocking is only available at the time you are transferring from a LIRA to a LIF. So you'd have to start withdrawals from the LIF within 2 years. If you don't want to start taking income just leave it all in the LIRA until you do (after all, it's just an RRSP with withdrawal restrictions).

You can also unlock to a RRIF (gives more flexibility on withdrawals, but you have to take the prescribed minimum withdrawal) or unlock and take the cash (and pay the tax). Nothing stays in the LIRA if you do the 50% unlocking.

You only get one shot at this - can't unlock bits and pieces.

Al

BPA

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Re: To commute or not to commute (your pension value)?
« Reply #57 on: February 01, 2015, 09:28:32 AM »
Joan:  My CV jumped $52k thanks to the Bank of Canada lowering the key interest rate. 

I'd quit now, but have decided to wait at least until the next BofC announcement in March.  I still need to research which company to trust with investing my locked in portion.  Also, and this might seem greedy, some of the economists with the Big Five banks are suspecting that there will be another rate drop in March.  But mostly I still need to figure out where to invest.  There aren't all that many places that the government has deemed worthy of the LIRA. 

Woohooooo!

Joan-eh?

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Re: To commute or not to commute (your pension value)?
« Reply #58 on: February 01, 2015, 10:13:38 AM »
Fabulous, BPA!!!   thanks for the update! that sure will be helpful to pay for the taxes on the cash amount!

I have a problem with the pension right now. I wrote an email a week or so ago to ask a question what we were having here --- but instead they gave me a termination package - which will reflect January's CV - ugh!  I will call Monday to have them undo that!!! - and yes, fingers crossed for  March.

BPA

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Re: To commute or not to commute (your pension value)?
« Reply #59 on: February 02, 2015, 08:02:55 AM »
Fabulous, BPA!!!   thanks for the update! that sure will be helpful to pay for the taxes on the cash amount!

I have a problem with the pension right now. I wrote an email a week or so ago to ask a question what we were having here --- but instead they gave me a termination package - which will reflect January's CV - ugh!  I will call Monday to have them undo that!!! - and yes, fingers crossed for  March.

Oh no!  Here's hoping that they won't be difficult!  Let me know how it goes...if anyone is working there today.  It's a snow day for pretty much everyone in Hamilton.  Even my brother, who works in the private sector, is home today.

Joan-eh?

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Re: To commute or not to commute (your pension value)?
« Reply #60 on: February 22, 2015, 10:24:51 PM »
Finally got the c.v. thing sorted out. It had to go to a committee. Thankfully I won my argument and the c.v.isnt locked in. and I got the bump up with the interest rate drop. Wow - big difference. I wonder if there will be another in March.  I haven't hear more rumblings.

BPA

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Re: To commute or not to commute (your pension value)?
« Reply #61 on: February 24, 2015, 05:47:50 AM »
Some of the major banks are predicting another rate drop in March.  TD was one, I think. 

Glad it got sorted out, Joan. 

My friend told me her husband's pension plan is cutting double digit percentages to payouts to current retirees.  After seeing that happen to former Stelco employees and others, I know that I will be taking CV.


Joan-eh?

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Re: To commute or not to commute (your pension value)?
« Reply #62 on: February 24, 2015, 07:25:12 AM »
A little part of my worry, is that I see how much time can be taken up with fussing about managing the money or tinkering with overall spreadsheets.  Would a cheque in the mail provide more freedom?

Yes, a few years of equalling the s&p500 for example, puts commuting ahead. If more conservative investing is needed, that's harder to do. Ithing 4,5% Is the Magic number.  But I still struggle with figuring out tax consequesence and inflation.

Is there a particular day that a March cut would be announced? I haven't heard about the possibility since the January announcement, anything recent.?

As soon as you see what you want to live with, ask for the termination package. Then the cv amount is locked in for 6 months.


