Take the Money or Leave It? I wrote it a month after I got laid off from Nortel. Somehow, this ended up showing the Best Financial Decision I ever made? Well, it certainly looks to be the case. I have a retirement, path to victory.
In that article, I mused the following interesting question (remember, this was 2008 during the great crash):
The options I have are:
- Leave the money in my former (or soon-to-be) employer’s pension scheme and start drawing from it at either age 55 or later.
- Take the money out and put it into a Locked-In Retirement Account (LIRA), or at least the portion that the government allows.
As background, Nortel’s pension plan is funded by a reasonably large amount. I also have passed a point so that I can draw from the pension when I am 55.
Which Financial Decision?
Thanks to Mrs. C8j, Michael James and a little common sense on my part I ended up doing the second option and it was the best financial decision (read luckiest) I ever made due to the fact that:
- Nortel’s Pension plan was even more underfunded than anyone knew and it had serious issues and effectively collapsed. I kept hearing that the Ontario Government had “insurance” to back up the pension, but given the money, I took out that “insurance” would not have covered the amount I should have been paid. “There is no way the government would let Nortel and/or its pension fail”? I think we know what happened there as well.
- The money I received went into an LIRA in December 2008. This was when stock prices were the lowest, and it grew a great deal until I took it out to buy into my current employer’s pension plan. Blind luck and no great “market timing” strategy on my part. Luckily, it was me needing to buy when the market is lowest.
Best Financial Decision Ever?
Many financial decisions cannot be evaluated immediately. Sometimes it takes a while to realize it was the best decision or a massive blunder.
Nortel related articles
- On Being Laid Off (a 10 year retrospective) what had I learned the 10 years after getting laid off.
- A Year Ago, written a year after that day I was laid off luckily I was waiting to start a new job
- Sometimes it’s better to be lucky a retrospective about how lucky I was to get laid off when I did. Read on to find out why.
- Pensions and Severance an important topic I took from my layoff from Nortel.
- Twenty Years in One Line is what my severance letter did. My 20 years are summed up in a sentence.
- Financial Issues With Severance what do you do with your severance if you have options? If you get severance as well.
- On Being Laid Off my explanation of being laid off from Nortel, a day or two afterwards.
- Nortel Still Paying Out? Really, well not that much.
I had a neighbour who retired from Nortel as an executive and was a millionaire holding only Nortel stock. I tried to advise him at the time that this was highly risky but apparently he was so convinced in Nortel that he would never sell it. He moved before the crash. I often wondered what happened to him.
I had a similar story about a High Level Exec who “retired” in 1998 or so, on his options (he exercised them, and HELD the stock, instead of selling, to live on the Dividends). This chap sent a fairly pointed, “Good bye and thanks for all the fishes” retirement e-mail, but was back “working” in 2002, after the first major stock failure of Nortel.
Potential money, while nice, is not real money.