Nortel : What is Left?

Most of my regular readers know that I am a survivor of the great Nortel debacle, and I have had a lot of folks ask me questions about whether I am one of the unlucky people (still) standing in line hoping to get money from the former Canadian Technology Demigod, and the easy answer is no (fortunately), I don’t think they owe me anything (but I am not positive, there may be payments for patent work).

I first wrote about leaving Nortel in On Being Laid Off, which was just a raw statement that I had been let go after 20 years working there, but I have mostly stayed away from the topic of Nortel. Given time has passed, let’s look back 6 years ago and I can expand on a few areas where I have had many questions about what happened to me in specific after I got laid off.

Nortel

Nortel Once a Giant Now Deceased High Tech Firm

In my article Nortel Teeters, I hinted that things might not go well should Nortel declare bankruptcy in January, 2009, but I really had no sense of just how lucky (and prophetic) that I was with my statements. At the time, I still thought the Canadian government would not let Nortel go into full bankruptcy, there was too much on the line, but I was sadly mistaken.

On January 15, 2009, I saw how close a bullet I had dodged (more like a howitzer shell) and learned Sometimes it’s Better to be Lucky in life. To paraphrase what I wrote:

  1. I had already been paid all of my severance money before the bankruptcy declaration
  2. I had removed my funds from the Nortel pension plan (earlier than I had planned, again by blind luck)

So, in fact, I wasn’t just lucky, I was the same as  the Irishman who decided not to take the Titanic, and take an earlier  boat. How was I this fortunate ? Thanks go to Michael James, My Wife and a few other folks, as they made me act quickly enough and I am lucky I did, because anybody owed money by Nortel on January 15,2009 were out of luck. Who might these unfortunate folks have been (aside from the folks who loaned them money (bond holders), subcontractors and other real creditors)?

  • Anybody owed severance payments of any kind, have received next to nothing (if not nothing) since that date (that I am aware of)
  • Folks on their disability insurance program, as Nortel was self-insuring, thus those folks stopped getting payments as well
  • The Nortel Pension was owed a great deal of money, as it was in a short-fall before the bankruptcy, that never got paid back (that is one of the bigger arguments about remaining funds).

In the news lately (this being 2014) there are discussions going on about the remaining funds from the Nortel dissolution (mostly from the patents sales  and the like), and who will be getting funds from this pool of money? Bond holders will be getting some money, that is for sure, and some of the European pensioners will get some money, but who gets what of the remaining money remains in question , the money seems to be in the hands of two people now. Two bankruptcy judges one in the US and one in Toronto are now deciding what to do with the left over billions.

For me, I was lucky (the understatement of the century), I am owed nothing more (that I am aware) from Nortel, for those waiting for hopefully a few crumbs from the remnants, I wish them Bonne Chance, and hope for the best for them, and their families. At times I have had survivor’s remorse, in that I managed to get away in one piece, and I know of others that were not so lucky, but that is how life works, I suppose.

 

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Pensions and Spousal RRSPs

Spousal RRSPs

When I first started writing I wrote many paragraphs on the importance of Spousal RRSPs, to enable being in a lower tax bracket when you retire. A problem many folks have is that if you only have an RRSP in the main breadwinners name, the tax rate the money comes out of the RRSP (into the RRIF) may be higher than when the money went into the RRSP, which seems wrong (in that you pay the government the maximum tax on things, I always like to try to minimize my tax payments, but that may be just my thing).

When I first wrote about this (in 2005), my scenario was:

  1. I might have a pension from my employer (BNR/Nortel) (yes later I learned how foolish that thought had been, but only long after planning things).
  2. My wife might have CPP but that would be her sole income.

At the time, the concept of splitting pension income was not on the table, so the only way to put money into my wife’s hands, was to put money into a Spousal RRSP. A spousal RRSP, counts against the contributors RRSP room, however when the Account has money withdrawn from it, it would be taxed in the spouses hand (this is a gross over simplification, in fact the money is only in the spouse’s hands 3 years after deposit). This was the only way to “split income” and thus lower the tax burden.

Currently, life is better for retirees, in that they can:

  1. Split their private pension income (this is a simple act on your tax forms, I believe)
  2. Split your CPP, a much more complicated scenario

So I have read where folks are saying that a Spousal RRSP is now obsolete for those with pensions, but I disagree.