MorningCoffee

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Re: To commute or not to commute (your pension value)?
« Reply #63 on: February 24, 2015, 07:44:58 AM »
Joan-eh?, I chose to pull out my CV two years ago now. If you have  the option to buy back any time before pulling out your CV, ask for those numbers. otpp worked out the scenario for me, and it was definitely worth it. I'm thankful someone at the pension board encouraged me to look into it.

BPA

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Re: To commute or not to commute (your pension value)?
« Reply #64 on: February 24, 2015, 07:53:34 AM »
A little part of my worry, is that I see how much time can be taken up with fussing about managing the money or tinkering with overall spreadsheets.  Would a cheque in the mail provide more freedom?

Yes, a few years of equalling the s&p500 for example, puts commuting ahead. If more conservative investing is needed, that's harder to do. Ithing 4,5% Is the Magic number.  But I still struggle with figuring out tax consequesence and inflation.

Is there a particular day that a March cut would be announced? I haven't heard about the possibility since the January announcement, anything recent.?

As soon as you see what you want to live with, ask for the termination package. Then the cv amount is locked in for 6 months.

Good to know about the six month lock in.  I haven't quit yet.  I have to quit and then ask for the termination package. 

Next Bank of Canada announcement is March 4.  The one after is April 15.


Al1961

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Re: To commute or not to commute (your pension value)?
« Reply #65 on: February 24, 2015, 09:29:35 AM »
The discount rates (there is one for the first ten years of pension payments, and a higher one for pension that would be paid more than 10 years in the future) used for CV calculations are determined at the first of each month.

The discount rates are based on month-to-month market changes to three bond market indexes, not the Bank of Canada rate. They may move in the same direction, but they may not.

Monthly rates for the past however long are here:
http://an-actual-actuary.com/Pension%20Plan%20Interest%20Rates.xls

Columns A-C are the bond rates,
Columns H,I are the discount rates for unindexed pensions, and
Columns M,N are the rates for indexed pensions (will vary based on input in cells N3 and N4 that describe the indexing limitations. The default is 75% indexing for inflation after 1%. If you are fully indexed for all inflation, the inputs are 100%, 0%.)

That was one hell of a drop in rates last month. I'm a bit ticked, since I was locked in at October's rates, and received my CV funds late in January. Oh well, the market returns have been quite good....

Al

Joan-eh?

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Re: To commute or not to commute (your pension value)?
« Reply #66 on: February 24, 2015, 07:17:43 PM »
Joan-eh?, I chose to pull out my CV two years ago now. If you have  the option to buy back any time before pulling out your CV, ask for those numbers. otpp worked out the scenario for me, and it was definitely worth it. I'm thankful someone at the pension board encouraged me to look into it.


I only have 16 years in Otpp . And out of it now, and into a new one for 10 years.

 Is buy back even possible?

Joan-eh?

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Re: To commute or not to commute (your pension value)?
« Reply #67 on: February 24, 2015, 07:21:17 PM »
Al1961

Sorry to say I'm not learned in these areas of pension lingo. could you explain further this paragraph?

T he discount rates (there is one for the first ten years of pension payments, and a higher one for pension that would be paid more than 10 years in the future) used for CV calculations are determined at the first of each month.

Al1961

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Re: To commute or not to commute (your pension value)?
« Reply #68 on: February 24, 2015, 09:41:32 PM »
Al1961

Sorry to say I'm not learned in these areas of pension lingo. could you explain further this paragraph?

T he discount rates (there is one for the first ten years of pension payments, and a higher one for pension that would be paid more than 10 years in the future) used for CV calculations are determined at the first of each month.

I don't know if I can un-jargon this for you - but here goes.

The Canadian Institute of Actuaries has a standard that determines the interest (discount) rates to be used to calculate Commuted Values. The spreadsheet that I linked above shows the current and historical rates. The discount rates are derived from three different Government of Canada Bond Rates.

