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A dash of cold water on my dreams of retirement
12-15-2011, 11:43 AM
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#1
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Recycles dryer sheets
Join Date: May 2011
Posts: 496
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A dash of cold water on my dreams of retirement
I spoke to our HR retirement advisor yesterday and found out that my plans to retire on September 1st would be stupid. I'd totally forgotten about the severance payouts (in my case about $50K).
If I retire at the end of the calendar year, that severance will be added to my annual income, which will bump me up on the tax ladder. I'm already paying 40% - this would take me to nearly 50% and would essentially wipe out half of the severance.
If I wait until January, my income drops by 40% (pension), the tax rate on that amount drops to 30% and the severance will only bring the tax rate up to about 40%.
Sigh..... sorry about the whine.
__________________
Inside me is a skinny person crying to get out, but I can usually shut the b*tch up with cookies
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12-15-2011, 11:57 AM
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#2
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Full time employment: Posting here.
Join Date: Sep 2007
Posts: 514
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What's a "pension?"
-Signed, a Gen-X'er
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12-15-2011, 12:11 PM
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#3
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Thinks s/he gets paid by the post
Join Date: Nov 2006
Location: Bossier City
Posts: 2,183
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lol...it'll all be ok.....
__________________
“Change is the law of life. And those who look only to the past or present are certain to miss the future.”
-John F. Kennedy
“Hard work never killed anybody, but why take a chance?” - Edgar Bergen
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12-15-2011, 12:38 PM
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#4
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Administrator
Join Date: Jul 2005
Location: N. Yorkshire
Posts: 34,123
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At least you found out now, rather than after the event.
Since you've said that you enjoy your job, it should be no problem. Just take that dash of cold water and mix it with some single malt.
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Retired in Jan, 2010 at 55, moved to England in May 2016
Enough private pension and SS income to cover all needs
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12-15-2011, 12:54 PM
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#5
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Recycles dryer sheets
Join Date: Dec 2010
Location: Tequesta
Posts: 323
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Pension? We don't get no stinking pension. You've sorted it out, it will be fine.
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12-15-2011, 02:15 PM
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#6
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2007
Posts: 14,328
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That is actually kind of a nice problem to have........
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12-15-2011, 02:42 PM
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#7
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Oct 2005
Location: North Oregon Coast
Posts: 16,483
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Quote:
Originally Posted by travelover
That is actually kind of a nice problem to have........
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Yeah, if I were in a position where I was fortunate enough to pay into a marginal rate of 40% or more -- and would pay into a 30% rate even into retirement -- I'd have already jumped ship.
What I don't understand is this: Severance in what sounds like a voluntary retirement on your own schedule? I'm puzzled.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
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12-15-2011, 03:40 PM
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#8
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Administrator
Join Date: Jul 2005
Location: N. Yorkshire
Posts: 34,123
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Quote:
Originally Posted by ziggy29
What I don't understand is this: Severance in what sounds like a voluntary retirement on your own schedule? I'm puzzled.
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I took this to mean a lump sum as part of the pension package, but if the company is asking for volunteers to retire early and not be on the payroll for 2012 then I can see them allowing folks to delay a few months.
__________________
Retired in Jan, 2010 at 55, moved to England in May 2016
Enough private pension and SS income to cover all needs
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12-15-2011, 03:52 PM
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#9
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Recycles dryer sheets
Join Date: May 2011
Posts: 496
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Quote:
Originally Posted by ziggy29
Yeah, if I were in a position where I was fortunate enough to pay into a marginal rate of 40% or more -- and would pay into a 30% rate even into retirement -- I'd have already jumped ship.
What I don't understand is this: Severance in what sounds like a voluntary retirement on your own schedule? I'm puzzled.
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That's what our HR people call it - it's for people who are retiring. We get 40% of unused sick time (in my case 1190 hours) and a pay-out of 1 week for every 2 years of service (in my case, 26 years = 13 weeks). On top of that we get pay-out for unused vacation time (8 weeks/year). I will probably use up the vacation time and delay the pension.
My pension is based on the average of the 5 highest years of salary x 2% x years of service. By the time I retire, I will have 29 years in - so my pension will be 58% of my current salary.
Sweet deal, eh?
__________________
Inside me is a skinny person crying to get out, but I can usually shut the b*tch up with cookies
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12-15-2011, 04:05 PM
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#10
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Administrator
Join Date: Jul 2005
Location: N. Yorkshire
Posts: 34,123
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Quote:
Originally Posted by Nuiloa
Sweet deal, eh?
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The sweetest I've ever heard of. Congratulations.
