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Hi Everyone
Old 07-10-2005, 05:00 PM   #1
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Hi Everyone

What a great site.

I've been spending a lot of time thinking about retirement lately, and have tried several different retirement calculators. My gut feeling is that it's mostly just a matter of picking the time. I'm 52, and my wife is 54.

It's one of those deals, however, where it always looks better 2 years from now than it does now. On the other hand, there are some perfectly valid reasons why it would be quite financially advantageous for us to wait until about November of 2007 to pull the plug (I will be 55 in Feb. of 2008).

The first reason is that that would get us enough time to pay off about $22,000 in credit card debt (at 2.9% interest for the life of it, not bad but still...) and stash some money away to help the kids get through college. The second reason is that the next 2 1/2 years would have a major positive effect on how much pension I would receive (I won't bore you with the details, but it is truly astounding). The third reason is that my employer has a deferred compensation (457) plan as well as an annuity (401A plan), and between the 2, since I am into the "catch-up" provisions, I can tax-shelter about $35,000 per year and roll them into an IRA when I'm done.

I have transferred into a permanent seasonal job way up north (and by that I mean way up north, as in still no sunset), and will typically work 7 months of the year, about 4 months of which will be 60 hour weeks. I plan to ski all winter, so in a way it's almost like partial retirement.

There is, however, a major downside. My wife has her own job (planning to quit about the same time), but it is not here. So we are apart about 1/2 the year (I just started this phase on June 1). On the other hand, part of me says that working 60 hours a week is better done without the wife around.

So, it's very interesting reading about others' plans and experiences.

I'm also struggling just a bit on how to position our investments given that we will be living in Canada, but 75% of our retirement investments are tax-deferred vehicles in the US (the other 25% in Canadian RRSPs--like IRAs). I am concerned about the currency risk, given that the Canadian dollar seems to be moving up along with the Euro. I have limited options, and have put a greater than usual amount in international funds. Any opinions on this?

Sorry about how long this is.

Thanks for any constructive (or not-so-constructive) advice

Bosco
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Re: Hi Everyone
Old 07-10-2005, 05:30 PM   #2
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Re: Hi Everyone

The first reason is that that would get us enough time to pay off about $22,000 in credit card debt (at 2.9% interest for the life of it, not bad but still...) and stash some money away to help the kids get through college.* The second reason is that the next 2 1/2 years would have a major positive effect on how much pension I would receive (I won't bore you with the details, but it is truly astounding).* The third reason is that my employer has a deferred compensation (457) plan as well as an annuity (401A plan), and between the 2, since I am into the "catch-up" provisions, I can tax-shelter about $35,000 per year and roll them into an IRA when I'm done.
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Sounds like you have ID' d the must do things in your life even though it may be painful for a couple of years.* Believe me, if you can pump that pension big time by hanging for a couple of years, you'll probably be smiling for the next 40 ,50 or 60 years.*
Hard to say much about your investments, but whenever someone says Canada, I think about one of my best mutual fund investments ever.* The Fidelity Canada Fund"
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Re: Hi Everyone
Old 07-10-2005, 05:48 PM   #3
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Re: Hi Everyone

JPatrick wrote

Quote:
whenever someone says Canada, I think about one of my best mutual fund investments ever. The Fidelity Canada Fund
That is certainly an option since some of the US investments are with Fidelity. Canadian funds certainly didn't tank in the early part of the decade las much as their US counterparts. On the other hand, the Canadian equity markey historically has not returned as much as the US market.

I think it is clear that committing some of the US money to Canadian investments makes sense, since only 25% of the money is actually in Canada. I just haven't figured out how much. I'm toying with the idea of about 1/3 intertnational (EAFE), 1/3 US equities (mixture of large and small cap index funds), and 1/3 Canadian.

I don't expect to have to tap the retirement funds for 10 or 12 years, given that we should have fairly robust pensions starting in 2008 (and I can "front-load" the payout to be higher age 55-65, followed by a reduced amount). So even though I am close to retirement, I am thinking long-term on the investments.

