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Learning, Sharing, and Teaching => Investor Alley => Topic started by: Danor71 on August 17, 2015, 11:11:02 AM

Title: Transfer Options for my Defined Benefit Pension - Canadian
Post by: Danor71 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

Title: Re: Transfer Options for my Defined Benefit Pension - Canadian
Post by: Heckler 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

Title: Re: Transfer Options for my Defined Benefit Pension - Canadian
Post by: Heckler on August 17, 2015, 01:03:50 PM

http://www.moneysense.ca/invest/canadas-best-discount-brokerages-2015/

http://canadiancouchpotato.com/model-portfolios-2/

Title: Re: Transfer Options for my Defined Benefit Pension - Canadian
Post by: sky_northern on August 17, 2015, 03:06:48 PM

Quote from: Heckler on August 17, 2015, 01:03:50 PM

http://www.moneysense.ca/invest/canadas-best-discount-brokerages-2015/

Doesn't seem I can access this, asking for subscription.

Title: Re: Transfer Options for my Defined Benefit Pension - Canadian
Post by: Danor71 on August 17, 2015, 05:45:51 PM

Quote from: Heckler 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

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.

Title: Re: Transfer Options for my Defined Benefit Pension - Canadian
Post by: RichMoose 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.