Should I cash out early on my State retirement?

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FloridaLeo's picture
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

 

bluestone's picture
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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

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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.

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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

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FloridaLeo
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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

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

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

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

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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!

bluestone's picture
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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

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

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.

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

Have you seen this yet...: http://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...

Wendy S. Delmater's picture
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Re: Should I cash out early on my State retirement?

I suspect we are about your age (mid to late 50s). I have been raiding my self-directed IRA; I'm doing it slowly under the guidance of my CPA who is trying to keep us in a 15% tax bracket, and using the money for preps. My husband has as good a pension as you're likely to find (not  with a state, but a fortune 500 company that is doing well as they save people money). We will live off of his pension if things go at all well and off my preps if they do not.

You need not take it all, if the option to only use part of your retirement money is available. Think of using a portion of it as insurance.

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

I agree with Safewrite...keep in mind the taxes and use it (as you need) it for the preps.                                                                                                 Lisa

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

I can chime in.

I took a pittance compared to Leo's amount out of my home state's retirement system. It cost me more because I took the whole lot out and it bumped me into the highest bracket for taxes. I can't remember the penalties but I think it was like 10%.... So, I got about 40% of the total amount.

My (new) accountant told me to "STOP THAT!" ... taking money out of the retirement accounts. I told him, besides there being a small amount in there I was afraid that when the state became insolvent, I would get squat!

If, you can take money out in small enough amounts to minimize the impact taxes, that may be better.

Better advice? Seek out an accountant (hard to find) that understands what your concerns are. Be firm and respectfully tell him that you feel "conventional" wisdom does not apply any more concerning the outcome of the next few years. Ask him to minimize your tax burden while getting  most of your money out as quickly as possible.

My personal advice on what to do with the cash FWIW - pay off as much debt as you possibly can first. Think of it like this, if you have any consumer credit (credit cards, line of credit, home equity loans) extinguish them first. one credit card with a 10K balance that you can take 10K of that money and extinguish that burden, in my opinion will pay back the taxes on that borrowed 10K by the savings in interest not paid.

We will be "raiding" my wife's state account this year asap to extinguish the rest of the "consumer" debt that we have left. I figure that we can "save" in interest payments almost the amount of taxes paid in about 1 year.

Good Luck!!!

 

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

RNcarl -

Sounds like what we are doing. We got a good accountant who lets us know when our disbursements from my self-directed IRA (a rollover from my old engineering job in NYC) are gonna put us into the 25% tax bracket. We are normally in the 15% bracket and try to stay there. My retirement money is accessible; my husband's is not. He's fully vested with a Fortune 500 company but cannot touch it for years. We do not think we have years, but if we do then his retirement money is our back-up plan (for whatever it will be worth after hyperinflation...if we still use the USD).

Here is how the numbers work out on the tax/penalties hit : 10% early withdrawal penalty, 7% state tax, 15% federal tax. So we lose 32% of the money right out the gate, but we are spending it on things like an airtight woodburning stove, repairing our solar hot water heater, a large Square-Foot Garden, finishing our attic for storage space (which included a solar attic fan and gable fans), a deep larder, a well, and security items like a fence and gun safety training, etc. Meanwhile I put the remainder of my IRA into a gold ETF and energy and food stocks, and am putting much of it into physical silver through a custodian. We use Gold Star Trust for that.

It's a very personal decision to cash out your retirement early. After all the hype I heard about compound interest it was a tough thing to let that hypothetical profit go and decide to plan for a very different future. But, for me, the peace of himd far outweighed the pain of the taxes and penalties attached.

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

That all sounds very good.

my only question to you is this, (forgive me if you answered this somewhere else) have you extinguished all of your other debts? If you owe nothing I applaud you.

We got in a "jam" of sorts when my wife "maxed out" her 401K contributions and we were still holding consumer debt (all kinds). Since we were putting money into an area that made it "painful" to get at, the consumer debt just festered. We kept spending on travel, kids needs etc.....

I am the poster child on what NOT to do in the world of finance! But, I am learning.

Debt is a bond that enslaves tightly, silently and completely. I am most likely in the top 10-15% of wage earners and most likely in the top 5% in my current geographic location yet, I still have to come home for lunch! I can't spend a dime out of place lest I can't service my debt!

