Author Topic: Transfer Options for my Defined Benefit Pension - Canadian  (Read 1731 times)

Danor71

  • 5 O'Clock Shadow
  • *
  • Posts: 3
Transfer Options for my Defined Benefit Pension - Canadian
« on: August 17, 2015, 11:11:02 AM »
Long-time lurker, 1st time poster.  I've learned so much here.  Thank you all for the wisdom.

I've just changed jobs after 10years + at my old job.  I've just received paperwork requesting instructions on what to do with my Defined Benefit Pension.  I am really not sure how to proceed.

Option 1 - Transfer into a Locked in Retirement Account  (LIRA) or Life Income Fund (LIF)

Option 2 - Deferred Pension - accept the pre determined amount as indicated on the forms once I retire at 65 (which is not my plan) paid for the rest of my life

I'm leaning towards Option 1 as I am concerned about the company eventually disappearing.  Where do I go to setup a LIRA or a LIF?

Any help would be appreciated.

Thank you in advance


Heckler

  • Handlebar Stache
  • *****
  • Posts: 1370
Re: Transfer Options for my Defined Benefit Pension - Canadian
« Reply #1 on: August 17, 2015, 12:56:18 PM »
If you're not nearing retirement age, I would go with the LIRA and set up a self directed LIRA (same as RRSP, but locked in so that you cannot access the funds until retirement age).  Any financial institution (who offers self directed RRSP accounts) of your choice can do so.  then you can buy whatever ETFs you choose (ie. Vanguard). 

If the amount is small, you may be able to unlock a LIRA and move it to your self directed RRSP, allowing access to funds at any time.

http://www.taxtips.ca/pensions/rpp/unlockingrpp.htm
« Last Edit: August 17, 2015, 01:00:07 PM by Heckler »


sky_northern

  • 5 O'Clock Shadow
  • *
  • Posts: 99

Danor71

  • 5 O'Clock Shadow
  • *
  • Posts: 3
Re: Transfer Options for my Defined Benefit Pension - Canadian
« Reply #4 on: August 17, 2015, 05:45:51 PM »
If you're not nearing retirement age, I would go with the LIRA and set up a self directed LIRA (same as RRSP, but locked in so that you cannot access the funds until retirement age).  Any financial institution (who offers self directed RRSP accounts) of your choice can do so.  then you can buy whatever ETFs you choose (ie. Vanguard). 

If the amount is small, you may be able to unlock a LIRA and move it to your self directed RRSP, allowing access to funds at any time.

http://www.taxtips.ca/pensions/rpp/unlockingrpp.htm

Thanks for that.  I'm about 10-15 years away from retirement.  I guess I should check out Vanguard and see how they compare to my current financial advisor.


RichMoose

  • Pencil Stache
  • ****
  • Posts: 965
  • Location: Alberta
  • RiskManagement
    • The Rich Moose | A Better Canadian Finance Blog
Re: Transfer Options for my Defined Benefit Pension - Canadian
« Reply #5 on: August 19, 2015, 10:08:19 AM »
Just a little math might help in your decision making. Use a compound interest calculator like: http://www.getsmarteraboutmoney.ca/tools-and-calculators/compound-interest-calculator/compound-interest-calculator.aspx

Take your transfer amount and compound at 5% for (x) yrs until you're eligible to take your pension. Then use 3.5% or 4% to figure out a safe withdrawal. If the amount you can safely withdraw is significantly more than the monthly pension they are offering I would say your decision is made using relatively conservative numbers.