Always a parent

[MoseySusan]

#1 child was ranting about retirement withholding from their paycheck. I get that...it's a chunk of money and their paycheck is already barely enough to cover expenses and have a good amount of discretionary income. I had to explain what a pension is and how it works. Then I shared the weblink with information about requesting a refund of retirement withholding in the event they leave the job. They didn't know they could do that and appreciated having the info. Still teaching my child how to adult.

[Razors Edge ★]

25 minutes ago, MoseySusan said:

pension

In 2021? Wow!

[Randomguy]

30 minutes ago, MoseySusan said:

#1 child was ranting about retirement withholding from their paycheck. I get that...it's a chunk of money and their paycheck is already barely enough to cover expenses and have a good amount of discretionary income. I had to explain what a pension is and how it works. Then I shared the weblink with information about requesting a refund of retirement withholding in the event they leave the job. They didn't know they could do that and appreciated having the info. Still teaching my child how to adult.

Please teach me next.

[jsharr ★]

25 minutes ago, Randomguy said:

Please teach me next.

and mark as solution please.

[Bikeguy]

39 minutes ago, Razors Edge said:

In 2021? Wow!

Yeah... even my company switched from pensions to a savings plan (in both cases you still could have a 401K) about 15 years ago or more. 

I got to choose between the pension, and moving to the savings plan.  Of course the company was expecting you to move to the savings plan.  The info for the savings plan explained how I'd be a millionaire when I retired, based on the projected percentage of growth in some indexed fund and matching funds, etc...   Yeah right... like I believed that. (some people did) Of course I used Excel and modeled the savings plans annual expected growth.   After I was able to match the companies rather outstanding prediction of the future with huge annual gains in the fund, then I changed the annual gains to what I considered more reasonable.    I stuck with the pension.   More than a few people switched to the savings plan, they now regret that decision, some are still working and will be for a while.

[Bikeguy]

1 hour ago, MoseySusan said:

#1 child was ranting about retirement withholding from their paycheck. I get that...it's a chunk of money and their paycheck is already barely enough to cover expenses and have a good amount of discretionary income. I had to explain what a pension is and how it works. Then I shared the weblink with information about requesting a refund of retirement withholding in the event they leave the job. They didn't know they could do that and appreciated having the info. Still teaching my child how to adult.

That's one thing that I didn't learn in school.   I can't remember my parents explaining that to me.    Good job...

Somewhere along the way I learned about compounding interest, the stock market, mutual funds, etc..  

[Parsnip Totin Jack ★]

35 minutes ago, Bikeguy said:

Yeah... even my company switched from pensions to a savings plan (in both cases you still could have a 401K) about 15 years ago or more. 

I got to choose between the pension, and moving to the savings plan.  Of course the company was expecting you to move to the savings plan.  The info for the savings plan explained how I'd be a millionaire when I retired, based on the projected percentage of growth in some indexed fund and matching funds, etc...   Yeah right... like I believed that. (some people did) Of course I used Excel and modeled the savings plans annual expected growth.   After I was able to match the companies rather outstanding prediction of the future with huge annual gains in the fund, then I changed the annual gains to what I considered more reasonable.    I stuck with the pension.   More than a few people switched to the savings plan, they now regret that decision, some are still working and will be for a while.

Same here.

[MoseySusan]

1 hour ago, Bikeguy said:

Yeah... even my company switched from pensions to a savings plan (in both cases you still could have a 401K) about 15 years ago or more. 

I don’t think PERA is going to switch to employee savings. Too many low/un-skilled positions and high turn-over. 

[Razors Edge ★]

2 minutes ago, MoseySusan said:

I don’t think PERA is going to switch to employee savings. Too many low/un-skilled positions and high turn-over. 

Seems like that would be a good option - in some ways - since it is "portable" and can be moved from job to job (or managed outside an employer's plan).  The risk is always folks cashing out and losing employer match/vesting complications for true high turnover folks.

[MoseySusan]

1 hour ago, Bikeguy said:

That's one thing that I didn't learn in school.   I can't remember my parents explaining that to me.    Good job...

