# This Financial Advice Sounds Wrong To Me



## G J D Swain (Oct 20, 2009)

Sorry for the poor description in the thread title . Hate it when people post "come look in here" threads ... but it's complicated .

Anyway , I'm looking at commuting my pension now , investing in mutual funds as a method of *hopefully* increasing the value . I also need some cash now to pay off my credit cards . Yes , I know it's dumb , but these are very tough times for me personally , and welfare , bankruptcy , crime , and living in my car are not viable options .

So I saw an investor at a bank and he told me that my only option is to purchase RRSP's and mutual funds with the commuted value , then cash those RRSP's in , in order to get some cash .

I told him I thought there would be some cash available to me if I was to transfer to a LIF or RIF but he said that I cannot transfer to a LIF or RIF because then I would have to start drawing money from those 2 vehicles right away , and that my plan to invest in mutual funds for 5 years can not be done that way .

I realize that a bank investor is not a financial planner , but still , I would assume that they at least know the very basics of pension commuting . I asked if he did and he said "yes , of course" , but I am wondering if he actually does , since he seemed a little vague on certain points I was concerned with .

Sorry to sound so dumb . It's very embarrassing to be poor , and even more embarrassing to be asking such stupid questions , trust me . I'm trying to learn the *IN's & Out's* but there is a lot to learn , indeed .

Thanks In Advance
G J D Swain


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## MoneyGal (Apr 24, 2009)

A pension commutation cannot be made right to cash. The advice you got as you described it is correct. 

I'm not totally sure what your LIF plan is. You can invest in the market for 5 years (or whatever your horizon is), using a LIRA, and then purchase an annuity. 

I suspect your actual options are: roll over to a LIRA/locked-in RRSP, leave the money and take a pension at retirement, or use the funds to purchase a deferred annuity. It sounds like you are considering the LIRA option. 

Your options for getting money out of the LIRA will vary by province and with your situation. In Ontario, you can "unlock" some of the value of a LIRA in some circumstances. You can also apply to the Financial Services Commission of Ontario under the financial hardship provisions to allow some unlocking of a LIRA.


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## OhGreatGuru (May 24, 2009)

It's hard to tell from your post if the bank rep was inaccurate or if you didn't understand what he/she was telling you. As Moneygal says, commuted pensions usually have to be rolled over into a locked-in investment of some kind. LIRAs are usually locked in until you are 65, so you wouldn't be able to use any of the money to solve your current financial problems unless you are over 65. And I think there are maximum withdrawal rates after 65 (unlike the minimum withdrawal rates for RRIFs). If you put it into an annuity you can't get the capital either, but maybe you can get one that starts payments earlier - I don't know. Better talk to a few more bank advisors and your pension reps until you fully understand all your options.


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## MoneyGal (Apr 24, 2009)

The issue is that pension plans are designed to provide income in retirement. "Breaking" a pension plan, or the proceeds (commuted value) of a plan, to fund expenses before what is considered to be the normal retirement age (usually 65) is difficult. 

There are circumstances in which you can do this, but - in Ontario - they relate to having a small LIRA (i.e., the total LIRA size is small), or having financial hardship (i.e., an alternative to bankruptcy), or a dramatically shortened life expectancy.


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## OhGreatGuru (May 24, 2009)

Going back to your original post, you have mixed 2 different things up. 

_Anyway , I'm looking at commuting my pension now , investing in mutual funds as a method of hopefully increasing the value . I also need some cash now to pay off my credit cards . _

Commuting your pension into a LIRA, it could be in invested in mutual funds of your choice for future growth. No problem. Whether you would get any better return than a pension plan is a whole other question. 

But the second objective, getting access to some of the capital now, is a problem.


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## G J D Swain (Oct 20, 2009)

*Happy Valentine's Day*

Well , not sure what to say . Firstly of course I will say "thanks" for posting to this thread . Almost any response is better than no response at all . I'm sure that eventually something can be learned from almost any kind of dialogue .

Anyway , there's no sense in expressing my frustrations here . As an FP told me recently ,"free advice is worth just that" . Then he gave me more free advice that was embarrassingly inaccurate . I corrected him with an email and never heard back from him . Good , I was totally tired of his educated guesses and flagrant inaccuracies (and totally useless pointed pontifications and generalized bullshit) .