We have set out on a plan to rid ourselves of the chains of debt. Some here are betting on inflation to help "cure" their debt. I for one, want to be able to live prior to that happening and with learning how everything is manipulated, there is no guarantee that waiting for inflation to "help" will work.

Perhaps, a little pain now, will be better than a lot of pain later.

If Chris is dead wrong, and the next 20 years WON'T be different than the last 20 years...... isn't it better not to be enslaved by debt anyway?

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

Hi all,

This is my first posting at this forum. This man'squestion reminds me of my similar concerns about retirement funds, and I would love to hear your recommendations. Anyway, sometime in 2008, when the economy crash was beginning, I transferred my two IRA's (one Roth, one Trad) into gold and silver IRA's with Swiss America. A few months later, my husband did the same with his IRA's. These are my concerns: 1)The gold and silver IRA's are volatile. 2) Our representative purchased numismatic coins for our accounts, so the premiums were way above buillion prices. At that time, we didn't know a silver eagle, from a silver round. Nor did we know that we could have requested all buillion coins, which I think would have given more value to our IRA's. My point is that I don't know how easy it would be to sell these coins, how long it would take, and perhaps we would take a loss because of the numismatic premiums. 3) There are annual storage and maintenance fees which are now up to $160.00 for ea. account ($640.00) total. 4) As the government becomes more desperate for money, might they seize our retirement funds? Would it be better judgement to cash them all out and pay off debt, buy food, keep some emergency cash, etc. We would  have to pay taxes and penalties, but at least we would eliminate so much uncertainty. Thank you all for reading my post, and I appreciate whatever input you might have. I am glad that you all are here to ask.

furysfancy

 

 

 

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

RNcarl,

To answer your question, we owe nothing. No creidt card debt, no mortgage, no car loans, no student loans. Debt is slavery.

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

Hi all,

This is my first posting at this forum. This man'squestion reminds me of my similar concerns about retirement funds, and I would love to hear your recommendations. Anyway, sometime in 2008, when the economy crash was beginning, I transferred my two IRA's (one Roth, one Trad) into gold and silver IRA's with Swiss America. A few months later, my husband did the same with his IRA's. These are my concerns: 1)The gold and silver IRA's are volatile. 2) Our representative purchased numismatic coins for our accounts, so the premiums were way above buillion prices. At that time, we didn't know a silver eagle, from a silver round. Nor did we know that we could have requested all buillion coins, which I think would have given more value to our IRA's. My point is that I don't know how easy it would be to sell these coins, how long it would take, and perhaps we would take a loss because of the numismatic premiums. 3) There are annual storage and maintenance fees which are now up to $160.00 for ea. account ($640.00) total. 4) As the government becomes more desperate for money, might they seize our retirement funds? Would it be better judgement to cash them all out and pay off debt, buy food, keep some emergency cash, etc. We would  have to pay taxes and penalties, but at least we would eliminate so much uncertainty. Thank you all for reading my post, and I appreciate whatever input you might have. I am glad that you all are here to ask.

furysfancy

 

Hi furysfancy,

First, how'd you wind up with one Roth and one traditional IRA?  Are you trying to hedge your bets? 

Second, you got snookered with the numismatic coins.  Check around and see if you have some legal recourse.  IIRC, there was a successful lawsuit against certain gold dealers for falsely convincing customers that the numismatics had more investment value than they actually did.  I would personally take the premium hit, liquidate the numismatics, and buy bullion.  In the future, you will still most likely find a larger bid/ask spread with the numismatics than bullion and therefore still take a bigger loss.  Liquidation will probably take 3 weeks or more so it's not something you can do instantly.  Also, in a SHTF scenario, it is highly unlikely that you will get your value for the numismatics.  Buyers will be interested in plain old gold, not fancy gold with a jacked up price.  

I'm assuming you have about 640K in the 4 IRAs (since storage costs are 0.1 %).  Why not hedge your bets and cash out half.  If you have the IRAs in bullion, it will hold its value and if you "cash out", you can have it transferred to you directly and not have to take possession of confetti value FRNs.  The government, if it takes your retirement account, would most likely force your gold sale for significantly less than spot (ala FDR in '33) and/or force you into government securities but it is exceedingly unlikely you would lose everything.    

