Don't laugh at my question but... whats the difference between a pension and retirement or is it the same?

Question

Im not sure what the pension is usually used for.

Retirement is for when you retire I do know that much.

My husband used up a generouse loan from the bank and now promises he will remodel our home with his pension money. Im mad but not sure what this is taking away from us.

Is this good or bad?

Answer 1

A pension is what a company pays it's employees who have retired for thier years of service to the company. The forumla is based on many factors. But it is essentially a monetary payment. Depending on the retirement plan, the pension can be taken in a lump sum or drawn on a monthly basis.

In answer to your question regarding using the proceeds from the pension plan for remodling a house.

From a tax standpoint it is a bad idea. If he takes a lump sum distribution you will have a large tax bill at the end of the year for this, despite the fact that you get the advatage of the mortgage deduction. In any case avoid the trap of thinking that because you have earned this money you get it tax free. That is just not true.

Now some plans state that you could borrow against the total value in the pension account with the understanding that you would be required to either pay back the loan, or lose the investment income the pension fund earns on that money.

Answer 2

I don't know if you are in Oz or the US but I will answer this as if you were in Oz.
A PENSION is a payment made by the government determined by your assets and the fact that really you are a baby boomer and therefore were not subject to compulsary superannuation by you and your employer. The reason that it is determined by your assets is the fact that you may have, let's say, $1mil in property that is being rented out, netted you a enormous sum per annum not to mention the negative gearing you have on those properties. Therefore it wouldn't be fair if you have all that money you should recieve a PENSION compared with a single person who owns a home to the value of $300k with that being their only asset.
RETIREMENT is the money that your husband has saved during working which is really SUPERANNUATION. This is a compulsary 9% for employers and a compulsary (I don't have paperwork with me now but I think) 6% "you" contribution as well. If worked properly, the pension will not apply to your husband because of the fact of the loan but then again he may not have declared the loan.
In short, No, your husband can not use the PENSION money to remodel your home due to the fact any plans will have to be approved and will of course lift the value of the home therefore decreasing the money he is allowed through the PENSION. Don't spend more as you will have A LOT less.
SUPERANNUATION would have been paid when your husband retired and filled out the paperwork. This can be paid in a lump sum or fortnightly depending on circumstances. Superannuation is now NOT TAXED however once withdrawn and placed into different accounts it will be taxed.
I feel that what your husband has done is got is Super Payout, not a loan from the bank, and has spent it thinking he can rely on the Pension. Unfortunately the Tax Dept balances books with our government and your husband will be in a lot of trouble. You will be left with nothing and your husband will have to pay back the money from the PENSION.

Answer 3

Could be either. A pension is usually a two-way contribution vehicle that will draw interest until retirement. I am an educator and I have a pension with a defined benefit. I take the number of years that I worked and multiply by 2.4 and that gives me the percentage that I will be paid of an average of the last three years of my work life. If I die my wife gets 1/2 of that money each month until I die.

So if I retire at 30 years I will get 72% of $100.000.00, or $7,200 each month for the rest of my life. My pension has zero cash value and I cannot borrow against it. After 10 years I am fully vested and cannot cash it out without retiring even if I leave education. This type of account is very restricted as I am not eligible to draw SSI, as educators in CA do not pay into SSI.

I also have a retirement account that I contibute to alone. I pay in about $350.00 a month and I will get about $1,200 each month when I retire past age 65. I can borrow from that with penalty. I can also cash it out at any time with penalty

Some retirment accounts are nto as defined and restricted as mine. I know that some workers can borrow from pension plans some cash for such things as home repairs/remodeling and the the like.

The question would be how are you going to live and pay regular expenses if he spens the cash from the pension, especially if he is already retired. If you are living on the pension that may be very hard.

Answer 4

They are the same. A pension is what you get after you retire. It's a monthly payment you receive for your years of service with one company. However, if you don't retire from a job you've been with for years, then you get your retirement payments from Social Security - some people get both, it just depends. Your husband is making promises to remodel your home with his pension, well that's nice but if he's not making a huge living now, his pension will need to be on a fixed budget. Good luck.

Answer 5

Retirement is sort of like a self savings plan. You put money into it and depending on the employer, they will also contribute to your retirement fund.

A pension is strictly paid by the company. If you retire from that company, they will give you a monthly amount of money. Not sure for how long or anything like that...but it's something that you yourself do not contribute to. It's usually a percentage of your salary.

Answer 6

pension is what you get from companies like SSS...

if he's an employee, part of his salary is deducted by his company and remitted to SSS....and so depending on the numbers of years he served there....his pension will be computed when he retires....

retirement is the amount you get from the company.

separation pay...after a min. of 5 years employed.

all are subject to tax.

and, you can loan against your SSS...its not wise to have a bank loan. two kinds of loans...if its by a private party...for a house, its usually a term loan...he will not get his pension unless he's about 65. and that's just enough....

loan is bad....
i don't think a pension can cover a monthly interest of a loan...its usually 2 or 1.5 higher than treasury bill closing rates.

i suggest pay off the loan, and remodel one step at a time, not one big project. i hope that helped.

Answer 7

A pension is the difference between the total retirement allowance specified by law and the amount provided by employee contributions.

Answer 8

Your "Pension" is what you receive after you retire from the employer that you retired from - IF that employer offered a pension that you are qualified to collect. Not all employers offer a pension; in that case, all a retiree might have is Social Security Retirement and any Savings he may have.

Answer 9

pension is company issued and funded upon retirement based upon company guidelines.

retirement plans are employee invested and funded but can be partially funded by the company in the case of company 401k matching.

retirement plans include- IRA's, ROTH IRA's, 401k, 403b

Answer 10

HAHAHAHAHA...no i dont know either.