__________________
Retired in Jan, 2010 at 55, moved to England in May 2016
Enough private pension and SS income to cover all needs
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12-15-2011, 04:26 PM
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#11
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Recycles dryer sheets
Join Date: May 2011
Posts: 496
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It gets better: we also get a "bridge benefit" which is an extra amount per month that is added to the pension from ages 60 to 65, to approximate the Canada Pension Plan. The bridge ends at 65 when CPP kicks in.
And we are allowed, at the time of retirement, to put an additional one-time $20K into a registered retirement plan (which defers taxes), on top of our annual yearly maximum. At least that saves the taxes on part of the severance.
Sometimes it's good to be a Canadian :-)
__________________
Inside me is a skinny person crying to get out, but I can usually shut the b*tch up with cookies
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12-15-2011, 04:44 PM
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#12
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Dryer sheet wannabe
Join Date: Dec 2011
Posts: 10
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hi....just guessing but based on how juicy your retirement benefits will be, i figure you must work for the federal government. am i right
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12-15-2011, 04:45 PM
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#13
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Recycles dryer sheets
Join Date: May 2011
Posts: 496
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Provincial :-)
__________________
Inside me is a skinny person crying to get out, but I can usually shut the b*tch up with cookies
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12-15-2011, 04:46 PM
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#14
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Recycles dryer sheets
Join Date: May 2011
Posts: 496
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Federal is much better. My sisters will get 100% of their salaries for life after they reach age 55.
__________________
Inside me is a skinny person crying to get out, but I can usually shut the b*tch up with cookies
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12-15-2011, 06:03 PM
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#15
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Recycles dryer sheets
Join Date: Jul 2006
Location: Massachusetts
Posts: 182
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Quote:
Originally Posted by Nuiloa
Federal is much better. My sisters will get 100% of their salaries for life after they reach age 55.
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Oh, Nuiloa I am so envious of your sister's retirement deal! Yours sounds pretty good, too!
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12-15-2011, 06:16 PM
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#16
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,358
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Is it possible to retire in September and ask them defer paying you your "severance" payments until January 2013? If so, you might be able to have the best of both worlds.
Or stop working in October, take vacation through Jan 1, 2013 and then retire to push the severance income into 2013.
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12-15-2011, 06:33 PM
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#17
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2011
Location: West of the Mississippi
Posts: 17,255
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These details are important to know ahead of time. I have heard some real horror stories of people who did not get the details correct and had problems. One fellow I know retired, but decided to delay benefits for a year since his wife was working and the delay would boost his monthly check. But he did not realize to buy into the medical plan one had to be getting a check. So he had several years of worry before medicare finally kicked in. Note: paid medical is not part of his plan, but he does have the opportunity to buy into the group plan at retirement if he pays 100% of the premium. Since he had pre-existing conditions, the group plan was the only one that covered his medical costs.
__________________
Comparison is the thief of joy
The worst decisions are usually made in times of anger and impatience.
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12-16-2011, 01:32 AM
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#18
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Thinks s/he gets paid by the post
Join Date: Apr 2005
Location: Duesseldorf, Germany
Posts: 1,202
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It is a good problem to have... and to find out while you still can change your plans.
Would you feel better if you calculate your additional income per additional day of work, like a salary increase?
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12-16-2011, 01:52 AM
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#19
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2008
Location: Leeward Oahu
Posts: 17,886
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Quote:
Originally Posted by Nuiloa
Sometimes it's good to be a Canadian :-)
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And sometimes not, heh, heh:
Quote: If I retire at the end of the calendar year, that severance will be added to my annual income, which will bump me up on the tax ladder. I'm already paying 40% - this would take me to nearly 50% and would essentially wipe out half of the severance. End quote:
Now I see how you can have "free" healthcare.
YMMV
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Ko'olau's Law -
Anything which can be used can be misused. Anything which can be misused will be.
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12-16-2011, 09:04 AM
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#20
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2008
Posts: 35,712
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The OP made me curious, so I had to check out the Canadian income tax system. See this.
The total of both Federal and Provincial taxes looks to be significantly higher than those of the US.
Quote:
Originally Posted by ziggy29
Yeah, if I were in a position where I was fortunate enough to pay into a marginal rate of 40% or more -- and would pay into a 30% rate even into retirement -- I'd have already jumped ship.
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Well, I am not so sure, after seeing how high the taxes are up there. So, they take away nearly half of your income, then give back some to you for pension. In that light, not so good a deal. Of course, it would be a lot better to have a pension than not, in that system. For federal workers, 100% salary after age of 55! Son of a gun!
Quote:
Kumquat, a Canadian, has made some comments about his free healthcare. Wonder where he has been?
What's happening here? Old-timers on this forum keep disappearing!
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"Old age is the most unexpected of all things that happen to a man" -- Leon Trotsky (1879-1940)
"Those Who Can Make You Believe Absurdities Can Make You Commit Atrocities" - Voltaire (1694-1778)
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