  

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

We use Gold Star Trust for that.

Consider using Sterling instead.  When it comes to crunch time, it'll be harder to get Gold Star to do what you need done, in the time you need it done.  Also, Gold Star seems a bit greedier than Sterling from my experience.

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

Hi Safewrite,

  •            Thanks for your reply! I waited to reply to your message because I really couldn't remember why my husband and I had traditional and roth IRAs....well after speaking with him this morning, he really couldn't remember either. The best that we could come up with is that each  IRA was from roll overs from different retirement accounts that we had from different jobs. I'm pretty sure my Trad. IRA was a rollover of a 401K, and the Roth IRA was another retirement plan with another job. Anyway, we don't have 640K in the accounts. Boy, wouldn't that be awesome!!!  I reposted my message as a new message (thinking it might get more replies) and stated the amounts, which are about 11,000 in my two accounts, and about 45,000 in my husbands two accounts. Gold Star Trust charges us $100.00 storage and $60.00 maintenance fees for each account, which I think is outrageous. That's why I'm trying to figure out a better way to have IRAs, or just cancel out of them entirely... As for looking into legalities about being persuaded, or hijacked into numismatics....at this time, I don't want to be involved with any attorneys. I have not had good experiences with hiring attorneys, and I have paid way too much, for a lot of lip service and hype, with very little action or follow up...in other words, paths that lead to nowhere. I really appreciate your input, and we will consider your recommendations. My husband is out of town at the moment, but it will be discussed when he returns home. Thanks again!
  • furysfancy
santamarp's picture
santamarp
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state retirement money take it out?

What are your thoughts on taking out part of my state retirement money   -  -  say 36 months, and investing it in my 403b?  I will still receive moneys from the state as a retirement income for the rest of my life but about 800 less than if I don't take it out.  Is this a sound thing to do?

bonniemousis's picture
bonniemousis
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pension plan

Hello everyone, can anybody please give some advise.

I want to differ money to a pension plan in order to decrease my tax liability, do you have any suggestions where to open an account,or which insitution to open an account with?

 

I would really appriciate any help.

Thank you

Bonnie

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rsalmon63
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New York City Police Pension?

 What will happen to my pension, when this next great collapse happens!?!?!? They tell me "Nobody can touch your pension." I know that this can't be true, if the economy bottoms out and states go bankrupt. So I'm here looking for a reasonable answer. Even in the 30's era stock market collapse law enforcement, postal service, fire dept. still were getting paid, right? Or does a gallon of milk become out of my price range along with other commodities...

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Government pensions

Welcome rsalmon63 to the CM community!

My wife and I will each have Philadelphia city pensions (DHS, Police) but we aren't confident at all in what we'll actually get.  Our pension fund is woefully underfunded already and we're headed into even worse financial times.  If the City goes bankrupt (or some other equivalent) our pensions (and yours) can be legally reduced or eliminated in the process.  Nationwide this has already started happening in some locations and is looming in others.   On the other hand, we may experience a "virtual" reduction through extremely high inflation over the rest of our lives.  (10% inflation cuts our purchasing power in half in a mere 7 years.  Yikes!)  There's no difference to us if a bankruptcy judge reduces our monthly pension check by 40% or if inflation reduces our purchasing power by 40% (we won't have cost of living adjustments).  Just for planning purposes, we are expecting our purchasing power on our pensions to be about 1/2 what we've been promised in today's dollars.  By the way, we're expecting the same result in Social Security.  (Frankly, even that seems overly optimistic sometimes.)

To compensate for those losses we are investing in gold and silver with everything we can get our hands on until we retire.  The way we look at it, the same economic problems that would cause our pensions and Social Security to collapse in value will at the same time cause gold and silver to skyrocket in value.  So, if the impending collapse comes and wipes out our pensions and SS, we'll be OK with our gold/silver.  If the collapse never materializes then our two pensions and Social Security will be enough to retire on (plus we'll have the gold/silver on the side).

"Nobody can touch your pension" is one of the myths we've been sold to keep us quiet and submissive.  It's about as accurate and truthful as some others we've heard, "Housing prices always go up over the long term," "Work hard and save, and you'll be OK no matter what happens," and "The best investment strategy is to buy and hold for the long term a diversified basket of stocks and bonds."

Good luck!

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