# People Just Don't Know



## sags (May 15, 2010)

On this forum, people want to know the details of everything. They pore over all the different scenarios....from benefits to taxes.

I am struck by how different it is in this forum, from my experience in real life.

When GM announced the early retirement buyouts, there was a lot of new discussion in the workplace.

It was shocking how many people didn't know what their pension benefits would be or even that they had a pension at all.

Several people were working past the date they could qualify for a full pension (30 years) and didn't realize they could retire with full benefits plus an added $1000 a month for the 30 and out benefit. They thought they had to be 65 years old to retire. Some were traveling many miles each way to work, paying for someone to look after their kids when on afternoon shift, and taking a couple of days off each month for their kids. They were better off financially with retirement, but didn't know it.

It was remarkable, considering the company supplied us with benefit booklets, the union supplied us with information and had a pension rep on staff, and there were union contract meetings every 3 years to discuss changes in our wages and benefits.

I guess they didn't read any of the literature, didn't attend any of the meetings, and never talked to anyone about it.

Hard to believe......for more than 30 years.......but it happened.

We had people arguing over if they could claim the buyout tax deduction "twice" by buying RRSPs with the money, after it had been distributed to them in an RRSP form already when they received it. Of course, they couldn't but some people were bound and bent they could deduct it from their last year of earnings and claim a large tax refund.

We had one guy who retired and came back a month later wanting to "cancel" his retirement, and a few people who signed up and changed their mind...........one of them on the last day as he stood in front of the severance papers and declined to sign them.

The lesson I learned from all this.............is that a lot of people have no idea what or how they will retire. 

It doesn't cross their minds, until they are standing at the doorstep.

They just bump along life with a happy face and hope it all works out.


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## wendi1 (Oct 2, 2013)

A guy at my work asked me some questions - after 65, he could take money out of his RRSP without paying tax, right? Wrong. But CPP and OAS would take care of him, right? Sure, to a max of about $19K annually, if he worked at the max CPP level 39 years...

He has just bought a new house, which will be mortgage free when he is 79.

Sometimes I wish I could just bump along with a happy face - must be nice to not worry...


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## fraser (May 15, 2010)

The final value of my pension and supplemental pension is forty percent higher than my employer's first quote to me.

I kept all the documents, I read the plan in detail, and I reviewed the amendments to the plan. I kept on challenging the number until I was satisfied that it agreed with the provisions of the plan. 

It was the highest paid work of my career.

Throughout the process I was shocked at how few people truly understood the plan. Or took the time to understand it...including those who were retiring.

I guess it is the same reason why some people have absolutely no idea how much interest they are paying on consumer debt or how high the MERS and backend charges are on those mutual funds that their bank rep or so called financial advisor was kind enough to 'recommend' to them.


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## richard (Jun 20, 2013)

fraser said:


> The final value of my pension and supplemental pension is forty percent higher than my employer's first quote to me.
> 
> I kept all the documents, I read the plan in detail, and I reviewed the amendments to the plan. I kept on challenging the number until I was satisfied that it agreed with the provisions of the plan.
> 
> ...


Well the good news is that no pension is really under-funded!


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## RBull (Jan 20, 2013)

There's plenty of people in this part of the world who don't do critical thinking and don't focus on what is important, while some others do. I'm sure most if not all on this site do focus on the importance of their financial affairs. 

Congratulations Fraser on being a step ahead of your employer.

Working when you're further ahead being retired???? Buying a house with a mortgage until age 79??? :upset::hopelessness:


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## peterk (May 16, 2010)

My girlfriend didn't realize that she got a raise on January 1st.

Plenty of people at my office don't know how to read their paystubs any have no clue what any of the deductions or benefits mean.

My company offers a mortgage program (subsidized low interest loan) and it's baffling the amount of misinformation that's out there about it. Strange strange interpretations of things that require only basic reading comprehension.

I've heard of some people at work who resigned at 54 instead of retiring at 55 because they wanted to take the money and not get locked into the company pension plan. Fair enough... except that they were throwing away over half a million bucks in bridge benefits that go to 0 if you leave the company before 55. Oops.

Madness all around.


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## sags (May 15, 2010)

fraser said:


> The final value of my pension and supplemental pension is forty percent higher than my employer's first quote to me.
> 
> I kept all the documents, I read the plan in detail, and I reviewed the amendments to the plan. I kept on challenging the number until I was satisfied that it agreed with the provisions of the plan.
> 
> ...


I had a similar event when I was considering a commuted value over the pension.

The quoted value was around $240,000 which was ridiculously low, so I called a guy who calculates commuted values for teachers. He told me commuted value quotes are often wrong and should always be checked.

I ran out of time and was totally frustrated by the lack of cooperation by Hewitt Associates who administered the plan. I asked to talk to the actuary who did the quote and they told me they don't have one........but they had a woman who had all the schedules who did the calculations. I even had to pay for the calculation to be performed.