Currently my wife has a small private pension, along with CPP, so I can simply use the Spousal RRSP as another means to even out our income levels at retirement. Before I retire, it is another way to put money in my wife’s hands as well, as the funds in there are “hers” (in the eyes of the CRA) after 3 years, so if there was a need for my wife to have income, aside from me, that is another option as well.

Question for my smart readers (that is all of you), what is your thinking on Spousal RRSPs? Still a good idea? Obsolete ?

Do same-sex couples get to take advantage of Spousal RRSPs? Anybody?

 

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October, Hello Ebola, Give Blood and #theBestFin4TheWeek

October snuck in the door this week, and I didn’t notice until I wrote a cheque, checked the calendar, and went, “Where the **!@ did September go?!?”. October is like the Fog in Sandburg’s poem it “… comes on little cat’s feet…”, but unfortunately it may well leave with a boat load of snow. If it is October, then we have reached the final (calendar) quarter for the year 2014, might be time to start thinking about a year-end wrap up on your financial plans and such?

Tank Man

Where Did this Man End Up?

The best question asked a few weeks ago was, “How long until there is an EBOLA vaccine and cure?”, the answer is, “About 50 infected rich white guys”. Now that the virus has landed in North America, will the speed of finding a cure increase? EBOLA is now on the North American continent, not sure what this means, but it does make for sensational headlines, doesn’t it?

Hong Kong is full of folks demonstrating, let us hope it ends better than previous “democracy” demonstrations in China. We really don’t need another Tank Man, or any of the other events that followed The Memory of Tiananmen 1989 (PBS Link). This site is already “blocked” in China (I have checked), so I don’t think I am in danger of that, however, I do note I get a lot of “illegal access” messages from Shang Hai, and Beijing (must be fans of mine?).

For those DIY Tech folks out there, should you ever break off the pin from your headphones in the jack of your iPad, all you need to fix it is a Q-tip and Krazy Glue. The video is at the bottom of this article (yes, I really did it, and it worked).

Canadian Blood Services, really needs donors, if you haven’t given lately, time to drop by, the blood supply is dangerously low!

 

My Writings for Week Ending October 3rd

Thanksgiving for Canada is next weekend, and that can mean only 1 thing, bad turkey puns, and lots of talk of Christmas.

  • Most of the information I found on my Equifax report was right, but my name is kind of wrong, as I outline in Equifax and Their Information
  • On occasion I write blatantly obvious statements, in hope they cause folks to go, “Oh, yeh!”, and that was my hope with Best Way to Save Your Money
  • I am a person who learns better from concrete examples showing me what would happen (money wise) if I started putting money in my child’s RESP, and that was my goals with RESP from Start to Spend, to create a concrete example to show how it is better to start early.

Scotia Bank Value Visa

[click to continue…]

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RESP from Start to Spend

I supply the following scenario as a simple example to show how RESPs can work, and include some advice from my experiences using the program.

Registered Education Savings Plan (RESP)

So, now you have had a baby, and you are sure that your child will be a Doctor one day, or an Engineer, or maybe a Plumber? If you are thinking this, and you want to help them meet this goal, by helping financially, you might want to start working on saving money, and luckily (in Canada) the Government is kind enough to have set up the Registered Education Savings Plan (RESP).

What is your first step? Get your child a Social Insurance Number (the day after they are born, would be a useful time to apply, given how busy you will be in the days after that).  Get that done, right away, or you will have to start waiting, and time is your friend at the beginning of this process, but don’t procrastinate, you are wasting valuable doubling time, if you do.

Next step, go set up an RESP with whomever you feel comfortable dealing with, or whomever gives you the best deal (Shop Around, don’t just use your bank because it is convenient). Check the RESP page for my experiences, and I would recommend try to stay away from Bank Mutual Fund accounts, give yourself enough freedom to use some simple Couch Potato Portfolios to invest your funds (remembering you have a relatively short period, and shouldn’t be too risky either, as you don’t have a lot of recovery time in your investment plan).

