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Should I cash out early on my State retirement?

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  • Sat, Jan 01, 2011 - 03:05pm

    #1
    FloridaLeo

    FloridaLeo

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    Should I cash out early on my State retirement?

I am very concerned about my state pension. I have been hearing alot about the pension crisis along with the possibility of the stock marked falling.  What would happen to my pension if the economy collapses?

I currently have 17 years in the Florida retirement system.  I can cash out now and receive $267,000, plus cash out my 457b with $65,000. I would like to use that money to invest in PMs.  I am debt free, have a bit of gold/silver and a years worth of food for my family. 

I have a side business that I could fall back on to pay bills and survive on.  I have really been struggling lately thinking my retirement might disappear.

Any advice?

FloridaLeo

 

  • Sat, Jan 01, 2011 - 04:04pm

    #2
    Peak Prosperity Admin

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    Re: Should I cash out early on my State retirement?

Leo

just a on opinion.  cash out – yes, yes, yes.  I would carefully select what you invest in.  certainly a core of bullion PMs.  not a GLD or SLV account.  IMO the state pensions are ponzi schemes.  those who get out first do ok.  those who wait are in trouble

Brian

  • Sat, Jan 01, 2011 - 05:15pm

    #3
    Peak Prosperity Admin

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    Re: Should I cash out early on my State retirement?

Cash out NOW, what are you wasting time in front of the computer. Get your PM and prepare to help feed friends and family around you.

  • Sat, Jan 01, 2011 - 05:49pm

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    Peak Prosperity Admin

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    Re: Should I cash out early on my State retirement?

 

No one can you what to do. But I think that if you think more about the following questions, it may help you arrive at a better decision.

  • If you cash out, will that cash-out be taxed? If so, roughly how much would you have left over?
  • Can you cash out a portion instead of all of it – so you can spread out the tax burden over a few years, or else have an amount to work with now while still being able to count on something later?
  • Is it possible to wait  a little longer to build on it – assuming you’re still working for the state – to cash out with a larger amount, just keeping your finger on the trigger at the first sign that the Federal or Florida government is about to do something with taxes or retirement cash-outs?

I’m not asking you to answer these questions for me – just giving you some additional questions to ponder.

Poet

  • Sun, Jan 02, 2011 - 01:46pm

    #5
    Peak Prosperity Admin

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    Re: Should I cash out early on my State retirement?

Thanks for the responses.  This is a very tough decision and is weighing heavily on me.  I also have to consider losing my heath insurance.  Maybe I can get some free Obama Care!

If I stayed the full 25 years I would have 900k to 1.9 million, dependant on market conditions, in my investment account.  That is alot more money but if the marked/economy collapses that money would be gone anyways.

I will do some chekcing this week on taxes.  I will definately have to pay taxes, the 457b is taxes plus penalty, I am not sure if a penalty is accessed on the my retirement money.

Anybody else out there in a situation like me?  I have talked to people at work about the economy and my concerns and they think I’m crazy.

FloridaLeo

  • Sun, Jan 02, 2011 - 04:20pm

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    Peak Prosperity Admin

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    Re: Should I cash out early on my State retirement?

[quote=FloridaLeo]

Thanks for the responses.  This is a very tough decision and is weighing heavily on me.  I also have to consider losing my heath insurance.  Maybe I can get some free Obama Care!

If I stayed the full 25 years I would have 900k to 1.9 million, dependant on market conditions, in my investment account.  That is a lot more money but if the marked/economy collapses that money would be gone anyways.

I will do some chekcing this week on taxes.  I will definately have to pay taxes, the 457b is taxes plus penalty, I am not sure if a penalty is accessed on the my retirement money.

Anybody else out there in a situation like me?  I have talked to people at work about the economy and my concerns and they think I’m crazy.

FloridaLeo

[/quote]

FloridaLeo

I think most people out there are in a situation of having no pension cash-outs available to have such a wonderful dilemma to ponder. It’s like worrying about whether to eat steak now or wait for a possible lobster later. I bet many people wish they had your problem.

