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Pension Planning For the Future

Amanda Bar

As I mentioned a few months ago, the city which I work for has recently found itself struggling under the financial crisis, and in order to regain some losses it decided to cut the benefits of all civilian employees working within the city.  Not only did I lose 4% of my total monthly income but my pension was also frozen, and I knew that sooner of later I'd have to decide what to do with my stagnant pension funds.

This week I received a letter from the Principal Financial Group advising that I currently have $12,000+ sitting in my pension plan (including interest) and I had two months to choose my options: either direct rollover into an IRA, or go for a cash distribution.

I know that I need to focus on the future, and that an IRA is the smart and obvious choice.  I don't currently need the extra pocket money, and I'd lose a large portion of it via an excise tax if I choose the pay-out option.  But woah, is it tempting!  It's been near impossible for my to build up my savings accounts since I purchased this house, and I still have so many little projects I'd like to accomplish if I could just get my hands on some extra cash.

Luckily I have relatives and co-workers to steer my impulses in the right direction, because it's so hard to think of tomorrow when you could use the funds today.

Posted by Amanda Conwell at 05:56 PM on September 16, 2010 in Banking , Savings | Permalink | Facebook | Digg | del.icio.us | AIM

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