It's been a little like your typical 'Alice-In-Wonderland' adventure , trying to attain simple answers to simple questions . Bizarre , and if I wasn't hurting so much financially I'm sure I could find the strength to laugh out loud at the total absurdity of this recent 18 month quest .

However , time is rapidly running out . I am down to my last dollar . I have my pension commute papers , my cash value statement , my Visa bill , my landlady's look of scorn , ...

So , getting back to the original concern - the advice from the bank investor ... to transfer some of the commuted value into RRSP's and then immediately cash them in , in order to get rapid access to some cash to pay my back rent and credit card debt ...

... does this sound like it's do-able , or not do-able ?

Thanks again , in advance , for any and all help offered
Sincerely,
G J D Swain


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## MoneyGal (Apr 24, 2009)

Not do-able in the way you've described it. 

You cannot transfer funds from a pension to an RRSP. Instead, they must be transferred to a LIRA, a "locked-in" retirement account. 

Getting funds from a LIRA prior to the normal retirement age (usually 65) is difficult, but not impossible. You cannot withdraw funds from a LIRA like you can from an RRSP. 

I'm not sure what province you are in, but here is the link for "unlocking" a LIRA in Ontario, when you have either a very small account or financial hardship: 

http://www.fsco.gov.on.ca/english/PENSIONS/unlocking/

I agree with the FA that free financial advice is usually worth what you pay for it. Unfortunately, simply paying for advice is no guarantee of quality, either. I assure you that I am more highly trained and experienced with these issues than the FAs you describe in your posts.


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## jambo411 (Apr 6, 2009)

We commuted my wifes pension 4 years ago. Only a certain percentage is commuted ( the equivienat of something over over $2200 per year of service compounded I believe)and the excess is given as cash. The cash component in her case was almost 40%. 

When I asked about commuting my pension years ago my max rollover again was about 60% and I had to take the rest as cash or roll into an RRSP if I had the room. My wife's municipal employer refused to roll the cash component into her RRSP and we took a huge tax hit. These figures are from public service plans.


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## MoneyGal (Apr 24, 2009)

Hmmm. My understanding is that only the non-vested portion can be commuted in cash, and that typically only relates to contributions in the year of commutation. The OP said (in another thread) that he had not worked for 20 months, so I assumed there were no non-vested benefits available as cash. 

The problem is that there are many different pension plans, including in the public sector, and obviously many different options. I have never heard of a ps plan with a 40% cash component at commutation, but evidently this must be possible!

This underscores for me again the difficulty of providing generic "advice" or input without having the actual details available. I am very well-schooled in the generalities, but EVERY pension plan has specific features which provide for different outcomes. 

There are financial advisory firms that only do these kinds of calculations, such as Longhurst and Jack, two actuaries who only do retirement income planning. You can also find a consulting actuary who does pension valuations, but that is more actuarial horsepower than you are looking for. I think you are up against the problem of free advice here, and we are up against the generalities of internet forums.


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## G J D Swain (Oct 20, 2009)

*My Poor Ulcer ! (the one I'm going to get)*

Thanks again for the replies . The more replies the better , I think . Sooner or later the truth will be reached , even if I have to write it myself 

Anyway , I'm just leaving for my appointment with the bank guy . I'll mention the LIRA and cash option mentioned in this link (3rd page) and see what he says . I can almost guarantee he will scratch his head and then book me into another appointment this week so that he can check it out .

I'll be bok

G J D Swain


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## MoneyGal (Apr 24, 2009)

What is it that you are expecting the "bank guy" to do for you? Are you giving him a chance to "win your business" (if you decide to commute)?


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## OptsyEagle (Nov 29, 2009)

MoneyGal said:


> Hmmm. My understanding is that only the non-vested portion can be commuted in cash, and that typically only relates to contributions in the year of commutation.



MG, in some cases where the pension plan in question is in surplus, the pension fund is obligated to not only commute the earned pension benefits, but also the surplus amount. Since the surplus amount is techically not part of the pension benefits and has not been taken into account with respect to pension adjustments for RRSPs, etc, the government will not allow this money to transfer into a tax sheltered plan. Hence it is paid in cash and taxed accordingly (unless they have RRSP contribution room available).


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## G J D Swain (Oct 20, 2009)

*Stop The Insanity !!!!*

Get's crazier by the minute ... just came from the bank . I'll post results soon . First I should try and tackle these replies .