Thanks

Bosco
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Re: Hi Everyone
Old 07-10-2005, 08:44 PM   #4
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Re: Hi Everyone

You in state pension plan? I really would like to hear your benies? including why you are staying longer. Do you have an age reduction at age 55 that you are staying a few years. How much in the 457k that you coulndt just leave now. You realize an age reduction factor just there because if you leave at age 55, you will get a couple years more pension. In the long and short of it, if you have enough savings, you really dont NEED to stay a few years.

Is your pension based on some avg. of your last 3 years or something similar that you are hanging your hat on?

Also, does your state pay health care insurance at retirement.
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Re: Hi Everyone
Old 07-10-2005, 11:54 PM   #5
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Re: Hi Everyone

Maddy,

I will try to answer your questions. I am in a bit of an unusual situation in that I first hired onto the state in 1976, but only worked 8 months. Then I rehired in 1992. However, it is the rules in effect when you first hired that determine the benefit package (they are much less attractive for later hirees).

The main reason I feel that I need to stay is to establish my highest 3 years. I only have a little over 15 years--thus a pretty modest pension to date. But--it is based on highest MONTHLY average of highest 3 consecutive years, and to count as a year, you only need to be in employment status for 115 calendar days. I was recently able to take a "downgrade", take a position farther north (which increased average rate of pay due to "geographical adjustment", thus more than negating the downgrade), and switch to a seasonal overtime eligible position. Because I am in "tier 1" this means that overtime and geographical adjustments count in my "high 3 average". So if I can put in 3 good construction seasons and make a decent amount of overtime, my pension could be significantly higher than if I don't--meaning 36-40k per year (depending, of course on how much overtime is available) instead of 23k if I left tomorrow. Engineers with spreadsheet can be dangerous!

I get full retirement at 55. I agree, taking it earlier is not a bad deal since you get to draw for a couple extra years--if I went now I would get about 85% of 27k. The reason I want to hang in there until 55 is not to avoid taking the "early retirement hit" nor for the extra 2 1/4% per year but rather to boost my high 3 years average.

Yes, my state health does pay health insurance at retirement, but in my case it does that even if I take early retirement so that is not an issue. My wife's teacher pension also pays medical, and between these two coverages (which do work in Canada) and the Canadian medical system, I am not worried about health coverage.

I am hoping to get a pension in the neighborhood of 35-40k per year, instead of 22k per year (if I left now) by putting in an extra 20 months or so of actual work and skiing in the winter. My wife's pension will be much smaller (around 8-10k, until she gets old enough to receive social security and Canadian pensions, which is at 65 or 67). All in all, it seems like a good return on the time investment and so far I like the work. Being away from home is the hardest part.

Our total retirement savings is only about $420k US combo of 457, 401a, 403b, Roth and traditional IRAs, and Canadian RRSPs, but with 2.5 more years of major contributions from us both and modest earnings in the stock market, it could easily be more than $600k by the time I quit. We have a mortgage on a house for $137,000 (Canadian), but also a piece of property we are trying to sell, hoping to get about $100k which we will pay against the mortgage if and when it sells. If the property sells and we continue to make double mortgage payments, we could burn the mortgage in about 3 1/2 years. Fortunately, very little of our retirement money is in Roths. The Canadian govmt does not recognize Roths and we would end up paying taxes on the earnings anyway. I will probably cash what little is in them before officially giving up my US residency to avoid paying Canadian tax on them.

You are probably right--We don't NEED to work a couple more years, and I have wrestled with this question. I wonder if I am being too cautious, or too greedy. It usually comes down to the same issue--do I want to try to pay $22,000 in credit card debt and help my kids through college on a very modest pension, or worse yet, tap the retirement accounts prematurely? This way seems to provide more cushion. I have given myself permission to quit if being away from home this much becomes too stressful, but so far (after 1.5 months on this "new" plan, I'm doing fine.

Although the fact that I will sit and type this long of an answer might say something....lol!!

Bosco
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Re: Hi Everyone
Old 07-11-2005, 02:00 PM   #6
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Re: Hi Everyone

Sounds like you've thought it through pretty well. Two and a half years can go pretty quick given the numbers you've got. How will the 6 months away work with your family? Are they ok with it? Are you? If so, the numbers seem to run for it.
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