The CV calculation is a present value calculation in several parts, with two different interest (discount) rates used depending on when cash flows:

The estimated pension cash flows are mapped out in a time sequence based on when you are eligible to start receiving the pension, and continue until the mortality tables indicate average date of death (so around age 86 for Canadian women).

In the first step, any cash flows that happen more than 10 years in the future from the Valuation date are discounted using the >10 year rate, but only to a date that is 10 years out from the Valuation date. Currently that discount rate is 1.2% for a fully indexed pension and 3.3% for a non indexed pension. (Rates for February 2015)

The second step is to discount the PV balance ten years out (determined in the first step) and any other pension payments in the first ten years to today using the <10 year discount rate. This rate is currently 1% for fully indexed pensions and 1.9% for non indexed pensions.

OK, that was probably hard to follow, so I'll try to lay this out a bit better using some arbitrary dates:

A. March 1, 2015 - CV Valuation date

B. March 1, 2020 unreduced pension payments would start

C. March 1, 2025 "10 year out measurement date"

D. March 1, 2051 Assumed Age 86, pension ends

Part I
All pension payments that would have been made between date C and D are discounted back to date C using the >10 year discount rate. The total of those discounted payments are then discounted back to date A using the <10 year rate.

Part II
All pension payments made between date B and Date C are discounted back to date A using the <10 year discount rate.

The total of Part I and Part II is the CV

I built a spreadsheet using this logic and was able to come within ~$2k of the payout calculated by my pension plan. I believe the difference was due to me using annual amounts rather than monthly amounts specified in the CIA standard.

Al

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Re: To commute or not to commute (your pension value)?
« Reply #69 on: February 25, 2015, 07:09:06 AM »
Joan-eh?, I chose to pull out my CV two years ago now. If you have  the option to buy back any time before pulling out your CV, ask for those numbers. otpp worked out the scenario for me, and it was definitely worth it. I'm thankful someone at the pension board encouraged me to look into it.


I only have 16 years in Otpp . And out of it now, and into a new one for 10 years.

 Is buy back even possible?

Just ask - they'll tell you if you have any time you can buy back. It's common for women who took maternity leave, for example, or someone who took a leave of absence and didn't buy back their pension at the time.

sky_northern

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Re: To commute or not to commute (your pension value)?
« Reply #70 on: February 25, 2015, 05:13:37 PM »
I still need to research which company to trust with investing my locked in portion. 
Questrade has LIRA accounts.

I have about 10 more years till I can pull the plug but I read this thread with interest, as I'm in the Government of Canada's Public Service Pension Plan.

Joan-eh?

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Re: To commute or not to commute (your pension value)?
« Reply #71 on: March 04, 2015, 12:38:39 PM »
http://business.financialpost.com/2015/03/04/toronto-house-prices-climb-11-as-average-for-detached-home-tops-1-million-for-first-time/

A little,   Okay....a lot off topic for this thread, but thought my fellow Canadians with whom I've enjoyed chatting/learning might enjoy laughing at Toronto.... And share my pain?!?!?!?!

Joan-eh?

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Re: To commute or not to commute (your pension value)?
« Reply #72 on: April 20, 2015, 07:33:05 PM »
Just checking in : BPA - any news anout the ins and outs of commuting your pension value. Are you still moving ahead with your decision?

BPA

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Re: To commute or not to commute (your pension value)?
« Reply #73 on: April 21, 2015, 05:17:09 AM »
Just checking in : BPA - any news anout the ins and outs of commuting your pension value. Are you still moving ahead with your decision?

That is still the plan.  Who knows what our next collective agreement will eventually be like, but as long as the CV doesn't drop too much from where it is now, I will be out at the end of December?  I'm thinking of going through TD e-series for investing it (a la the Canadian Couch Potato), but will have three years in cash. 

Did you finally get yours?

ETA:  Home prices in Toronto are insane.  Hamilton is getting worse too.  I'm keeping my FIRE options open, but as I've said before, if my cash reserves get low, I wouldn't mind moving east and buying a house for a quarter of what mine is worth here. 

