Do you work at Ford Canada? Have you been a long-time employee and are on the Defined Benefit Pension Plan at Ford?
Older employees at Ford Motors had a Defined Benefit (DB) pension plan. Let’s dive into your options if you are planning to retire soon from Ford Canada.
A defined benefit pension plan is a type of pension plan where Ford ‘sponsors’ your retirement plan by promising a specified pension payment. The great thing about defined-benefit pensions is that employers guarantee a very specific retirement benefit amount for each participant in the plan. When you retire, we’re able to figure out exactly how much your pension is worth and what you’ll be paid out once you’ve retired. In this video we explore your 3 options when retiring or leaving your employer, and you have a defined-benefit pension plan with the company.
YOUR 3 OPTIONS
CHOICE #1: DO NOTHING
Do nothing. Leave your pension with Ford.
Ask yourself, in 30 years is the company still going to be making vehicles here in Canada and employing people to contribute to my pension? Who will be putting money into your pension so you can take it out?
CHOICE #2: COPYCAT ANNUITY
The copycat annuity (also known as a “mirror annuity”) is a popular choice for employees coming out of a defined-benefits pension plan. It allows you to receive the same pension that your employer promised you, but it gets paid out by a secure Canadian insurer instead of the company you worked for, such as Sun Life, Canada Life and Desjardins. Plus, sometimes your company’s pension has a surplus and the Canadian insurance company may pay you your pension plus extra cash. We’ve seen bonus cash payouts up to $30,000. You might qualify.
CHOICE #3: TAKE THE CASH
Taking the cash is known as the commuted value. You’re able to move the money out of the company pension plan so it can be self-managed by you. Watch out for the government tax grab, but beyond that, this is your money. Use it for retirement or to pay off your mortgage or buy a boat or RV. Take a trip. The rest is your estate.
Contact a financial planner at Pension Solutions Canada to help you invest your funds so that you’ll have enough money to last you for the rest of your life. We can help.
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