Somewhere along the way I learned about compounding interest, the stock market, mutual funds, etc..  

Accounting is the HS class here that teaches personal finance and investments. The Econ curriculum includes investment, but not personal finance.

My dad taught me how to understand my pay stubs and how to file taxes, but not insurance or investment. I had to learn about retirement planning on my own, and we have some family who have been helpful. They’re freakin’ loaded from careers with companies that build military stuff. 

[MoseySusan]

2 minutes ago, Razors Edge said:

Seems like that would be a good option - in some ways - since it is "portable" and can be moved from job to job (or managed outside an employer's plan).  The risk is always folks cashing out and losing employer match/vesting complications for true high turnover folks.

I’m guessing they prefer to keep their employees uninformed about the whole thing. When they quit, the money just stays put. 

[shootingstar]

Myself and siblings had to learn most investment /money things on our own.  My father didn't earn much money to invest beyond a house and raising children.  In fact, I recall seeing my father's credit card neatly stored in desk box. He never used one.  Either it was a loan for big stuff (house, car) or straight cash.  He never used pay day loans. Just went to a national bank.

However despite my parents' lack of knowledge, what we did learn was how to save money by keeping base desires in check, doing price comparisons and not feel pressured, save, save money for ghe big one (ie. a home or car or education). I did go shopping as a teen, with a parent when occasionally looking a furniture, a carpet or my mother spending effort to lay out money for curtains.  It's a great exercise to bring along a teen and have them follow you around. Let them be bored..how else are they going to learn?

[shootingstar]

7 hours ago, Old No. 7 said:

Same here.

I worked for over 9 different employers. I never got a choice. It was whatever plan the employer offered. Many years ago, I went to an info. session for employees. We were all working for govn't. I noticed the excitement of some employees wanting cash out their pension and invest it.  And that is a public sector pension plan where there is annual increase to keep pace with cost of living and such things are getting rarer in CAnada --defined pension plan in private sector!

I never did cash out, when I left Ontario govn't.... 25 yrs. ago. Hence, I will get an indexed small pension plus other stuff.  If I had cashed out at that time, I doubt I would have invested it as well, since I had less knowledge back then. (Or shall I say, I cared less back then.) 

[shootingstar]

8 hours ago, MoseySusan said:

#1 child was ranting about retirement withholding from their paycheck. I get that...it's a chunk of money and their paycheck is already barely enough to cover expenses and have a good amount of discretionary income. I had to explain what a pension is and how it works. Then I shared the weblink with information about requesting a refund of retirement withholding in the event they leave the job. They didn't know they could do that and appreciated having the info. Still teaching my child how to adult.

There's always something to learn on managing money and investing. Always.

[Tizeye]

That drove me crazy when I was a stockbroker. While withdrawal at job change direct to another plan or IRA is a non issue, what would drive me up a wall was a withdrawal before age 55 1/2 because they "need" the money, usually to purchase a depreciating asset. It is not that they are diminishing their future retirement assets. Rather, it is THE MOST EXPENSIVE MONEY you can get. Even a high interest rate credit card is cheaper. For example. if below 55 1/2 and for easy math withdraw $10,000. In the middle 24% tax bracket, assuming it doesn't push you higher, $2400 is owed for taxes. Additionally, there is a 10% tax penalty based on the original withdrawal amount, or $1000. You effectively gave 34% to the government and netted $6600 of the original $10000, which probably doesn't meet your perceived need and have to take more, like closer to $15.000 to net $10,000.

[MoseySusan]

1 hour ago, Tizeye said:

because they "need" the money, usually to purchase a depreciating asset

This! I think #1 child gets it that there are good loans and bad loans. They don’t have a credit card, thankfully, which is partly why the deduction for a pension feels like a loss of useful income. And they don’t have any loans currently, having paid off their car and a signature loan for repairs. 
But they’re starting school again in a couple of weeks and need tuition and materials. We’re hoping Pell grant money will cover it. We have a 529 to help out.

[Bikeguy]

12 hours ago, shootingstar said:

I never got a choice.