« Last Edit: April 21, 2015, 05:21:38 AM by BPA »

Joan-eh?

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Re: To commute or not to commute (your pension value)?
« Reply #74 on: April 21, 2015, 05:58:54 AM »
BPA- ahhh, I thought you were leaving this spring.

It seems that I read contradictory infirmation about unlocking 50% of the lira.  i must commute my pension before my 50th birthday (according to the pension rules) , then I see the rule that says  the Lira must be unlocked within 60 days "after December 31, 2010, you transferred money into an Ontario life income fund that is governed by the requirements of Schedule 1.1 and, within 60 days of this transfer, you want to withdraw or transfer up to 50% of the total money that was transferred to the Schedule 1.1 LIF - Form 5.2" and other places I read that we have to me 55yrs old.

Any thoughts?

BPA

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Re: To commute or not to commute (your pension value)?
« Reply #75 on: April 21, 2015, 06:08:45 AM »
BPA- ahhh, I thought you were leaving this spring.

It seems that I read contradictory infirmation about unlocking 50% of the lira.  i must commute my pension before my 50th birthday (according to the pension rules) , then I see the rule that says  the Lira must be unlocked within 60 days "after December 31, 2010, you transferred money into an Ontario life income fund that is governed by the requirements of Schedule 1.1 and, within 60 days of this transfer, you want to withdraw or transfer up to 50% of the total money that was transferred to the Schedule 1.1 LIF - Form 5.2" and other places I read that we have to me 55yrs old.

Any thoughts?

Not properly caffeinated yet, but I did contact the OTPP and they told me it was 50 for us, not 55.  As for the unlocking, I sure hope I can unlock within 60 days of turning 50, because I have other ideas for that money.  I should try to confirm that.  I wonder if, because I am taking the CV before 50, I need to transfer it out when I put it into the fund even if I won't be 50 yet.  Thanks for raising the question because I had thought that I just needed to wait until I was 50.   

BPA

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Re: To commute or not to commute (your pension value)?
« Reply #76 on: April 21, 2015, 06:57:18 AM »
Found this information at http://www.moneysmartsblog.com/how-to-unlock-an-ontario-locked-in-retirement-account-lira-lrif/

If you are 55 years of age or at an age where you would have been eligible for a pension from the originating pension plan (whichever is less) then you can do the following:

    Transfer the LIRA or LRIF to a LIF (Life Income Fund) account. This LIF account will be considered a “new” LIF account. You will have to instruct your financial institution to do this step.
    You are allowed a one-time 50% unlock from the LIF account. This means you can request for a transfer of half the account value to an RRSP or RRIF account or just withdraw the money from the LIF.  This unlock has to be completed within 60 days of the creation of the new LIF account.  Do not delay!

When you complete the unlock, the money is treated as taxable income for that year.  If you transfer to a RRSP, you will receive a contribution receipt which will offset the transfer amount.



Joan-eh?

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Re: To commute or not to commute (your pension value)?
« Reply #77 on: April 21, 2015, 06:20:56 PM »
 Good Intell, Bpa!

I was at the bank to ask more about this process...I seemed to know more than they. That is worrisome.

I'm quite worried that I have not thought of all the implications.


Anyone out there in Ontario, who has  commuted c.v ??

Please help us learn from your experiences. From LIRAS, to unlocking, to taxes, etc...???

BPA

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Re: To commute or not to commute (your pension value)?
« Reply #78 on: April 22, 2015, 02:07:09 PM »
Good Intell, Bpa!

I was at the bank to ask more about this process...I seemed to know more than they. That is worrisome.

I'm quite worried that I have not thought of all the implications.


Anyone out there in Ontario, who has  commuted c.v ??

Please help us learn from your experiences. From LIRAS, to unlocking, to taxes, etc...???