The union was of no help as their attitude was "just take the pension like everyone else" and the company had no idea.

Fast forward to Jan 1st 2013 and a new option for retirees to take the commuted value is put into the contract as a company demand........and the commuted value is suddenly $640,000.

Only a $400,000 difference.....sheesh.

I don't know what would happen to anyone who decided to take the commuted value at the old quote.

It seems there isn't any oversight on how the commuted values are calculated.


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## fraser (May 15, 2010)

I also had to deal with Hewitt. I found them to be unresponsive and unknowledgeable when it came to the specific provisions of the plan in which I was a member. My issues were resolved only after I escalated them to the corporate counsel of my former employer. I was in a unique situation but the plan was very clear on how it was to be dealt with.

I often wonder how many people simply take the number without verifying the calculations to the provisions of the plan or simply to double check the math calculation.


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## Canadian (Sep 19, 2013)

Many find financial planning a daunting task, and therefore ignore it. I once had an acquaintance complain that RRSPs are a government scam because all he's done is lost money from them. When I tried to explain the concept of an RRSP he brushed it off and changed the subject.


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## avrex (Nov 14, 2010)

sags said:


> The lesson I learned from all this.............is that a lot of people have no idea what or how they will retire.
> It doesn't cross their minds, until they are standing at the doorstep.
> They just bump along life with a happy face and hope it all works out.





fraser said:


> I guess it is the same reason why some people have absolutely no idea how much interest they are paying on consumer debt or how high the MERS and backend charges are on those mutual funds that their bank rep or so called financial advisor was kind enough to 'recommend' to them.


All of the above statements are so true.

Issues that can have the *biggest financial impacts* in one's life, isn't given enough thought by most people.


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## Beaver101 (Nov 14, 2011)

> I had a similar event when I was considering a commuted value over the pension. ... *I don't know what would happen to anyone who decided to take the commuted value at the old quote. *
> 
> *It seems there isn't any oversight on how the commuted values are calculated.*


 ... one would just bend over and take the number unless you happen to be a pension specialist and an actuary then would you be able to "verify" that. As for "oversight" on how commuted values are calculated or "properly" calculated ... one would think FSCO is for that???


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## fraser (May 15, 2010)

A quick way to ball park it is to compare it with an annuity rate for the same age, payout.

The numbers will not be the same, but you it will give you a first pass test for reasonableness. IF the number is way out of whack it is easy enough to pay for your own actuarial estimate.


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## Beaver101 (Nov 14, 2011)

fraser said:


> A quick way to ball park it is to compare it with an annuity rate for the same age, payout.
> 
> The numbers will not be the same, but you it will give you a first pass test for reasonableness. IF the number is way out of whack it is easy enough to pay for your own actuarial estimate.


 ... how do you define "reasonableness" - a plus or minus #%?


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## nortel'd (Mar 20, 2012)

sags said:


> The lesson I learned from all this.............is that a lot of people have no idea what or how they will retire.
> It doesn't cross their minds, until they are standing at the doorstep.
> They just bump along life with a happy face and hope it all works out.


I was a member of a great union for 30 years and did not read my collective agreement until I decided to retire. My collective agreement covered my working rights, privileges and salary very well but had very little to almost nothing on retirement rights.

I have a family member who didn't realize that her early unreduced pension had two parts … a life-time portion and a bridge portion that is to being eliminated because she turned 65 mid January.


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## sags (May 15, 2010)

nortel'd said:


> I was a member of a great union for 30 years and did not read my collective agreement until I decided to retire. My collective agreement covered my working rights, privileges and salary very well but had very little to almost nothing on retirement rights.
> 
> I have a family member who didn't realize that her early unreduced pension had two parts … a life-time portion and a bridge portion that is to being eliminated because she turned 65 mid January.


Yup, I have seen that a few times too.

People who were already retired, were stunned when I told them the pension they were receiving at age 55.....wasn't their life time pension.

In fact, it was about 60%.......when discounted for the "30 and out benefit" and "bridge" benefits for CPP/OAS.

A typical auto worker pension for 30 years of service is $3500 a month but drops to $2200 at age 65.

If people aren't ready for the change...........it is going to bite them in the butt.

Funny thing was......After retirement, I was walking down the street one day and ran into the also retired benefits representative.

He started asking me questions about it. Yikes.......he was the one dispensing advice to everyone all those years.


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## Itchy54 (Feb 12, 2012)

What a great topic. hubby and I attend the retirement seminars every few years just to make sure we have it under control and every time we go we are the most informed people there. A few years back the speaker quietly said that medical benefits were being cut (after a question from myself, I had read an online document regarding the subject, a document that was deeply hidden on the retirement website) and he replied that it wasn't a big deal because most of us are healthy. I was stunned, no one said a word. After giving my head a shake I piped up and said that it was a $100/month loss and was a significant percentage of the pension. He turned beet red and quickly changed the subject and not one other participant said a peep.

