Shortly after I moved to my current residence, I switched jobs. My previous line of work was slowly coming to a close, and I needed to make sure that I wasn’t left jobless, so I kept my eyes open for new employment. When the opportunity came, I took another job that offered longer term employment. While I’m glad I made that decision, and I’m happy to move forward, my previous employment had some excellent benefits – including a matching pension plan. Now that I am no longer employed by that company, I’ve been given 3 options for the money that was put into my pension plan, and to be honest, I’m not sure which I want to do. Here’s the options.
Transfer to Current Pension Plan or RRSP
If my current employment had a pension plan, I could transfer the balance to the new pension plan. This would be the easiest and most seamless option. Pretty much nothing would change – the money that I’d already saved would simply transfer into my next pension plan, and when I retired or left this employment the balance would be either moved or saved in the same fashion. If my current employment does not have a pension plan, which it does not, I can transfer the balance to an RRSP, which I would set up through my bank. Both of these options are good because they do not offer any cost or fee for the full balance transfers.
Keep the Balance, Wait for Retirement
The second option would be to not move the money at all. I could, instead, simply keep the balance that I have already accrued and wait for my retirement, at which point my pension would begin to pay out. According the documents that I received, because of the balance that I have in the pension plan, I would get paid approximately $1000 annually beginning in 2052. Probably not the best option in this case, as a grand in 2052 will probably not even cover basic monthly expenses, and waiting 40 more years may not be the best option for my current financial situation.
The third option is to get the balance paid out to me. Because the pension deductions were not taxed in the first place, I would have to pay income tax on the amount that I brought home. In addition, I would also have to pay a percentage fee in order to withdraw that money directly. This is definitely the most tempting option, as having a bunch of extra money suddenly is always a wonderful thing. Granted, we would also be losing the most money this way, and having the opportunity at our age to lock away a bunch of money for retirement is also quite tempting. There’s just so much that we could do with the cash with this option, while perhaps the least financially sound, is definitely the most appealing.
All in all, I’m not sure which the best option would be at this point. Having the extra cash on hand would be nice, even considering the extra taxes we would have to pay in order to do so. It would open up a number of possibilities. One of the options that we are looking into is moving it into an RRSP that would allow us to withdraw the funds through the Home Buyers Plan in order to purchase a home. It’s something that we’ve just heard of, and aren’t sure of the restrictions or options just yet, so we’ll have to do more research before we pull the trigger on anything just yet. What would you do in this situation? Have you dealt with a pension payout before? What did you do? Sound off.