I sometimes worry that I haven't thought of all the implications too.  However, staying in this career is really making me unhappy.  I love the kids and the actual teaching, but the extraneous bs is driving me nuts, so I'm out at the end of December even if it means that I have to work again some day because I've missed something. 

I have one friend who commuted his pension right before the crash in 2000ish, so I'm almost afraid to ask him.  He is the reason I plan to have three years in cash and then dollar cost average in the rest.  His experience unlocking would probably not be relevant since the rules changed in 2010.

Joan-eh?

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Re: To commute or not to commute (your pension value)?
« Reply #79 on: December 28, 2015, 06:31:03 PM »
A bit nervous, but tomorrow I'm submitting the papers to request to commute the pension value!

Final reasons:

Circumvent issues of premature death
Flexibility of withdrawal


Fingers crossed! 

Thanks everyone for your insights, advice and support!

BPA

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Re: To commute or not to commute (your pension value)?
« Reply #80 on: December 29, 2015, 04:31:20 PM »
A bit nervous, but tomorrow I'm submitting the papers to request to commute the pension value!

Final reasons:

Circumvent issues of premature death
Flexibility of withdrawal


Fingers crossed! 

Thanks everyone for your insights, advice and support!

Congrats!  I commuted mine as of last week.  OTPP must be thinking, "WTF? Two of them?  In a couple of weeks?"

It's a good time to take it since interest rates are still low.  I quit, and then two days before my last day of work (the date that counts for valuation for me), the US Federal Reserve raised its interest rate.  My boyfriend was afraid to tell me, but I don't think the US Federal Reserve impacts Canadian pension valuations at all.  The Bank of Canada may not be far behind in raising interest rates.  The value of my pension was pretty solid on December 18.  Not quite as good as it was last January, but still good enough.  I'd been tracking it monthly for over three years and three years ago I would have be ecstatic to see where it eventually landed.

Edited to change "November 18" to "December 18"
« Last Edit: December 29, 2015, 05:46:24 PM by BPA »

Joan-eh?

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Re: To commute or not to commute (your pension value)?
« Reply #81 on: December 29, 2015, 05:16:01 PM »
BPA- good to hear from you! Oh, that's great! Indeed they must be wondering- because not many people do it, as far as I can tell.

In the new year, I will also take advantage of the 50% unlocking opportunity.

And will need to figure out if there is anyway to reduce the tax hit. I susupect the transfer won't take place until 2016.  Or did it happen quickly for you?

Best,
Joan-eh?

BPA

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Re: To commute or not to commute (your pension value)?
« Reply #82 on: December 29, 2015, 05:44:50 PM »
I called back in mid November and was told that even if I started the process then, I would receive the commuted value for the 2016 tax year.  I got some contradictory information when I called (for example, twice I was told that the valuation would be based on the day I quit, so if I called in the morning and liked the amount they gave me, I could give my two weeks' that day and the amount they quoted me would be the amount of the commuted value and this was not the case.  I had to hold my breath for a week and hope that it didn't tank in that time.). 

Because all of the paper work won't be processed until 2016, it makes sense that we are safe.  I was told that could take 4 to 6 weeks. 

I only have $18k in RRSP contribution room, so I can shelter that, but yeah...I figure I'm going to take about a $45k tax hit.  I don't plan to make any other income in 2016 or else that would taxed at 46%, but I am hoping to get some sort of other income stream after that.

I will take advantage of the unlocking in 2018 when I turn 50.  No way I'm limiting myself by not doing that.

Yay for us! 

Al1961

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Re: To commute or not to commute (your pension value)?
« Reply #83 on: December 29, 2015, 08:05:31 PM »
I did mine last January. That is, submitted the paperwork on Jan 5. Tool about three weeks to receive the cash - less 30% withholding tax on the amount in excess of what I could roll into a LIRA. No RRSP room. Had the joy of making a $20,000 installment payment on Dec 15 since the withholding tax was insufficient.