Pension seminars are a good thing but I believe that we need to do our own investigations and know exactly what is and is not going to be there when we retire. Some of the answers to questions asked are so vague that they are laughable.

We know our numbers, we understand what a bridge benefit is, and know our expenses and have tracked them for three years. I think everyone here has a good grasp on things but think that we are the exceptions. 

We are also well aware of benefits that can disappear, and that includes indexing. We are prepared.

We have acquaintances who are waiting for cpp to take effect, but they have no idea how much their checks will be even though we sent them the online forms to get an estimate. Just too lazy or afraid I suppose. It will be their only source of income, very sad indeed.


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## sags (May 15, 2010)

Our union took over ownership of our "health plan" when given the opportunity during the last bailouts. It was a demand by the government for the loans. We are lucky..........a lot of retiree benefits don't include health care benefits.

Since then our benefits have been chopped some, and we contribute more.........but at least we get some things covered.

GM arbitrarily cut all health care benefits to their salaried retirees, but the retirees fought back and sued the company.

The retirees won the court case and GM was ordered to reinstate the benefits, including paying the retirees retroactively.

The deciding factor for the judge..........was the fact that GM had produced a booklet clearly outlining that health care benefits would be given the retirees for over 30 years and there was no way for GM to deny that fact. The judge ruled the booklet constituted a contractual obligation and ordered GM to pay.

It pays to keep informed on benefits and pensions..........but so few people think it is important enough to bother.........until it is too late.

A lot of the time, those who are supposed to supply the answers don't even fully understand.


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## thebomb (Feb 3, 2012)

Canadian said:


> Many find financial planning a daunting task, and therefore ignore it. I once had an acquaintance complain that RRSPs are a government scam because all he's done is lost money from them. When I tried to explain the concept of an RRSP he brushed it off and changed the subject.


BINGO! This is what my in-laws think. Thank god my husband doesnt take after them. No wonder they are a mess, this despite a very healthy DB plan. Recently when they asked what they could get our son for Christmas we mentioned some money that we could put towards an RESP they said the same ridiculous statement, " its a government scam" and then they quietly laughed like they had it figured out and that we were the idiots. Thanks....done ranting......


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## richard (Jun 20, 2013)

Canadian said:


> Many find financial planning a daunting task, and therefore ignore it. I once had an acquaintance complain that RRSPs are a government scam because all he's done is lost money from them. When I tried to explain the concept of an RRSP he brushed it off and changed the subject.


So he got a tax refund on his contributions and now he won't have any withdrawals to pay taxes on? Sounds like he's ripping off the taxpayers! At least you could point out how much tax he's saving.


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## andrewf (Mar 1, 2010)

^ Exactly. He's lost a buunch of taxes he would have otherwise paid.


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## james4beach (Nov 15, 2012)

Getting back to the original obsevation.

It's simple: people don't like to read.

That's why people don't read prospectuses, and it's why nobody ever reads the financial statements of stocks they're investing in.

True story: I was sitting beside a woman on a flight. She had corporate pamphlets with her, the marketing documents where they show pictures of smiling ethnically diverse people gleefully engaged in some trade or business. These things are comically similar. Smiling people, bonus points for children or seniors in the photo. Followed by a bunch of super dumbed down bullet points to reassure the shareholders that all is well.

She was highlighting bullet points and circling things with pen. She looked like a child marking up a picture book. I thought to myself, oh man, I really hope she's not trying to do some kind of serious analysis because it's clear she's only reading the marketing crap and not a single page of hard financial info.

I asked her what she does. "I'm an analyst with OMERS"

Uh-oh. When the original poster observed that nobody bothers reading details, that's just the tip of the iceberg. Even people who are supposed to be delving into details, often have no clue what's going on. Pension funds, mutual funds, analysts and advisors... no clue. They have no clue.


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## Nemo2 (Mar 1, 2012)

^ Priceless.......(albeit scary....very scary) :encouragement:


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## RBull (Jan 20, 2013)

Nemo2 said:


> ^ Priceless.......(albeit scary....very scary) :encouragement:


+100000


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## Eclectic12 (Oct 20, 2010)

james4beach said:


> Getting back to the original obsevation.
> 
> It's simple: people don't like to read.
> 
> That's why people don't read prospectuses, and it's why nobody ever reads the financial statements of stocks they're investing in ...


I understand the point that it's very few (and highly time dependent) but there are few of us out there.

( ... which makes it all the more amusing when the media who is supposed to be on top of things writes "no private Canadian company would ever have given severance of $6 million" while the annual report for a private Canadian company from almost a decade before listed a severance payment of $21 million to the former CEO for 9 months service.)


