Pension Transfer Options

Updated : Nov 20, 2019 in Articles

Pension Transfer Options

so I’m really intrigued about this one
I’m all I always am because you make it sound so easy
the way you presented Anthony but we’re gonna talk about the pension transfer
options and this is a big one for people because no one stays in the same job for
the most part for their whole career they’re kind of jumping around so but if
you’ve been there for like the time you do have some investment in in some sort
of pension RSP or whatever what do you do so you’re gonna kind of perfect for
one reason or another you might find yourself changing careers and if your
previous job you had accumulated a pension as soon as you jump ship to a
new employer you’re gonna get some papers in the mail which gives you
pension options and the pension options you’re gonna have our three options that
are going to be in that report that you get mailed out to you and these three
options always confuse clients and I get a lot of calls when people are
transitioning from jobs sure what should they do
you can either roll that pension to your new employer if they have a current
pension in place you could transfer it you could keep it with your former job
and keep it in that pension or you can transfer it to your own locked in RSP
that’s what the Liras stands for okay oh good so what we boil it down to is
either you can decide to either keep it as pension money or transfer it into
your lira and this is what I’m gonna walk you through the pension by leaving
it in there you’re gonna have a guaranteed income at a certain
retirement age whatever that paperwork tells you it’ll say for example I did a
recent one where the client had a hundred and fifty five thousand dollars
he was in his early 40s of accumulated pension so the papers that he received
he was out able to take that one fifty five and put it into his own locked in
our spean control the investment himself or he could leave it with the pension
company and when he retires at age 65 he’s entitled to seventeen thousand
dollars a year for the rest of his life now that guaranteed income might sound
desirable but when you pick it apart and see what kind of rate of return do I
need to earn or does the pension company have to earn to supply me that income
stream when you do the math on this and you have to use a hypothetical life
expectancy so you kind of can figure out the math formula but you realize that
most pension companies only need to generate
Queen 2% and 3% rate of return to supply that monthly income so if you have an
opportunity to get this money on out of your pension and now in your control you
might have 20 or 30 years before you’re actually ready to retire you can invest
this and if you can generate a return that’s higher than 3% you’re probably
going to come out a lot further ahead at retirement time so question if so if you
go from this employer to this employer and this employer has a really good
investment plan or are they kind of all the same like well then it might be
worth while we’re talking here but it’s called a defined benefit pension plan
this is like if you work at the hospital or if you work for the city
teachers have these these types of pensions where you have no control over
how the money is managed you just get a promised a guaranteed monthly income and
you’ll get pension statements that will show you at a certain age what your
projected income is looking to be and so people just don’t see the rate of return
because it’s not required it’s promised to them they don’t have to you know deal
with the investment and that could be a benefit to keeping it with the pension
but you could be leaving a lot of money on the table so would you is this your
but like your suggestions on sort of my clients personality type because one of
the downfalls of having Alire is that you have to manage it yourself but by
managing it for you that’s where I come into play but the benefit or the
downfall or the risk with Alire is that you have access to this money much
earlier than if it was locked in the pension and you had to wait till full
retirement age with a lira you can access it as early as age 55 on the so
if you’re bad with money and you have the temptation to withdraw you could be
spending your pension money during your private working good idea for that but
not if you’re a spender you’re a person that’s constantly in credit card debt
that’s probably not going to be the best option for you but for most people who
are responsible building up a bigger lira is a lot better than leaving it
inside the pension but usually you don’t get that opportunity to take pension
money out unless you’re changing jobs so this is actually an opportunity more
than it as a negative another downfall about having it as a
pension is that when you when the pensioner dies when they pass away
there’s a spousal survivor percentage so they don’t get a
hundred percent of your pension your pension is now reduced and the pension
company keeps that and every pension you have to look at what your survivorship
percentage isn’t fair well that’s just the way it works you know
but but this is a big downfall with with the pensioner dies early then their
spouse is receiving a reduced amount and it ranges from sixty to seventy percent
so you could easily be losing 40 percent of your pension if you die prematurely
in retirement age right whereas with the locked-in RSP that money is now in
hundred hundred percent whatever you don’t get around to spending one hundred
percent of it can be passed down to your spouse so for the benefit of disposal
survivorship percentage on the lira side also with controlling on your
withdrawals on the lira just because you have access to it at age 55 doesn’t mean
that you have to take it if you have income from other sources and you’re not
needing this money you could postpone and defer it for even longer than your
traditional retirement age and that will help you avoid taxes because if you’re
pulling out income when you don’t really need it all you’re gonna do is have more
income tax to pay at the end of the year so depending on your situation if you
want to access it early you can if you want to postpone it you can but this is
the opportunity that comes with changing jobs is getting that pension money
unlocked and you put it into a lira which is an RSP account that’s locked
into late 55 that’s how it works that’s cool yeah yeah great perspective good
things to think about right I mean because we don’t we don’t think about
our money I was talking to both Jim and Joe the ride for dad segment earlier
just exactly about that right is it at 20 in your twenties you don’t think
about putting money somewhere for retirement that’s like a long way away
but if you did you’re gonna be laughing in your retirement retirement retiring
at a much younger age and we talked about that before too Anthony thank you
so much great wonderful always putting it in perspective making it so easy for
people to understand a cap Financial Group you can find them up in
Flamborough you can email Anthony at cap financial CA you can find them on the
web cap financials CA and you can always call 905-lostjob

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