Finance and Gen Y

Someone asked me, “What Gen Y has brought to the table?”.

My first response was: “No World Wars good, Pay Day Loans bad, but #ADDSociety is major thing”, which translates to they haven’t had a world war (yet), however, on their watch Pay Day Loans have exploded as a concept and it seems all of society has Attention Deficit Disorder (apologies to those suffering from ADD, I do not mean to ridicule you (in specific) all of society is like that).

Generation Y
Gen Y ?

The excuses I continually get from Gen Y in specific and Gen Y wannabes is:

  • It’s too complicated so I didn’t read it
  • I have too many messages so I ignored it
  • I can only read while driving, texting, drinking coffee, watching TV and shaving
  • I can’t get anything done unless I am Multi-tasking  (when in fact it just means doing a whole bunch of things at the same time, badly)
  • Yes I do sound like a crotchety old man

I think Gen Y is going to have to deal with a very nasty time bomb as they age, namely Boomers retiring and Gen Y having to support the aging “Greatest Generation Ever” (keeping their pensions afloat, as they live longer and longer). There is going to need to be a “paradigm shift” in how all this works, because it is pretty clear that all pensions (public and private) are in trouble, and barring a horrific plague there are going to be too many people trying to live on too little money (I may be proven wrong, but I doubt it).

Will Gen Y (in most western nations) never see the Inflation and High Interest rates that I grew up with? I don’t know, it really does seem that the days of Canada Savings Bonds with 19% interest rates are long gone (1981 I do believe was the last year with that).

Remember that the Boomers (and their parents to a lesser extent) are really the first generations that has ever had the chance to retire (folks died before retiring previously), will the following generations be able to do this? That remains to be seen.

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Pension or LIRA? A decision (redux)

One of the few good (read very lucky) decisions I made was to remove my money from the Nortel Pension and put it into a LIRA for holding purposes after I got laid off in 2008, and this post, I wondered (aloud), whether I had made the right decision, but in hindsight it was an astoundingly good decision (i.e. Pension or LIRA ).

Show me the Money?

pension or LIRA
Now that is some Ca$h (thanks to Bank of Canada)

For those who have read for a while, I had to decide about whether to leave my pension in my former employer’s pension fund (which is under funded) or to take a cash settlement and transfer most of the contents into a Locked In Retirement Account (LIRA) (and take the rest as a cash settlement).

I got a lot of advice from different folk about whether I felt confident enough to invest the money wisely enough to mimic or improve on the growth I might get in the Pension fund, however, in the end I just did not trust that my former employer will:

  1. Exist in 5 years
  2. Whomever buys, or takes over them will not replenish the pension fund short fall

So I have decided to take my money out, and move it to a LIRA (and a small part to a TFSA and whatever else I can into my RRSP, thus the pension or LIRA -> LIRA).

I tried to show as much diligence as I could to the documentation that I had to submit, because the default answer if I do not submit my request in time is for the company to keep the money in the (under funded) Pension. I had the Investment Councilor at the bank that set up the LIRA, check over to make sure all the forms had the correct info and then I had Mrs. C8j check everything over as well. No point in making this big a decision and not being careful with the forms.

I mailed the forms using Registered Canada Post delivery, so I have a tracking number and will know when then the forms were delivered as well (can’t be too careful here). Paranoid? Maybe, but again, it would be imprudent to trust regular mail with these forms.

Luckily the forms got there when they did, and I got the money out a few weeks before the Pension announced a large short fall and they started discounting all pensions. As a bit of background info, here is what Nortel’s demise looked like graphically.

pension or LIRA
Graphically, the Death of Nortel

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CPP Splitting A Different Process

One of the important things that I learned on my “so you think you can retire” course last week was that if you wish to split your Canada Pension Plan benefits it is a very different kettle of fish than if you wish to split your Company Pension Plan benefits.

A while ago, it was decided that a couple can share Pension income from a company pension plan, thus lowering the effective tax rate on the pension income.  For those with private pensions this was a big deal and could mean a large tax savings for retirees.  To do this you simply submit a T1032 Joint Election to Split Pension Income and away you go (saving tax money hopefully). If you don’t want to do it the year afterwards, you simply don’t submit this form.

Splitting CPP benefits is a very different kettle of fish.

You must submit forms to Service Canada asking to split your CPP benefits with your spouse (or common law partner), and both spouses sign the forms to get this all put in place, relatively straight forward, just a little bit of government red tape (or so you might think).

If you wish to stop sharing benefits with your spouse, both folks that signed the forms to set up the sharing must agree and sign the forms to stop doing this. Doesn’t sound like much, but if you become estranged with your spouse for some reason and don’t wish to share your CPP benefits with them, they have to agree to this as well.

Pensions and Divorce is a very complicated issue, but not just before retirement.