Cheers


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## Nemo2 (Mar 1, 2012)

Eclectic12 said:


> the media who is supposed to be on top of things


'Journalism' courses....on a par with Underwater Basket Weaving?


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## Eclectic12 (Oct 20, 2010)

Nemo2 said:


> 'Journalism' courses....on a par with Underwater Basket Weaving?


 ... not sure about that .... but I have seen a bit of attitude.

Two Canadian newspapers picked up Industry Canada's "Cheapest Bank Fees" study. 

Problem was all three source were stating that I was paying $2.50 a month at the cheapest where my records showed just under $4 in five years (about $140+ discrepancy). I pointed out the discrepancy plus that I believe the explanation was that the usage profile assumption buried in the appendix was resulting in the monthly charges by emailing the two reporters, in addition to posting a note on the web site the study was published on.

For the first newspaper, there was no response to my emails. Industry Canada was a bit better as the web master emailed me to acknowledge that the usage profile was causing the charges but that they believed this was clear to anyone reading the study. (So the average Canadian is going to read to something like slide 62 to find the small text bullet point documenting this?) To their credit, I did notice when I checked the following year's study that the title hadn't changed but the usage profiles were documented on slide 4, in larger text.


The second reporter was the most interesting. 

The first email response was that "most people won't pay attention to where free ATMs are" so that while technically the fees weren't "the cheapest", they would match the way most people used their bank account. When I responded that I had no problem with the profile - the problem was that the profile info was hidden while the title/text stated "this is the cheapest". 

The response was "thanks" but bear in mind that the "overworked, under deadline media types don't have time to read the study that spawned the article"!

If someone who is paid to write about it isn't reading the study - where does that leave the reader?

Cheers


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## jacofan (Apr 17, 2013)

Great topic! I have many co-workers in the 22-35 age range around me. I'd say all don't know what a RRSP is. They think its a GIC at the bank. I get the sense that they think retirement planning is too complicated and they just want to trust that the company and union is doing it for them. Most want to "buy a house". There seems to be zero comprehension of what compounding means and they all think its "too complicated".

I tried to take a few of the wiser young ones under my wing to help mentor them a bit about retirement planning and even though they have a good union paying job, they seem to live paycheque to paycheque. The parking lot is full of many new cars thought (mostly 20-30k) imports. Not BMW's and such. I suggest to them that they should at least invest in the banks instead of just putting their money in a GIC. There is definite fear of the stock market with them - likely fear of the unknown.

Still the emphasis from them goes back to "I'm saving to buy a house". 

Myself, as someone who tried to be money smart all my life, I never looked into what my pensions were until my mid-40's. I'll be honest and say that I didn't want to sort through the paperwork to find phone #'s and be put on hold... ... so if I felt like that, I can imagine how others less motivated in the financial area feel about the subject.

Now that my account has grown and grown, its cool to see monthly gains that start to exceed my current monthly paycheque! I wish I could get through to them to start putting away even $100/month.


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## andrewf (Mar 1, 2010)

james4beach said:


> I asked her what she does. "I'm an analyst with OMERS"


That really is terrifying. Hopefully the people making actual decisions are a bit more rigorous.


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## james4beach (Nov 15, 2012)

I was terrified too. Perhaps it was a special situation, like a new employee or an intern or something. I hope


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## fraser (May 15, 2010)

I would not confuse how people behave in their private lives vs. how they behave in their vocation. I know of more that one very astute business person whose personal finances are in a mess due to inattention to detail and excess spending.

I never paid much attention to my pension plan until I was in my early 50's. Then I did an audit of the company match add on portion to my DB pension. Two mergers had gone by. I discovered that the company match had not been paid into my account for six years.


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## cainvest (May 1, 2013)

james4beach said:


> Getting back to the original obsevation.
> 
> It's simple: people don't like to read.


I don't think it's the reading part so much, though going through financials is boring to probably 99% of the population, it's the learning part coupled with frustration. There is lots to read but finding material without marketing/personal bias or misleading/confusing information isn't all that easy sometimes. Financial institutions don't make this any easier, their answer is likely "oh, invest with us and we'll get you a sailboat for retirement".


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## Addy (Mar 12, 2010)

I admit readily that I am clueless about my pensions (I have three) other than they are defined contribution plans. Being a military family, we move often (hense my three pensions, I can't stay at a job long) and it's a PITA updating my address every move, and the rules on HOW to update my address with the pension plans seems to change every time.  I doubt I have much paperwork on any of my pensions. These recent posts about pensions has me thinking it's high time I got more information.

Same for my husband, he is military and will be eligable to retire in 13 years, but I have yet to see any concrete document regarding his pension - I may hound him to find out more too.


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