MoneyGal said:


> Not do-able in the way you've described it.
> 
> You cannot transfer funds from a pension to an RRSP. Instead, they must be transferred to a LIRA, a "locked-in" retirement account.


Well , I know what you mean , but maybe I should mention that my commute paperwork mentions a 'Locked-In RRSP' as one of the 6 vehicles available to me , for commuting into .



MoneyGal said:


> Getting funds from a LIRA prior to the normal retirement age (usually 65) is difficult, but not impossible. You cannot withdraw funds from a LIRA like you can from an RRSP.


Well , talked to a financial planner today and he told me that I can have access to 50% of the cash from a RIF , when I turn 55 in August . Of course , he's the same guy who advised me to commute now so that I can get some cash immediately . Today he told me that was not possible with my pension .



MoneyGal said:


> I'm not sure what province you are in, but here is the link for "unlocking" a LIRA in Ontario, when you have either a very small account or financial hardship:
> 
> http://www.fsco.gov.on.ca/english/PENSIONS/unlocking/


Thanks for the link . I should have mentioned in my preamble that I was already aware of the 'Financial Hardship' clause in Ontario and have looked into it at that website . The lengthy processing time is a consideration factor , so I was looking for other methods that may not take quite so long .



MoneyGal said:


> I agree with the FA that free financial advice is usually worth what you pay for it. Unfortunately, simply paying for advice is no guarantee of quality, either. I assure you that I am more highly trained and experienced with these issues than the FAs you describe in your posts.


Yes , I don't doubt that , which is the reason I posted here after my first bank appointment . I really wanted to believe what this guy was saying , of course , but common sense told me that he must not have a clue what he was talking about .

That's why I asked him point-blank if he had any experience doing pension commutes . He said "Yes" , but it turns out he did not after all .

Anyway , not trying to insult you or anyone else here . It just get's a little frustrating when one person tells you one thing , another something else , etc , especially when it's coming from professional people that I've talked with in person .

Very , very frustrating , actually . 

Anyway , thanks again very much for your helpful posts & sorry if I accidentally slighted you in any way .

Sincerely ,
G J D Swain


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## G J D Swain (Oct 20, 2009)

MoneyGal said:


> Hmmm. My understanding is that only the non-vested portion can be commuted in cash, and that typically only relates to contributions in the year of commutation. The OP said (in another thread) that he had not worked for 20 months, so I assumed there were no non-vested benefits available as cash.
> 
> The problem is that there are many different pension plans, including in the public sector, and obviously many different options. I have never heard of a ps plan with a 40% cash component at commutation, but evidently this must be possible!
> 
> This underscores for me again the difficulty of providing generic "advice" or input without having the actual details available. I am very well-schooled in the generalities, but EVERY pension plan has specific features which provide for different outcomes.


Right . I've learned that P Plans like those for teachers and fire department/police are different from mine . My FA was giving me advice based on the advice he has been giving teachers , for many years . Even when I gave him all my paperwork he still didn't see the obvious differences until I pointed some of those differences out to him (once or twice) .



MoneyGal said:


> There are financial advisory firms that only do these kinds of calculations, such as Longhurst and Jack, two actuaries who only do retirement income planning. You can also find a consulting actuary who does pension valuations, but that is more actuarial horsepower than you are looking for.


Thanks for the link . Looks like something I could have used last year . I have an actuary working on my pension . Good guy and offered to do it for free , but that was 4 months ago and has stopped returning emails & phone calls 2 months ago . Very frustrating ...



MoneyGal said:


> I think you are up against the problem of free advice here, and we are up against the generalities of internet forums.


That's part of it no doubt , but I have indeed found out that there are other factors involved too . I don't want to dwell on those factors that relate directly to professional people and the incorrect advice that I've been given , out here in the real world , but I will say that I have been extremely disappointed on more than one occasion in the last 18 months .

Cheers
G J D Swain


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## G J D Swain (Oct 20, 2009)

MoneyGal said:


> What is it that you are expecting the "bank guy" to do for you? Are you giving him a chance to "win your business" (if you decide to commute)?


Well , I went to see him last friday with an open mind . I sat , told him about my very poor financial situation , gave him all my commute papers , and asked him if he had any solutions .

