This my first time asking for help from this community and based on what I've seen so far I am confident I can get good advice! I am hoping the info below is clear and sufficient to do the calculations, without having to show all of our family finances as in a full case study. Please let me know if additional info is required.
Here's the scenario: I am a (Canadian) teacher who has taught for 8 years, but as of this year am age 54.I am married to another teacher who still has a few years more to go and whose pension will be far better than mine. We have 2 kids in post secondary, and one still in school. No debts, own our home. $50,00 in RRSPs. Education fund set up for kids.
If I want, I can retire when I am 55 next year. Because I have only taught 8 years, my pension amount will be quite small (approx. $600-700 per month, depending on whether I actually teach next year; very possible I will not. If not I can expect a pension of approx.$650).
Because I am not yet 55, I have the choice to take a lump sum (of approx.$150,000) which has the following criteria attached: a certain amount must go into a LIRA (approx. 90,000) and the rest is paid out in cash ($60,000 taxable at 30%). Half of the LIRA can subsequently be put into an RRSP. The other half is kept in a retirement vehicle which can't be touched. I am free to invest the cash portion (minus taxes) however I wish, in or out of a retirement vehicle.
If I do not work next year, and go ahead with receiving the lump sum, I will get the tax back that is withheld, the following year.
I am thinking that it may be better for me to take the lump sum and invest it so that it grows to a greater amount than what it would be even if I live until I am 80 or more. Because it isn't a huge amount that I would receive per month, it is not as if I am gambling with our life savings. I plan to still work here and there to ensure I have an income of sorts, but want to get out of my very stressful job and pursue some other things before I am too old.
The question is whether taking the lump sum has a reasonable expectation of doing better than the monthly amount I would be guaranteed for life if I went the conventional route. I know it is the "safer" route, but I have learned a great deal from this site and others and know that what seems safer is not always the best way to go.
I am very interested in what other more financially savvy readers would have to say about this.
The critical point is whether I would lose a chunk of the cash portion to taxes. If so then I think it would be best to take the monthly pension. If I don't work next year however (likely) then I would get the taxes back.
Thank you in advance for any help offered!