Don't forget to do a dry run on your 2016 taxes so you can determine how much your installment payment, if any, should be. Penalties and interest on un-remitted installments can get expensive.

Al

BPA

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Re: To commute or not to commute (your pension value)?
« Reply #84 on: December 29, 2015, 08:52:50 PM »
When I calculated mine out, I should receive a couple thousand back when I submit my taxes for 2016, but I will check that again a couple of times.  This was the website I used:  https://simpletax.ca/calculator

My taxes will be simple for 2016 since I won't be generating any other taxable income.

According to my tracking, January was the best time in the last three years to take CV, so good for you. Al.  Talk about optimization!  If had had gone then, I would have taken home about $11k more after tax, but I really wanted to work to the end of this year. 


Joan-eh?

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Re: To commute or not to commute (your pension value)?
« Reply #85 on: December 29, 2015, 09:37:25 PM »
As I am still working, so I am going to end up paying 50% (or more with the new Liberal tax rates). It makes me sick, but its still the right choice.

Im actually thinking of taking unpaid leave to lower income, I need to try to figure out if that makes sense.

good to see you here, too, Al,
you have both been part of my decision.
Thanks!

BPA

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Re: To commute or not to commute (your pension value)?
« Reply #86 on: December 30, 2015, 06:12:54 AM »
Thanks to you too, Joan.  I referred back to this thread a couple of times over the last few months because what was posted was so helpful.  Not many people commute pensions and, of course, the pension plans don't promote this option.

I also found this article a few months ago:  http://business.financialpost.com/personal-finance/retirement/your-pension-is-now-the-time-to-take-the-cash-instead Interest rates are even slightly lower now than they were when it was written (as we witnessed with enthusiasm a year ago).   

A bit of time off sounds like a good thing.  This would be the time to take it tax-wise. 

BPA

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Re: To commute or not to commute (your pension value)?
« Reply #87 on: January 07, 2016, 07:12:48 AM »
Joan:  OTPP sent me an email with the final amount of my commuted value and I am happy with it.  I hope you receive a similar email very soon if you haven't received it yet.

So far, I feel so at peace with my decision. 

BPA

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Re: To commute or not to commute (your pension value)?
« Reply #88 on: January 07, 2016, 03:46:02 PM »
And considering that we are taking commuted value when interest rates are low and commuted value is therefore relatively high,  and the current bear market should make buying low relatively easy, I'd say the stars are really lining up for us.  This was my most hoped for scenario.

On a less great note, the school board overpaid me by three days.  Not a huge sum of money certainly.  And thankfully it was only three days. 


Joan-eh?

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Re: To commute or not to commute (your pension value)?
« Reply #89 on: January 07, 2016, 06:57:52 PM »
Paper work all done! Now to figure out how to unlock 50% and then the 60 day ticking begins.

Indeed the stars! I figure I only have to beat/meet 3.5% to beat/meet the pension. And the flexibility is what I want. As I walked away from signing the papers, I had a moderate feeling of freedom. It wasn't ecstatic – which I didn't expect, but it wasn't regret. So I think it was the right decision

Three cheers for the stars aligning for us. I agree perfect age for a perfect interest-rate.

Let's keep in touch during the process fashion and then had to decide where to invest it

BPA

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Re: To commute or not to commute (your pension value)?
« Reply #90 on: January 08, 2016, 08:15:36 PM »
Paper work all done! Now to figure out how to unlock 50% and then the 60 day ticking begins.

Indeed the stars! I figure I only have to beat/meet 3.5% to beat/meet the pension. And the flexibility is what I want. As I walked away from signing the papers, I had a moderate feeling of freedom. It wasn't ecstatic – which I didn't expect, but it wasn't regret. So I think it was the right decision

Three cheers for the stars aligning for us. I agree perfect age for a perfect interest-rate.

Let's keep in touch during the process fashion and then had to decide where to invest it

Sounds good. 