Those who aren’t government workers with nice pensions and health benefits are understandably both envious and outraged. They look at their own life and realize that, in working for 25 years, they won’t see $900,000 to $1,900,000 in pension cash-out available. They also know that politicians and unions have for decades conspired to promise an undeliverable golden parachute while delivering zero or only a pittance in pension fund contributions – thus knowingly setting up taxpayers for the inevitable fall as they knowingly kick the snowball further down the road (not a can, but a snowball because a snowball grows). Some prescient union leaders have even managed to get politicians to write pension guarantees right into their own State constitutions, knowing the day will come when such a legal clause will need to be brandished over the heads of budget axe-wielders.

Now some say they worked hard for their pensions and sacrificed years of lower wage government jobs for it. That may have been true long ago, but nowadays, government wages and health benefits are much, much better than what most in the private sector could dream of.

This situation won’t last long because the snowball is about to hit. And that is where you are at now, trying to see if you should get out before that mass of snow and ice reaches terminal velocity. I hope the questions I provided earlier will help you in making the most informed choice about your financial future.

Poet

  • Sun, Jan 02, 2011 - 04:37pm

    #7
    Peak Prosperity Admin

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    Re: Should I cash out early on my State retirement?

FloridaLeo,

That’s indeed a tough decision to have.  Here’re some other points to ponder.

In all likelihood, if you go the full 25 years, when you take your money out, the taxes will be much higher percentagewise than they are now.

Also, if, like most state retirement accounts, your investment options are limited to mutual funds investing in stocks, bonds, and/or cash, your return on investment is not likely to be very high and you will probably not amass the 900K to 1,900K you are expecting (inflation adjusted, of course … you could make millions but they may not be worth much).

Don’t count on ObamaCare type insurance unless you are destitute.  The general consensus is that, under ObamaCare, most employed middle class individuals will ultimately be paying more for insurance, not less (whether paying directly via insurance premiums or indirectly via higher taxes).  Loss of health insurance is a BIG factor, especially as you get older.

How secure is your present job and how much can your side business be expanded in a declining economy?

What is the financial condition of the Florida state pension system?  This is the most important question you need to find the answer to!

  • Mon, Jan 03, 2011 - 03:24am

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    Re: Should I cash out early on my State retirement?

Florida Leo

I live in upstate NY in the Albany area which is the capital.  I have some friends that are state workers.  I’ve spoken to them about the debt problems of NY state, and they look at me with blank stares.  It’s just not on the radar screen of most people, so I would expect your coworkers to think you’re crazy.  I agree with AO, you need to understand the status of the Florida state pension system.  Personally, I think that 8 years is too long to wait and I suspect that in a few years, almost all of us will be uninsured (health insurance), so you’ll have a lot of company.  Just my opinion

 

Brian

  • Mon, Jan 03, 2011 - 04:03am

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    Peak Prosperity Admin

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    Re: Should I cash out early on my State retirement?

Have you seen this yet…: https://www.peakprosperity.com/comment/98518#comment-98518

We cashed out my wife’s superannuation, and have spent the whole lot (almost) on preps…  best thing we could’ve done we think…

  • Mon, Jan 03, 2011 - 04:04am

    #9
    Peak Prosperity Admin

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    Re: Should I cash out early on my State retirement?

[quote=FloridaLeo]

If I stayed the full 25 years I would have 900k to 1.9 million, dependant on market conditions, in my investment account.  That is alot more money but if the marked/economy collapses that money would be gone anyways.[/quote]

This sounds to me like a defined contribution, personal account (within some group) that has, at least, an annual accounting of the value of your vested account. If so it is not a defined benefit plan that is in danger of being clipped by politicians. So the questions to ask are:

why kinds of securites is the fund invested in?

can you control the type of investments?

when you cash out can you transfer your fund to some tax sheltered vehicle?

if you wish to accumulate PMs can you do this with current income?

while I am not aware of your level of contributions your expected value in 8 years seems somewhat out of whack with the value accumulated over 17 years since the bulk of future gains come from the compounding of the already existing fund. I wonder what the assumptions are?

 EDIT: I’ve realised that the present value may be some kind of discounted early cash out value of a defined benefit plan. If so you need to assess the likelihood of the State defaulting on the plan. Not knowing the type of plan makes my comments somewhat speculative. I think you need some good professional advice.

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