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What Happens If You “Cash Out” The Commuted Value Of Your Pension? (Next Steps…)

We know what a commuted value of your pension is, it’s the cash value. As one client said: “Just give me the cash.”

Your employer cuts the big cheque to the investment company, then we do the investment management for you.

Simple.

Now let’s complicate that.

You don’t get one cheque. You get 2 or 3. The first will be the locked in amount or LIRA.

That amount is capped by some antiquated legislation called the “Maximum Transfer Value”, MTV.

Basically, it is a chart that determines how much of your commuted value, the CV, can be tax sheltered.

Simple example: in your mid 50s the factor is 10. Take your lifetime pension and multiply by 10. There’s the LIRA.

Beyond that, all the “cash” is taxable. So you will earn hundreds of thousands of dollars in your retirement year.

The bad news is that cash is fully taxable, plus any income, plus severance if applicable. You’ll owe $100k or $200k income tax.

How can you avoid that?

There are a couple of strategies that include your RRSP room and time of year.

But you will very likely have a tax bill. Look past that. Tell yourself: “i’ll still have $500k or $700k of investible assets.

Call me to strategize BEFORE you put in your retirement papers.

 

– BRUCE YOUNGBLUD, CFP, CIM

 


Bruce Youngblud is a Certified Financial Planner in southern Ontario with over 25 years of experience. Bruce & his spouse have 3 boys, two daughters-in-law, and one grand dog plus some kitties.
Bruce and his team specialize in helping individuals prepare for retirement and advises clients on pensions, government pensions, tax planning and estate planning.

Considering a copycat annuity when you retire? Chat with us first!

Now it’s time to take action! Get a free consultation to analyze and discuss your pension options.  Our services are at no cost to you. Schedule a 15-minute call here with one of our Certified Financial Planners!

The team at Pension Solutions Canada specializes in helping individuals prepare for retirement and protect their assets. We can also help you with estate planning, address tax minimization, and answer all of your retirement and pension questions.

Call 1-888-554-6661 to speak with Kennedie who will book a call with one of our pension experts at a time most convenient for you.

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Book a no-obligation 15-minute virtual Zoom consultation call with a Certified Financial Planner who can answer your pension and retirement questions and inform you of all your options!

Retiring in 2022? Book A 15-Minute Virtual Consultation!

Chat with Certified Financial Planner, Bruce Youngblud. He can advise you on pensions, retirement planning, tax planning and estate planning. Plan to enjoy retirement to the fullest!

Retiring in 2022? Book A 15-Minute Virtual Consultation!

Chat with Certified Financial Planner, Bruce Youngblud. He can advise you on pensions, retirement planning, tax planning and estate planning. Plan to enjoy retirement to the fullest!