I don't talk about it much, but I work as a civil servant. I have the part-time writing gig for Frank, but most of my income emanates from my day job.
The government recently decided to allow civil servants to tap into what is called a public service award, an amount of money paid to retiring civil servants. One week of salary for each year of service, up to twenty six weeks. In order to get this money, you couldn't leave your job in any way other than retiring. If you left to go somewhere else, you didn't get it. If you got fired, you didn't get it.
They want the money off the books, so they're letting us get the money now. By now, I mean in the coming few months, as there are only so many people working away at calculating these amounts owing, and it takes a while to do this work. I won't pretend to know about it.
Last week, we all got letters spelling out what our PSA amount will be. We also got options for how to receive that money. We could get it as one big payment, less income tax, CPP contributions, EI contributions, and everything else. Those going for that option, will likely get about 50% of that money. Maybe 55% at the most.
You could also opt to put all, or some, of that money into a retirement savings plan and defer the tax, as you would never see it.
What you do with that money, and how it is disbursed as above, depends on one's financial situation. I decided to go for the full payout, although it means taking a kick in the teeth, tax wise. I took on a fair amount of debt before my mother died, and added to that right after she passed. I have had to add yet more to get other important things done, too. I have been dutifully paying it down over the last few years, and I have about two years left to go.
If i get this payout as I have described, I can pay off that balance of that debt pretty much instantly. I will free up the cash designated for this debt, and put it toward other things, including savings. It seems like a no-brainer to me.
But others like the idea of socking the money away into the RSP thing, getting the tax break, and applying THAT money to whatever debts and other financial obligations confront them.
In speaking with a co-worker today, I opined that many people give little thought to their financial planning. They just want their net pay every two weeks that they can spend on what they want. As they approach retirement, they feel they should retire as much of their debt as they can, but that is about it.
I am not too far away from that attitude, and we suspect that most people are not, either.
I think my decision works for me. The die is cast. I mailed in my decision last week.
I am wondering what you would do in my case, and why? You don't have to tell me your precise financial situation. Don't give me actual dollar amounts of what you owe, or what you would spend it it. Just give me a rough idea of what you would do, and why.
I look forward to your thoughts.
See you tomorrow.