I had a lot of current teacher try to discourage me from taking commuted value because they know this story or that story and have no idea how to invest.  Also, none of them are as frugal as I am.  So, commuting a pension might be a bad idea for them, but it's the right idea for us. 


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Re: To commute or not to commute (your pension value)?
« Reply #91 on: January 13, 2016, 02:22:24 PM »
Mailed in my Commuted Value application and all the accompanying documentation today.  It should arrive late tomorrow. 

I also finished the paperwork for my BMO brokerage account.

I had to change my investment strategy a bit since my only investments were with Tangerine and they are not on the LIRA list.  Forcing myself to examine other investment options was an education I'm happy about. 

Hope we get our money soon!!!


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Re: To commute or not to commute (your pension value)?
« Reply #92 on: January 13, 2016, 04:52:19 PM »
I went to the bank again today to sign more papers. I'm using InvestorLine but the back of Montreal branch has been very helpful to help me navigate the process.

I asked today how to initiate the 50% unlocking opportunity as well.it must be requested within 60 days of…? I'm not sure if that's receiving the money or if the initial request from otpp.

Starting to get a little nervous about investing a large chunk of money all at once!

BPA

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Re: To commute or not to commute (your pension value)?
« Reply #93 on: January 14, 2016, 08:56:23 AM »
I went to the bank again today to sign more papers. I'm using InvestorLine but the back of Montreal branch has been very helpful to help me navigate the process.

I asked today how to initiate the 50% unlocking opportunity as well.it must be requested within 60 days of…? I'm not sure if that's receiving the money or if the initial request from otpp.

Starting to get a little nervous about investing a large chunk of money all at once!

I'm a bit nervous too.  It's a departure from my DCA into Tangerine funds and it is a much larger amount than I'm used to. I'm going to be following the Couch Potato investing idea at Money Sense.  I am going with the Vanguard ETFs (mix of Canadian bonds, Canadian equities, and international equities).  Then I'll rebalance quarterly or biannually. 

If I remember correctly, the unlocking can't happen for me until I'm 50 and transfer it from a LIRA to a LIF. 

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Re: To commute or not to commute (your pension value)?
« Reply #94 on: January 15, 2016, 09:49:39 PM »
I went to the bank again today to sign more papers. I'm using InvestorLine but the back of Montreal branch has been very helpful to help me navigate the process.

I asked today how to initiate the 50% unlocking opportunity as well.it must be requested within 60 days of…? I'm not sure if that's receiving the money or if the initial request from otpp.

Starting to get a little nervous about investing a large chunk of money all at once!

I'm a bit nervous too.  It's a departure from my DCA into Tangerine funds and it is a much larger amount than I'm used to. I'm going to be following the Couch Potato investing idea at Money Sense.  I am going with the Vanguard ETFs (mix of Canadian bonds, Canadian equities, and international equities).  Then I'll rebalance quarterly or biannually. 

If I remember correctly, the unlocking can't happen for me until I'm 50 and transfer it from a LIRA to a LIF.

There is also a "financial hardship"  rule for early withdrawal of the LIRA in Ontario.   Based on what you say your "projected" income will be - looks like you will qualify.  I plan on using this approach.

BPA

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Re: To commute or not to commute (your pension value)?
« Reply #95 on: January 16, 2016, 05:39:16 AM »
I went to the bank again today to sign more papers. I'm using InvestorLine but the back of Montreal branch has been very helpful to help me navigate the process.

I asked today how to initiate the 50% unlocking opportunity as well.it must be requested within 60 days of…? I'm not sure if that's receiving the money or if the initial request from otpp.

Starting to get a little nervous about investing a large chunk of money all at once!

I'm a bit nervous too.  It's a departure from my DCA into Tangerine funds and it is a much larger amount than I'm used to. I'm going to be following the Couch Potato investing idea at Money Sense.  I am going with the Vanguard ETFs (mix of Canadian bonds, Canadian equities, and international equities).  Then I'll rebalance quarterly or biannually. 