Now we have reached the part where you make your money start working. I am assuming that currently your family income is over $87,123 and that you can invest somewhere that will give you an average of about 4% growth per year. The big assumption is that you contribute the current maximum every year to the RESP $2500. What does this look like? Funny you should ask, I have a table right here for you:

Year Principal Contribution CESG Growth Year End Total
1 $0.00 $2,500.00 $500.00 $0.00 $3,000.00
2 $3,000.00 $2,500.00 $500.00 $120.00 $6,120.00
3 $6,120.00 $2,500.00 $500.00 $244.80 $9,364.80
4 $9,364.80 $2,500.00 $500.00 $374.59 $12,739.39
5 $12,739.39 $2,500.00 $500.00 $509.58 $16,248.97
6 $16,248.97 $2,500.00 $500.00 $649.96 $19,898.93
7 $19,898.93 $2,500.00 $500.00 $795.96 $23,694.88
8 $23,694.88 $2,500.00 $500.00 $947.80 $27,642.68
9 $27,642.68 $2,500.00 $500.00 $1,105.71 $31,748.39
10 $31,748.39 $2,500.00 $500.00 $1,269.94 $36,018.32
11 $36,018.32 $2,500.00 $500.00 $1,440.73 $40,459.05
12 $40,459.05 $2,500.00 $500.00 $1,618.36 $45,077.42
13 $45,077.42 $2,500.00 $500.00 $1,803.10 $49,880.51
14 $49,880.51 $2,500.00 $500.00 $1,995.22 $54,875.73
15 $54,875.73 $2,500.00 $200.00 $2,195.03 $59,770.76
16 $59,770.76 $2,500.00 $0.00 $2,390.83 $64,661.59
17 $64,661.59 $2,500.00 $0.00 $2,586.46 $69,748.06
18 $69,748.06 $2,500.00 $0.00 $2,789.92 $75,037.98
Totals $45,000.00 $7,200.00 $22,837.98
Assuming 4% Growth
Assuming family income over $87,123

Amazing watching money grow like that isn’t it? Did you look closely at the table? Did you notice that the current CESG max for you is $7200, so once you reach that maximum, you won’t get any more CESG kick ins (for now, given time, all these max values for contributing and CESG may change). Also remember that once your child turns 18, you would get no more CESG kick in either.

Remember that the Growth and CESG funds, will be taxed, in your child’s name, (from the example $7200 + $22838)  so figure out how you wish to extract money from the account once your child goes to Trade School, University, College or any of the other Ministry Approved post secondary programs, to minimize any tax impacts on your child. This can get tricky if your child is lucky enough to work in a CO-OP Program.

You should also realize, that if your child leaves home, this will only really cover tuition and fees.

 

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Best Way to Save Your Money

I borrowed the concept from another article, but the idea is so flaming simple, I think it does need to be repeated.

The best way to save your money is to not spend it.

The simplicity of this is clear, but most folks just really don’t get it, do they? I have railed on about the Semantics of Money, but let’s get back to the basics on this one, and here are some simple questions I’d love to hear some opinions from my good readers.

Also very True

Also very True

Someone goes out and spends less on some interesting piece of stuff (maybe it was planned), is that person more likely to take the unspent money, and spend it on something else (due to the halo effect of saving money on the previous purchase)? I have caught myself doing the same thing, “I saved money, so I can splurge on something else”.

Conversely, does someone who decides not to buy something that was planned, less likely to have that kind of “halo of savings”, and thus less likely to splurge the “saved” money?

If someone spends time trying to figure out how much can be saved buying something, why isn’t the most important question, that is usually not asked,  “Do I need this?”. Spending less money is not saving your money, it is just using less. Saving money, is keeping the money in your pocket (or your bank account).

Have you caught yourself saying (or heard a friend say), “If I buy this on sale, I can get two of them”?

Have you heard someone else say, “I decided not to buy that thing, but because of me not spending the money, I’ll go buy something else”? I guess (as Mrs. C8j pointed out) that if you decided not to buy a $5000.00 TV, and decided to celebrate with a cup of coffee and a donut, that might not be too bad.

Which of those previous two statements are more likely? I’d like to think that the second one is more likely, but I must admit, I have caught myself doing the first statement (far too bloody often). Does impulse spending compared to planned spending change the decision point?

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