A Young Couples Journey Out Of Debt, And Down A Path To Financial Independence.

Tuesday, November 27, 2007

Pension Pay Out.

I received a cheque toady from the pension plan of my previous employer. Because I was in the same pension plan at both of my jobs I was not allowed to roll one pension into the other. Apparently you are not allowed to have greater than 12 months of earnings in any one plan. As I have mentioned previously, at the present time we are focusing most of our time, money and energy on debt repayment. For this reason, I decided to take a cash refund of my pension and use it for debt repayment. I was very apprehensive about this decision, as most personal finance advice tells you not to do this, but to reinvest it. I consider debt repayment a good investment in the current market, so I am reinvesting the money that I received from the pension plan and paying off debt. The total value of the pension was adjusted for taxes @10% because the total value was less than $5000.00. I was only in this plan for 10 months, all the while making pension payments at my other job, which I am now full-time. I decided to cash it out based on a short time in the plan, current investment market, already paying into another pension, and the timing of the payout. The only cons were not reinvesting in a down market, and being taxed on the total amount of the plan.

Here's what I did. I received a cheque for $4945.00, of which I applied $4221.59 directly to my unsecured Line of Credit. The other $700.00 will go into our savings account. Our line of credit now stands at $6684.00, It totalled over $22,000 just six months ago. I was very excited to wake up and find this money in my account. November is turning out to be a very good month in terms of debt repayment. We have paid off nearly $7000.00.

If we continue at our previous pace for repayment, $1500.00 per month, we will be debt free at the end of march.

We can see the light at the end of the tunnel. We are so excited.

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