Author Topic: Pension Transfer Value / Lump Sum Pymt [Merged]  (Read 139963 times)

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Offline runormal

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Re: Pension Transfer Value / Lump Sum Pymt [Merged]
« Reply #225 on: July 12, 2018, 05:53:43 »
You were correct.  The transfer value is a lump sum.  Well, two lump sums: one amount is transferred into a locked-in RRSP that can't be touched until about age 65; the balance comes as cash that is taxable in the recipient's hands in the year it is received.

I don't see why it wouldn't, but does this "locked in" RRSP portion country against your RRSP room? I'm not planning on releasing this year, but I'll be shocked if I get my CD. I'll need to do some calculations, but given my age / value of my annuity vs the interest that could be compounded, I'd be crazy not to transfer everything into an RRSP.

Offline dapaterson

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Re: Pension Transfer Value / Lump Sum Pymt [Merged]
« Reply #226 on: July 12, 2018, 05:58:04 »
No. The locked in portion does not count against your RRSP limit; your RRSP limit was reduced over time due to your CFSA contributions.

Point to note: in some cases, leaving the money in the CFSA may be a viable option.  Not only will you receive an annuity at age 60, but you will be eligible for medical and dental insurance when retired. Taking the transfer value denies you that option.
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Re: Pension Transfer Value / Lump Sum Pymt [Merged]
« Reply #227 on: July 12, 2018, 06:15:53 »
No. The locked in portion does not count against your RRSP limit; your RRSP limit was reduced over time due to your CFSA contributions.

Point to note: in some cases, leaving the money in the CFSA may be a viable option.  Not only will you receive an annuity at age 60, but you will be eligible for medical and dental insurance when retired. Taking the transfer value denies you that option.

Interesting. Learning something new.

The SCAN seminars, and release process go to great lengths to cover as much as possible, and mention the retirement medical / dental benefit.
From all of that information, I don't remember hearing about the potential of losing the benefit for any reason, including the transfer value.

Thank you for mentioning that part.
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Offline dapaterson

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Re: Pension Transfer Value / Lump Sum Pymt [Merged]
« Reply #228 on: July 12, 2018, 06:18:08 »
Eligibility is tied to being in receipt of benefits under the CFSA (Part I or part I.1).
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Offline runormal

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Re: Pension Transfer Value / Lump Sum Pymt [Merged]
« Reply #229 on: July 12, 2018, 06:20:05 »
No. The locked in portion does not count against your RRSP limit; your RRSP limit was reduced over time due to your CFSA contributions.

Point to note: in some cases, leaving the money in the CFSA may be a viable option.  Not only will you receive an annuity at age 60, but you will be eligible for medical and dental insurance when retired. Taking the transfer value denies you that option.

Good to know thanks - re locked in portion.

I'll do some research and compare the offerings between the federal government retirees coverage and the army's retiree coverage. I'd imagine that they are similar, but over time (the additional 34 years of service that I need to retire w/o a penalty), I'd be willing to bet that the army's retiree package may be stronger.

I'll also re do my calculations to see if I made an error.

Thanks again as always.

Offline Pusser

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Re: Pension Transfer Value / Lump Sum Pymt [Merged]
« Reply #230 on: July 12, 2018, 10:39:32 »
I'll need to do some calculations, but given my age / value of my annuity vs the interest that could be compounded, I'd be crazy not to transfer everything into an RRSP.

I wouldn't be so sure about that.  Although there is certainly potential to make out big time (especially over the long term), there is also the opportunity to lose big time.  Talk to anyone who invested heavily in Nortel (including all the ex-Nortel employees whose pensions were tied up in Nortel stock and are now gone).  Unless you're rolling the money into another defined benefit public superannuation plan (e.g. PSSA, RCMPSA or provincial equivalents), I would be leery of taking the commuted value.  A defined benefit plan (even a small one) is pretty valuable because it's indexed and guaranteed by legislation, and not at all dependant on the financial markets.
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Offline Brihard