Another important thing to check out if you are lucky enough to have a Private Pension is how does your Pension Plan deal with the following interesting issues:

  • Death of the Pension holder. Typically there is a survivor benefit, but what else? Does the surviving spouse get medical benefits? How big is the survivor benefit? 
  • Separation of the Pension Holder from their spouse. Remember separation is not the same as divorce. If you get separated, go live common law with someone else and then pass away, who has rights to the Pension? Better go figure that one out.
  • What happens if the pension holder dies and there are dependent children, do they receive any survivor benefits?

Lots of interesting questions to go figure out, as having a Pension is a massive benefit for your retirement planning, you would do well to understand all the “ins and outs” of your pension program.

Thanks to Jim Yih also, for his post Differences Between Personal Pension Splitting and CPP, which I cribbed some information from.

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Civil Servants: Another Point of View

I have in the past used information from the Canadian TaxPayers Federation, so I feel it would be remiss of me if I didn’t include their latest YouTube video as part of my I am a Civil Servant, set of writings.

The points made by the TaxPayers Federation are valid and interesting, however, I somehow feel there is an implication that Government Employees are all overpaid, etc., in the delivery of the message (yes, they don’t say it, but I am reading between the lines). The e-mail that pointed  to the clip did include the following paragraph (which does make the point a lot clearer that Civil Servants are all RICH, or will be with their pensions):

After all, you along with every other Canadian, each owe about $6,776 and counting in additional taxes to pay for the rich federal government employee pension plan. That’s of course on top of our federal debt. Federal bureaucrat pension plans are short $227 billion due to the rich, unsustainable payouts negotiated.

Blaming Civil Servants for having a generous pension is interesting, so PSAC should have negotiated a crappier set of benefits?!? (apologies, that is flippant, but still valid) Also, another reason the pension fund is short is  due to the Federal Government raiding the fund in the 90’s, and bad investments as well (which all pension plans are now suffering through).

I believe the TaxPayers Federation will get their wish somewhat when the new Government budget comes down, and the Government will then explain how much money will be spent this year on severance packages for the LARGE cut back in the Civil Service (this will not be scalpel cuts, this will be Chain Saw hacking, similar to the early 90’s, is what my sources are saying).

Wonder what the Federation is going to say about the severance packages given to the Civil Servants? I guess that remains to be seen.

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I am a Civil Servant

I keep hearing from various media outlets and bloggers how much money is wasted on the Government and such, and inevitably out of these discussions comes statements about the typical Civil Servant, and I now feel that I have the right to comment on this stuff (having worked in both the Private (for 25 years) and now the Public Sector (almost 10 years)).

Let’s go over a few of the more interesting points that some folks seem to have an opinion about:

  • I am  paid by your taxes, but I also pay taxes. One media outlet seemed to be implying that a Civil Servant doesn’t pay taxes, but I can assure you, I pay taxes just like everyone. No free ride here.
  • Pretty much everybody can easily figure out from information readily available how much I make. This is disconcerting, since when I worked for Nortel, people could guess but they couldn’t be sure they knew how much I made.
  • Someone does drive me into work in the morning (these days). However, he or she works for OC Transpo. I don’t get limousine rides to work every day (yes, someone asked me that exact question when they heard I worked in the government). Never mention parking to a Civil Servant though (that is a mess at all levels of government).
  • Are all Civil Servants lazy? Let’s not go there on this one, let’s just say I have seen good and bad in both the Public and Private sector, and leave it at that. Some might argue I am a Lazy Sod, so maybe you shouldn’t ask me?

From what I can tell, a lot of misconceptions folks have about Civil Servants (or Public Servants) seems to come from the perks that Members of Parliament get.

The major issue I keep hearing is that I have a “gold-plated free pension”, which is an interesting fallacy, that again comes from the MP side of things. Yes, I have a very nice pension (that many people do not have, so I do realize having a pension is a huge benefit). The pension was negotiated with an elected government, but is in no way “free” to me. I pay a great deal of money into the Pension Plan, and will more likely have to pay more soon, to keep this privilege, but I did have this same privilege when I was at Nortel (until it all fell apart).

Yes, the taxpayer pays for part of my pension, but that is because they are the folks bankrolling my employer (i.e. the Federal Government), so again, I am kind of paying into that too.

Unlike Members of Parliament, Civil Servants take 35 years to get a “full” pension. Members of Parliament get a FULL pension after 6 years (oh and I don’t think they put much money in on their side either).

A Civil Servants “full” pension can be calculated as (assuming they work for 35 years in the Civil Service).

70% of an average of your 5 best years salary, which is then discounted by how much CPP you will get paid (once you are CPP eligible)  {simple isn’t it ?}

Big Deal You Are Still Better Off Than Most Canadians!

What’s the point of all of this? Just me venting at some of the more asinine commentaries I have seen on the Media and in the Blogosphere lately. I am ready to discuss whatever points you like on the topic of the Civil Service and it’s Pension system.

As an addendum a very well written article which helps clarify things is Michael James The Consequences of Keeping Bad Employees which talks about the biggest issue in the Public Service (IMHO).

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