# Net Worth - Pension Value Question



## Sustainable PF (Nov 5, 2010)

Hello,

When calculating your net worth do you / should you include matching contributions from your employer?


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## MoneyGal (Apr 24, 2009)

Why wouldn't you? They belong to you, right?


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## Sustainable PF (Nov 5, 2010)

MoneyGal said:


> Why wouldn't you? They belong to you, right?


The reasons I can think of might be: 

1) What if you leave said employer
2) What if the pension fund goes belly up

Just trying to think this through. Thanks for the response MoneyGal.


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## MoneyGal (Apr 24, 2009)

If you are calculating your present NW, you should include the current value of your account, including all contributions - yours and theirs. 

If you are concerned about the future solvency of your company, you should discount the current value by some factor. 

If you leave the employer, you should update your NW if you make any changes to your pension with them. You don't normally factor events that haven't happened into your NW statement.


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## the-royal-mail (Dec 11, 2009)

Interesting. I never thought of this - thanks!


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## Sustainable PF (Nov 5, 2010)

MoneyGal said:


> If you are calculating your present NW, you should include the current value of your account, including all contributions - yours and theirs.
> 
> If you are concerned about the future solvency of your company, you should discount the current value by some factor.
> 
> If you leave the employer, you should update your NW if you make any changes to your pension with them. You don't normally factor events that haven't happened into your NW statement.


Awesome! Thank you!


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## OptsyEagle (Nov 29, 2009)

MoneyGal said:


> If you leave the employer, you should update your NW if you make any changes to your pension with them. You don't normally factor events that haven't happened into your NW statement.


Remember, this update of NW, needs to be a part of your decision to leave (assuming the decision is yours). It is a real part of the financial decision, although I am sure many ignore it (at their loss).


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## MoneyGal (Apr 24, 2009)

If you are concerned about the future solvency of your company, leaving and taking your pension with you (ie. cashing out) is one way to cut your (expected future) losses. 

I don't honestly know why more Nortel pensioners did not do this, but I suspect it is (1) generational and (2) people misunderstand what a true pension is.


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## sags (May 15, 2010)

MoneyGal said:


> If you are concerned about the future solvency of your company, leaving and taking your pension with you (ie. cashing out) is one way to cut your (expected future) losses.
> 
> I don't honestly know why more Nortel pensioners did not do this, but I suspect it is (1) generational and (2) people misunderstand what a true pension is.


They would have to qualify, as in be under the age of 55.

They would lose all ancillary benefits such as health insurance, life insurance.

The commuted values of pensions, rarely comes close to the actual value of the pension.

I know that indexing, spousal, etc. are supposed to be factored in, and the commuted value is supposed to equal the amount paid out.....but it doesn't.

I went through a similar exercise with GM, when the pensions looked bad.

The commuted value that I was offered, was laughable.

It was for 200,000. I collected 150,000 in monthly benefits already between age 55-60, so I don't know what I was supposed to live on for the next 25 years.

I calculated it in simple math terms. 

Collect 30,000 for 10 years (age 55-65) = 300,000
Collect 22,000 for balance of life (say 20 years) = 440,000

So, 740,000 plus (indexing, spousal) compared to 200,000 offered.

Maybe that is why more people don't opt for the commuted value.


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## sleepingbeauty (Apr 3, 2009)

MoneyGal said:


> If you are concerned about the future solvency of your company, leaving and taking your pension with you (ie. cashing out) is one way to cut your (expected future) losses.
> 
> I don't honestly know why more Nortel pensioners did not do this, but I suspect it is (1) generational and (2) people misunderstand what a true pension is.


Sorry to hijack.

MoneyGal, I am interested in this as a soon to be ex-Nortel employee. What is a true pension??

I am one of the disable who was sold a self-insured insurance policy but with the Sunlife header and it being called insurance, I never asked questions. Anyone with disability insurance through your workplace, ask your HR to make sure it is REAL insurance and not self-insurance. They can look identical.

Connie


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## mutzy (Jul 26, 2010)

*Income generating (rule of thumb)*

You will need approx.18,000 dollars to
generate $100/mo. of income.


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## Bupp (Nov 13, 2009)

$200,000 upfront is a much better deal.


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## marina628 (Dec 14, 2010)

My brother in law worked 23 years with Nortel and lost his job about 5 years ago , He took a blood bath on his stocks as I guess they had incentives for employees to hold them .I don't know exact numbers but i think his $200,000 was in the $30,000 range when he lost his job.He had to go look for a job at age 52 and of course people will pick a younger person in most cases .He finally got another job about 14 months ago but in many ways he has been financially devastated by the chain of events.
Marina


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## MoneyGal (Apr 24, 2009)

Sorry - I missed the request earlier in this thread for more information on what I think a "true pension" is. I co-wrote a journal article earlier this year on this very topic, so I'm just going to go ahead and link it here: 

http://www.irpp.org/po/archive/mar10/milevsky.pdf

This article discusses Nortel specifically.


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## kcowan (Jul 1, 2010)

marina628 said:


> ...He finally got another job about 14 months ago but in many ways he has been financially devastated by the chain of events.
> Marina


I'll bet he emerges from this much stronger but it may take 5 years for him to get through it. I find every major change takes 6 months to absorb but much longer to accept. Two years is about the minimum if you approach it head on.


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## Sustainable PF (Nov 5, 2010)

MoneyGal said:


> Sorry - I missed the request earlier in this thread for more information on what I think a "true pension" is. I co-wrote a journal article earlier this year on this very topic, so I'm just going to go ahead and link it here:
> 
> http://www.irpp.org/po/archive/mar10/milevsky.pdf
> 
> This article discusses Nortel specifically.


Thanks Moneygal. This has been added to my holiday reading.


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## MoneyGal (Apr 24, 2009)

Enjoy that five minutes of your life!  I am doing lots of non-work reading this holiday, personally.


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## Sustainable PF (Nov 5, 2010)

MoneyGal said:


> Enjoy that five minutes of your life!  I am doing lots of non-work reading this holiday, personally.


Aside from working in our blog, my work has absolutely nothing to do with PF, so this is pleasure reading for me.


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