He said "yes" , we can just commute , buy some RRSP's , put the rest in Blue Chip , cash the RRSP's , get you a low interest debt consolidation loan , then gave me a prospectus or 99 to look at , and booked my appointment for today to fill out all the paperwork and get the ball rolling .

Today , he retracted most of that (as I predicted here in a previous post , just before my appointment with him today) .

No RRSP's -
No Loan -
No Cash -

Then he told me about the "Financial Hardship Clause" in the Ontario Pension Reg's . I told him , I was aware of it but that I can't wait for the commute paperwork to go through and then wait 60-90 days for the Financial Hardship paperwork to go through .

He shrugged his shoulders . Told me sometimes fin-hardship goes through in a mere 2 weeks .

I left , phoned the Financial Adviser (who told me in January that there would be some cash available to me immediately upon commutation) and asked him how this immediate cash was going to be made possible .

He said it wasn't possible .

They call them "Bad Days" . Very , very bad days ...

It sounds crazy , but it's 100% true . No sense getting mad and expressing frustration to them , it would solve nothing and would only create enemies . It wouldn't even make me feel any better anyway , so what's the point ?

Thanks again for your replies .

G J D Swain


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## MoneyGal (Apr 24, 2009)

I hope you are able to find your way through this. I don't know whether you have any more information or hope after your meeting today...but I'm hopeful anyways. You have my best wishes.

Editing to add that I just cross-posted with you. I'm really sorry you didn't get better news today. What do you think you will do next?


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## G J D Swain (Oct 20, 2009)

MoneyGal said:


> I hope you are able to find your way through this. I don't know whether you have any more information or hope after your meeting today...but I'm hopeful anyways. You have my best wishes.
> 
> Editing to add that I just cross-posted with you. I'm really sorry you didn't get better news today. What do you think you will do next?


Hi MG :

Thanks for your kind words . Much appreciated , trust me . I don't know what's next . I'm trying to get in touch with my Pension Administrator and see if she has any ideas for me . I met her a couple of weeks ago when I first applied for my pension . Very nice person and a real genuine pleasure to talk to . I'll call her and see if she has any ideas . Otherwise , I'm lost .

She told me that she would fast-track her paperwork for me and has so far . I have actually been feeling quite good since I talked to her , partly because I was under the impression that I was finally going to be able to pay off some bills etc .

Today has not been good ...

Thanks again ,

G J D Swain


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## Racer (Feb 3, 2010)

I have been in financial despair before, too, Swain, about six years ago. It isn't fun. I hope that you can get through this time somehow.

You mentioned a landlady. Can you hock all of your belongings and sleep on a friend or relative's floor? Now is not the time to get hung up on not imposing on people, not when you are so close to regular fixed income. Doesn't the old saying go "if you don't ask, you won't get"...?

Same goes for jobs. What jobs are you applying for? I know that you have sent out a couple of hundred resumes, but that was spread out over at least a year? What about flexible part-time gigs like paper delivery, pizza delivery, etc? What about busking? Only half-kidding here...

I'm just throwing some ideas out there -- not meaning to judge. Obviously you will decide just how far you will go before you give up and cash out for short term income. 

All the best to you.


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## G J D Swain (Oct 20, 2009)

Racer said:


> I have been in financial despair before, too, Swain, about six years ago. It isn't fun. I hope that you can get through this time somehow.
> 
> You mentioned a landlady. Can you hock all of your belongings and sleep on a friend or relative's floor? Now is not the time to get hung up on not imposing on people, not when you are so close to regular fixed income. Doesn't the old saying go "if you don't ask, you won't get"...?
> 
> ...


Hi Racer :

Good advice , I think . It's funny how some threads (like these last 2 threads of mine) can reveal a partial cross section of human nature . Some will flame-bait you , some will have a few good ideas but not bother to post , and some will encourage and attempt to offer good advice , like you and MoneyGal in this thread .

Thanks very much for your kind words and excellent advice . Thoughtfulness , intelligence & time can accomplish great things .

Cheers

G J D Swain


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## Berubeland (Sep 6, 2009)

JD just his year I was in bad shape. I thought I would have to cash in my RRSP's I have a hubby and 2 year old to support. In the end I did not have to but still we get by on fumes sometimes around here. 

I had to cash in all my airmiles for grocery coupons to buy groceries. It was crazy. 

