What I am doing with my pension after leaving my job

I finally received my pension paperwork from my previous job from when I “quit” back in February 2017. I basically have the same job but now I’m under my boss’ private company and no longer contribute to a pension or receive Registered Retirement Savings Plan (RRSP) matching. Oh, and I took an $6K pay cut. What a bum deal.

Anyways, the letter says I have two options:
A) I can leave the pension funds there and receive about $731/month when I retire
B) I can transfer the commuted value of $79K to a Locked-In Retirement Account (LIRA) and take $25K as a cash lump sum (this amount was over the taxable limit… err, or something) which I will pay withholding tax on. I originally thought I only had $59K but I guess they add on 2.4%.

I chose option A. Opening up a LIRA was quick and easy on Questrade since I already had an existing Tax Free Savings Account (TFSA) and RRSP account with them. I was fretting about getting a signature from an authorized person at Questrade for my pension form. I went on the Questrade chat and asked what I should do. The person I chatted with sent me his personal email and said he could get the signature for me. I received a response the very next day. I faxed and mailed all the documents off to my pension plan provider so now it’s in their hands.

What will I do with the cash lump sum? I reckon I will receive over $18K after withholding tax. I’m hoping the pension people will process my paperwork next year. The cash lump sum in addition to my salary will bump me up into the next tax bracket and I don’t want to have to pay additional taxes because of it. I plan to throw the whole cash lump sum onto my consumer debt which will bring it down by 50%. I’m so excited!

What will I do with the funds in my LIRA? Uhh…. can I get back to you on that? I have no fucking clue. I have some reading to do. I’ll most likely use the same strategy as in my RRSP: Exchange Traded Funds (ETFs) with low MERs or I’ll just use the Canadian Couch Potato strategy.


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