If I remember correctly, the unlocking can't happen for me until I'm 50 and transfer it from a LIRA to a LIF.

There is also a "financial hardship"  rule for early withdrawal of the LIRA in Ontario.   Based on what you say your "projected" income will be - looks like you will qualify.  I plan on using this approach.

When I saw that "financial hardship" meant an income of less than over $30k, I was rather amused.  I'm going to use that approach too.  Great minds think alike.  :)  Do you know if the early withdrawal for "financial hardship" includes the LIRA or is it only the LIF/LRIF?  I'm sure I won't need to access any of that money until I'm over 50, so I was focusing on the LIF early withdrawal, but I like the flexibility of being able to take out funds from the LIRA early if necessary.

Thanks, TC. 

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Re: To commute or not to commute (your pension value)?
« Reply #96 on: January 16, 2016, 10:25:07 AM »
I went to the bank again today to sign more papers. I'm using InvestorLine but the back of Montreal branch has been very helpful to help me navigate the process.

I asked today how to initiate the 50% unlocking opportunity as well.it must be requested within 60 days of…? I'm not sure if that's receiving the money or if the initial request from otpp.

Starting to get a little nervous about investing a large chunk of money all at once!

I'm a bit nervous too.  It's a departure from my DCA into Tangerine funds and it is a much larger amount than I'm used to. I'm going to be following the Couch Potato investing idea at Money Sense.  I am going with the Vanguard ETFs (mix of Canadian bonds, Canadian equities, and international equities).  Then I'll rebalance quarterly or biannually. 

If I remember correctly, the unlocking can't happen for me until I'm 50 and transfer it from a LIRA to a LIF.

There is also a "financial hardship"  rule for early withdrawal of the LIRA in Ontario.   Based on what you say your "projected" income will be - looks like you will qualify.  I plan on using this approach.

When I saw that "financial hardship" meant an income of less than over $30k, I was rather amused.  I'm going to use that approach too.  Great minds think alike.  :)  Do you know if the early withdrawal for "financial hardship" includes the LIRA or is it only the LIF/LRIF?  I'm sure I won't need to access any of that money until I'm over 50, so I was focusing on the LIF early withdrawal, but I like the flexibility of being able to take out funds from the LIRA early if necessary.

Thanks, TC.


Either or - here is a link with more information.  I have a friend who is a CFP - he has advised many clients to use the rule, with much success.
https://www.fsco.gov.on.ca/en/pensions/financial_hardship/Pages/Financial_Hardship_2012_Budget.aspx

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Re: To commute or not to commute (your pension value)?
« Reply #97 on: January 17, 2016, 05:30:18 AM »
Either or - here is a link with more information.  I have a friend who is a CFP - he has advised many clients to use the rule, with much success.
https://www.fsco.gov.on.ca/en/pensions/financial_hardship/Pages/Financial_Hardship_2012_Budget.aspx

Thanks!  I hadn't seriously considered it until after age 50, but that is good to know.  :)  Yay for us!

I sure love this RE thing. 

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Re: To commute or not to commute (your pension value)?
« Reply #98 on: February 12, 2016, 01:13:38 PM »
With the markets being what they are, I've had several people on a spectrum of "I told you so" to concern about my decision to commute my pension.  Thing is that I haven't received the money yet, so I'm pretty golden right now.

Gah!  I don't want to point out to them that just because they took a pension doesn't mean they are safe.  We've already seen plan amendments because of low returns for the OTPP.

Thanks for listening to my vent.

Joan-eh?

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Re: To commute or not to commute (your pension value)?
« Reply #99 on: February 18, 2016, 07:52:01 PM »
Just got my $$$$!

I'd say perfect time to get it, now to invest while markets are down. Since the cv was so high, only have to make 4% to beat the pension. Can do that just with dividends on RBC stock :-)

Okay, I know it's not so simple... But I'm feeling good so far about it.