Should you take your retirement pension as a lump sum payout? 7 important points to consider!
What is a defined benefit plan? Simply put, it’s a pension plan where the employer guarantees a monthly payment to the retirees under certain conditions and rules.
The payment is guaranteed, regardless of how long the retiree (and spouse) live, regardless of market conditions. Often, these plans have lump sum options meaning the retiree has the option to take the payment as one large lump sum instead of monthly payments. This lump-sum is a form of pension payout that calculates the present value of future payments at a prescribed interest rate.
Think of it like a mortgage loan: The lump-sum is the value of the mortgage, the pension payments are the equivalent of the mortgage payments, the term of the loan is the life expectancy of the retiree, and the interest rate is the rate approved by the governing body. A $5,000 monthly pension, depending on the age of the retiree, might have a lump-sum value of about $990,000.
So is it better to take this money and run or take the monthly payments?
In this video, we address 7 points to consider when trying to make this decision. It's important that when planning for this major life transition, you have a clear understanding of what your options are.
Another useful video is:
Understanding your pension plan: • Understanding Defined ...
Surprisingly, research shows that most people spend more time planning for their two week vacation then for their retirement.Vacation lasts a week - maybe 2 at the most but retirement could last 20 years or more and so proper planning is critical.
We encourage you to speak with a retirement planning expert.
Whether you are 10, 5, 1 year away or even already retired, it's important to meet with a professional to ensure that there aren't any gaps in your plan.
Retirement Coaching:
• Retirement Coaching Pr...
If you'd like to discuss your personal upcoming or current retirement, contact our office in order to set a meeting.
www.humphrieswealthgroup.com/...
Visit our website for additional information about our practice, free resources and more:
www.humphrieswealthgroup.com
Пікірлер: 6
I am receiving a pension.The calculation was 1.6% x avg of 5 highest years x yrs of service. An annual 2.9 % COLA comes with my pension.
@haraldkoch4446
2 жыл бұрын
I guess your pension is good without calculating it. The 5 highest years x yrs of service. To me this is wrong. Maybe criminal. My friend who is single worked like a maniac his last 5 years (city of Wpg) My friend took 5 months off every year before that. (Wpg doesn't need as many workers in the winter). My buddy gamed it and won at the expense of other workers. A married man or one who may have to care for a sick wife won't be able to work like a madman his last 5 years. The 5 year rule if adopted recently is a mistake. No Financial institution would ever do such a thing. The 5 year rule is a gift. There is a strong chance your pension is short about 1/3. When the next crash comes it could fall to 50% unfunded. My dad had a good pension. He retired at 50 in 1976, died at 86. It worked for him. The future of Canada seems screwed. During hyper inflation (inflation 40% or more a month for 2 years) elderly Germans in the 1920's couldn't find food so they committed suicide. Why such inflation? Government has fallen into a financial trap. It cannot reason and says yes to every new expenditure without fail.
commuted value, can part of it be moved to a spousal RRSP in Manitoba and is the remaining amount taxed at top federal and provincial bracket?
@haraldkoch4446
2 жыл бұрын
Why get more entangled with government. Government can rarely improve the situation. Commuted value means you are broke. When will you learn about incompetent even bad government.
HI !IAM A SS PENSIONER DO I QUALIFY FOR LUMP SUM PAYMENT?
@freedomwillring6749
3 жыл бұрын
Lol, your joking right? SS, not a chance.