I also had a even more difficult time when my husband of 7 years left to go live with his new GF while I was working one day. We were self employed and I got the house and he got the business however I was left with about 25 grand worth of credit card bills that had been used for the business in my personal name I had no hope of paying. I was absolutely depressed and hopeless and had no idea what to do. When the phone finally got cut off it was a relief because the bill collectors couldn't call to make me feel like a worst piece of crap than I already felt. At one point I didn't even have a sofa because when he left he took most of the furniture. 

I did learn several things

Not having money is just that.... it is nothing to be ashamed of.... you did nothing wrong. Your bills will get paid one day don't let those MF's make you feel bad. 

Many Many people have gone through hard times. Most successful entrepreneurs have gone bankrupt 3 times before finding wealth.

You will get through this.... 

And an interesting article my hubby sent me that might help you a little. 

http://www.telegraph.co.uk/technology/3304496/Be-lucky-its-an-easy-skill-to-learn.html


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## MoneyGal (Apr 24, 2009)

OT to the original post but related to Jambo's post: I went back and re-read the chapter from The Pension Puzzle about commutation options. I had forgotten that pension plans in surplus might include a share of that surplus (in cash) at commutation (my mind is much more on pension deficits, not surpluses, these days...)

There is one other situation in which the value of a pension plan at commutation may include non-rollover-able cash - *when the plan includes very generous early retirement benefits*. 

For those plans, when you leave before the plan's early retirement age, tax rules limit the tax-sheltered amount you can transfer to a LIRA. 

Essentially you give up the value of the tax breaks on the early retirement subsidy you aren't using...and this value must be taken as cash. If you have unused RRSP room, you can put the money into your RRSP, but you can't do the transfer directly (as a rollover). There is a set of age-based tax rules which set out how much you can transfer tax-free, and how much you must take as cash. 

Also, for G.D.S. Swain - "LIRA" and "Locked-in RRSP" used to have slightly different meanings but are now synonymous.


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## G J D Swain (Oct 20, 2009)

(EDIT : It's been 3 months since my last post here)

Hi All :

Well , first of all , I did finally find someone who did give me a chance for employment , close to 200 resumes later . Hadn't driven a truck in 25 years and I find myself taking a test drive , and not doing so well (of course) . Luckily , it was an older guy who understood I was very rusty and just needed some practice .

So ... I've been working for the last 6 weeks , making around $475 - $550/week . It is very low paying but if I can get enough hours in every month it will pay my bills (barely) . Finished several weeks with just $5 in the bank .

On top of the that , my original boss who deprived me of work for 28 months (while he hired many others in the meantime) called me back for a very long shift on a Sunday where I grossed almost $1000 . I'm a Union tradesman but unfortunately our Collective Agreement allows contractors to mistreat us if the supervisor simply does not like our face (hence the 28 months of unemployment from him) .

Any good Labour Lawyers out there ?

Anyway , I just want to thank Moneygal and Berubeland (thanks for the awesome link) and also Racer for the kind words . Those words are worth a lot when all you can see is doom and hopelessness .

Also , I think I should mention that the flames and insults thrown at me in similar threads in this forum are extremely disappointing , to say the least . It's not just sad to think that our world has such low-lifes sprinkled throughout the system , venting their sickness at every possible opportunity .

It's more than a little aggravating to encounter these pathetic types , whether it be in forums or in retail outlets etc . Tiny brained rats that seize every opportunity to crap on any helpless individual they can .

Unfortunately , these types also seem to gravitate toward positions of power where they can get away with their deeds unchecked . Or just do their deeds in forums anonymously and without repercussion .

It's been an eye opener , that's for sure .

So thanks again , and if you happen to meet a C#$K [email protected]&ker on your travels , please take the time to put them in their place immediately (or worse) !

cheers

G J D Swain


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## MoneyGal (Apr 24, 2009)

Glad to hear from you again, and with decent news. Best of luck as you move forward in life.


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## Berubeland (Sep 6, 2009)

I thought you might have died of starvation 

It's awesome that you are doing well, I'm so happy for you !!!! 

If I meet one of those people I will kill them with kindness, after all if I meet someone and they are difficult and I allow them to make me difficult then we have two c%$#%#%%#ks instead of one. I want to be a nice person after all I have to live with myself. 

My goal is to reduce the amount of difficult people in the world by one


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