It was just a one time choice, when the company was transitioning from pensions to a savings account for retirement.  They were hoping you'd take the savings plan. Many of us were smart and stayed with the pension.   I was betting I'd survive, not get down sized, fired, etc,..  out of the company, if that happened the pension would have been a horrible choice.   Others were afraid they would be let go, and chose the savings plan that was funded based on some kind of formula based on your years of service. 

New employees never had a choice, just the people who were there for X number (can't remember) of years had the one time choice.  

I chose the pension  Some who chose the savings plan later told me... 

 

[Bikeguy]

2 hours ago, Tizeye said:

That drove me crazy when I was a stockbroker. While withdrawal at job change direct to another plan or IRA is a non issue, what would drive me up a wall was a withdrawal before age 55 1/2 because they "need" the money, usually to purchase a depreciating asset. It is not that they are diminishing their future retirement assets. Rather, it is THE MOST EXPENSIVE MONEY you can get. Even a high interest rate credit card is cheaper. For example. if below 55 1/2 and for easy math withdraw $10,000. In the middle 24% tax bracket, assuming it doesn't push you higher, $2400 is owed for taxes. Additionally, there is a 10% tax penalty based on the original withdrawal amount, or $1000. You effectively gave 34% to the government and netted $6600 of the original $10000, which probably doesn't meet your perceived need and have to take more, like closer to $15.000 to net $10,000.

Yeah... some people would tell me they are taking out some of their 401k to buy the car (or whatever) they 'need'', etc..   I could NEVER understand why they thought that was a good idea.   As you pointed out they lost a LOT just to taxes. 

Also.. the person never understood, the lost opportunity of gain they just spent too.  

[Green Grass]

On 8/20/2021 at 9:26 AM, Randomguy said:

Please teach me next.

Might be too late...based upon the quality of the decisions you've made.

[team scooter]

My kids are all in their 30s and still seek our approval. I know when they are considering buying a big ticket item, they start campaigning about it like they did when they were kids. I remind them its their own money now, they dont need our OK to spend their own money.   

[MoseySusan]

5 minutes ago, team scooter said:

My kids are all in their 30s and still seek our approval. I know when they are considering buying a big ticket item, they start campaigning about it like they did when they were kids. I remind them its their own money now, they dont need our OK to spend their own money.   

That’s kind of nice when the adult kids want your stamp of approval. They use your validation as a guide that they’re on the right track. 

[shootingstar]

Probably the next big leap of learning for an adult kid is after parent dies, then they find out how parent invested their money.  That is, if the child knew very little about investment strategies, major tax matters.

I'm pretty certain that is the case with dearie's daughter now.  She has been living a good thrifty life and hence, has never managed complexity of multiple accounts and some investments. The sad thing is that I wonder if her lawyer will try to be Mr. Saviour and do everything for her (and bill every hr. of his time), instead of her seeing an accountant.  It will reduce her and brother's inheritance.  However that is their problem ....and their lawyer.

(and I can see it already:  her friends urging her to try out cryptocurrency soon. When you think about it, it's kinda sick.)

If a person has never dealt with a lawyer before nor worked in the legal sector, it's harder for laypeople to determine what they can legally do themselves and follow the steps laid out on the govnerment's website. And a lawyer is only to advise on the side and only intervenes when it's critical.

 

[BR46]

On 8/20/2021 at 10:56 AM, MoseySusan said:

#1 child was ranting about retirement withholding from their paycheck

Just have them play around with this and let them figure out how much money they can have in retirement if they start now. And what you can have with investing as little as 5 dollars a day.

https://www.bankrate.com/retirement/calculators/traditional-ira-plan-calculator/

[shootingstar]

26 minutes ago, BR46 said:

Just have them play around with this and let them figure out how much money they can have in retirement if they start now. And what you can have with investing as little as 5 dollars a day.

https://www.bankrate.com/retirement/calculators/traditional-ira-plan-calculator/

Some of the online calculators at least gets one thinking.  The problem I've found for the CAnadian decent ones, the tax rate is seldom included in the estimates. Not suprising, since the rate can change in the future or different mechanism introduced by law, by the federal govn't.