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Re: Pension Transfer Value / Lump Sum Pymt [Merged]
« Reply #231 on: July 12, 2018, 11:07:21 »
I wouldn't be so sure about that.  Although there is certainly potential to make out big time (especially over the long term), there is also the opportunity to lose big time.  Talk to anyone who invested heavily in Nortel (including all the ex-Nortel employees whose pensions were tied up in Nortel stock and are now gone).  Unless you're rolling the money into another defined benefit public superannuation plan (e.g. PSSA, RCMPSA or provincial equivalents), I would be leery of taking the commuted value.  A defined benefit plan (even a small one) is pretty valuable because it's indexed and guaranteed by legislation, and not at all dependant on the financial markets.

Anyone transferring something as substantial as a pension into an RRSP should be getting professional financial planning advice. Investing ten years' worth of pension contributions is a not inconsequential sum, and anyone who knows their stuff will be seeking diversification in assets. Yes, if you dump a ton of your wealth into one specific stock or a very narrow cluster of investments you can get burned badly (as I myself have when I was younger, dumber, and had a bunch of cash to play with). Definitely seek professional advice on this, but generally speaking, transferring your pension value to a locked in RRSP that is properly managed is probably going to be a pretty good bet.
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Re: Pension Transfer Value / Lump Sum Pymt [Merged]
« Reply #232 on: July 12, 2018, 13:20:31 »
Anyone transferring something as substantial as a pension into an RRSP should be getting professional financial planning advice. Investing ten years' worth of pension contributions is a not inconsequential sum, and anyone who knows their stuff will be seeking diversification in assets. Yes, if you dump a ton of your wealth into one specific stock or a very narrow cluster of investments you can get burned badly (as I myself have when I was younger, dumber, and had a bunch of cash to play with). Definitely seek professional advice on this, but generally speaking, transferring your pension value to a locked in RRSP that is properly managed is probably going to be a pretty good bet.

Sage advice!

I do my own investing.  The key is diversification and having the right spread of assets and securities in your possession.  Also, not putting all your eggs in one basket.

Cashing out your pension and investing in a single stock is stupid.  Cashing out your pension and investing in a healthy spread of stocks, mutual funds and bonds is very smart and you will most likely see a higher rate of return than if you just let your money sit in an RRSP or defined benefit plan. 

It's called having a strategy  8)

1.  Pay off all bad debt i.e. no credit cards, line of credit, etc.  Anything with a high interest rate as you will not make any money if your interest payments on bad debt are higher than your securities growth and/or dividend payments.

2.  Build a large cash reserve.  Before I started investing, I built a large cash reserve that I don't touch.  It is my "rainy day money" that just sits in a savings account as my Reserve.  As in warfare, always have a Reserve ;)

3.  Set some goals for yourself, is the money you want to invest for something you want 5, 10, 25 years from now.  This will influence what you put your money in to. 

4.  Pick a diversified set of securities to invest in to and also accounts that are tailored to your situation. 

My strategy is fairly simple:

I have a non-registered TFSA that I use to buy securities in a number of different Exchange Traded Funds (ETFs) , three to be precise.

One is an S&P 500 Indexed ETF (medium risk)
Another is a High Dividend ETF (medium-low risk)
Final one is a Consumer Discretionary ETF (high risk)

The reason I chose ETFs over mutual funds is because the fees are lower and  I don't trade frequently.  Rather I buy and hold and only in relatively large quantities to cut down on my fees which will kill you if you trade all the time.    My investment strategy involves investing my TFSA contribution limit each year in those ETFs and simply holding on to the securities for years. 

ETFs also allow you to invest money in a spread of securities so you don't put all your eggs in one basket.

I personally think the TFSA is the single greatest thing ever, it's my own little personal tax shelter for gains.  The greatest thing is you are only constrained by your contribution limit and gains cannot be taxed!  The government has been very lucky that more people aren't using it to its full potential!

This along with my pension will hopefully set me up nicely for what I call Freedom 45  8).  My future goal is to diversify further within the next five to ten years by acquiring some rental properties.