# Commuted Value



## Freedom51 (Feb 15, 2012)

Hi there,
I am new to the site and am looking for some advice on taking the commuted value of my pension. I am 52 years old and am excited about the potential of taking this next step in the journey of my life.

My commuted value from my plan is $1,356,000. 
I am 52 and my husband is 56 and is self-employed.
$510,000.00 would go into a LIRA and approximately $380,000 of the excess would go to pay off all of our debt which would include our home valued at approximately $260,000.00.

We are planning on purchasing a small motorhome and doing some travel.
We would then work as needed on our terms.

Does this sound doable?


Thank you for your advice.


----------



## MoneyGal (Apr 24, 2009)

Your question is too generic for any real answers to be provided. 

We don't know if you have any other savings, what your anticipated spending requirements are, whether you have any experience managing your own money, what your investing style is, etc. 

In order to have a commuted value of $1.3M at age 52, you must have been a very high income earner (and/or this is an inflation-adjusted public sector plan). So I suspect not working and travelling around in a motor home will be a big lifestyle adjustment. 

There are people here who will have insights on the cost of travelling in an R.V. (presumably through the U.S.) and how to manage risk through that process.

The one caution I would make is that you shouldn't overestimate your capacity to earn income "on your terms." What if that part of the plan doesn't work out?


----------



## Freedom51 (Feb 15, 2012)

Thank you for your reply Moneygal. In response to your questions, we do not have other savings and no, we do not have experience in investing.
An income of $30000. would be more than ample for us and we could actually get on less $20,000.
My husband is a contractor and is not anticipating not working, just working less.
There are many things I can do with my experience so there would be "part-time" work if I needed it.
Our hope is not to touch the LIRA for 10-12 years.


----------



## OhGreatGuru (May 24, 2009)

If you are taking 63% of that $1.365M in cash, you are also going to have a pretty big tax bill. Have you allowed for that?


----------



## MoneyGal (Apr 24, 2009)

One more thing, and only because the internet is anonymous (I have no idea who you are; you are posting asking for input without anyone knowing who you are) - you would be entering retirement with no debt, but only because you've taken part of what would otherwise be providing lifetime income in retirement and paying down the debt you accumulated. 

But how did you get or still have $380K of debt at the point you are retiring? If this is "lifestyle debt" (i.e., not due to extraordinary expenses) -- how will you ensure you don't rack up *more* debt while living on *less* (much less?) income?


----------



## OptsyEagle (Nov 29, 2009)

I question I have, before an answer can be formulated, is where are you currently expecting the $30,000 per year to come from. You said you don't intend to take anything from the LIRA for a while. Of the difference,

$1,356K - $510K = $846K minus $380 to debt = $466K minus about 
$370K payable in income taxes = $96,000 left.

That $96,000 would pay $30,000 for about 3 years. So to answer your quesiton, if your husband can earn $30,000 per year then yes, you can retire on $30,000 per year.

The question you might want to ask is whether it makes sense to give up that pension for the proceeds you describe above. I am not sure you factored in the income taxes. In any event if you let us know what annual income that pension would provide, from what age, survivor benefits and indexing, I am sure we could give you a suggestion on the mathematical merits of doing what you are suggesting.


----------



## Freedom51 (Feb 15, 2012)

Hi there,
Yes, I had figured in the taxes. 
If waiting for pension -Annual income that pension would provide from age 55 (with bridge benefit) is $61,000
At 65 that goes down to 51,000

Taking commuted value - Together, my husband and I will bring home a minimum of $50,000 from his business


----------



## Darisha (Feb 11, 2012)

MoneyGal said:


> But how did you get or still have $380K of debt at the point you are retiring? If this is "lifestyle debt" (i.e., not due to extraordinary expenses) -- how will you ensure you don't rack up *more* debt while living on *less* (much less?) income?


This bit confused me as well. I don't understand how anyone with that much debt would consider working less unless it was not by choice. If the house is valued at $260,000 and you have $380,000 in debt that is at least $120,000 in consumer debt, if not a lot more considering you probably have some equity in your home.


----------

