# Retiring this year at 60. What to do financially next.....



## DishCloth (Dec 9, 2013)

I am new to this forum and have a lot of questions regarding the most prudent things to do with my retirement funds including CPP, whether to take it early or not. What money to withdraw from where to minimize taxes over the long haul etc. Whether to take (RAB) Regular Account Balance funds as a pension or withdraw it and put it in self directed plan. I have read quite a lot of good information on this site and will be asking many questions in the future. However, I think its important to get a good base understanding of my own particular situation first so I can ask intelligent questions later. 
Having said all that my question is, does anyone know a good knowledgible professional in this field that they can put me in touch with to educate me in retirement tactics and strategies?
Any comments are welcome.....TX


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## Daniel A. (Mar 20, 2011)

I'm sure you will get plenty of good response but you may need to offer more information in detail. 

I've been retired four years now and couldn't be happier.


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## wendi1 (Oct 2, 2013)

There's a CPP expert here who can answer some of your questions - I believe he has a side business where he can provide a more detailled report on CPP issues.

http://canadianmoneyforum.com/showthread.php/15085-I-m-a-CPP-expert-Any-questions


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## Dogger1953 (Dec 14, 2012)

DC - Further to Wendi's plug for my services, I would be pleased to answer any general CPP questions on this forum for free, or I can certainly do some detailed calculations for a small fee, if you email me at [email protected].


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## fraser (May 15, 2010)

You might want to do some reading on your own as well. Try Gordon Pape's 'Sleep Easy Investing' and Milvesky's (SP) 'Pensionize Your Nest Egg". 

Be very wary of your friendly bank that is desperate to 'help' you invest in their 2.25/2.5 percent MER mutual funds.


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## birdman (Feb 12, 2013)

I do not understand what is meant by "Do I take my Regular Account Balance as a pension or take it in cash and put it in a self directed plan"? More info plse and perhaps I can provide some feedback.


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## DishCloth (Dec 9, 2013)

frase said:


> I do not understand what is meant by "Do I take my Regular Account Balance as a pension or take it in cash and put it in a self directed plan"? More info plse and perhaps I can provide some feedback.


Thank you all for your input so far.
A Regular Account Balance or RAB is another name for profit sharing that is invested and administered by the company. It ended in 1990 and was replaced by a Defined Benefit pension. I currently have $304k in the account. When I retire I have the option of taking the money and investing it myself or converting it to an equivalent pension. In other words it’s just like giving the money to an insurance company and getting an annuity. So the DB calculation would be based on 38 years leaving $304k with the company and giving me approximately $52k per year. Taking the $304k would mean 24 years DB with approximately $31k per year. The $21k difference says I would need to make about 7% per year ROI on the $304k if I were to take and invest it myself. My pension is not indexed. So my question is do I take the $304k and invest it for now with compounding interest in mind and dividend payouts as well as consideration of tax consequences in either case. Or should I go with the $52k sure thing? My financial situation with other investments and savings would allow me to afford the $31k option at least until 65.


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## Spudd (Oct 11, 2011)

Personally, I'd take the sure thing.


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## fraser (May 15, 2010)

Other considerations may include...

-is your DB plan well funded, is your company financially stable and do you expect it to remain so in the future?

- will the $304. component actually be similar to a SERP, ie supplementary pension that is actually administered outside of the DB and only good as long as the company is solvent (vs the DB plan component that is regulated either by provincial or federal legislation)? 

-if you decide to take the $304K , how will it be handled for tax purposes? Can you roll some of it over into a retirement vehicle thus shielding it from taxes. If it is taxed, understand the incremental tax rate in your province. It could be in the high forties/fifty percent unless you live in Alberta. Also, if you decide to take the $304K will you employer pay it over one, two, or three tax years in order to substantially reduce the tax. I had a similar situation this past October. My employer did not give me the option of taking the SERP component of my DB entitlement as a monthly pension but did agree to space the amount over three equal payments in 15 months-three calendar tax years.

-how is your health, do you have longevity in your family? If your health is questionable or you do not have longevity it may be more advantageous to take the money-always a gamble.


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## birdman (Feb 12, 2013)

Providing you are comfortable with the financial strength of the pension and your company I would tend to have the RAB rolled into the pension. My reasoning here is that the 7% return is significantly larger than current annuity rates and rolling it into your pension eliminates the investment risk from yourself. 
The comments regarding the SERP is another good point and sure helps with the tax if your employer would go for it. I was in a similar position and retired at 56 and negotiated a SERP payable over 14 yrs at the then going rate of 6.75% which carries me thru til I am required to start withdrawing RSP's. You seem to be in good financial condition and I like the diversification you are looking at: SERP ???maybe, Defined Benefit plan, CPP, OAP, and your personal registered and non registered invesments.


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## DishCloth (Dec 9, 2013)

fraser said:


> Other considerations may include...
> 
> -is your DB plan well funded, is your company financially stable and do you expect it to remain so in the future?
> 
> ...


I work for a major corporation which is financially stable now and expect to be so in the future.
The plan is funded at about 70% and as far a the $304k goes it it is definately not a SERP. 
The money can be put into a self directed RSP or taken as cash (not a good plan) or sold for a pension annuity. I will have to check with our pension administrator but I believe that lump sum is under a group RRSP plan so it can be transferred without tax implications until you start to withdraw. My thinking is that if I kept the money in a conservative portfolio that even if it made only 3% a year, and all I did was take out $1750 a month that money would last me better than 15years. This amount gets me back up to the $52k a year including the DB pension. The upside is that I have control and can leave a heritage for the family. The down side is that I will use that up before I dont need it. Of course I will intend to sell my house and use the equity from that to supplement my retirement. 
Great discussion that helps me and hopefully others better understand the financial options when it comes to retirement.

Health wise I am ok and as do my financial planning around a 20 year window. After that,,,,I guess I become someone else's problem.


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## fraser (May 15, 2010)

My tendency, all things being equal, would be to leave it as a pension. The return is good AND it appears that you have other funds, equities.

You could, if you wish, do an assessment on your fixed/equity ratio at retirement.
Take the commuted value of your pension, your RAB, your home(only if you intend to sell it), and your equity investments. Add them up and then see what percentage you have in fixed (pension value, term deposits, cash, bonds etc). 

At that point you need to decide what ratios you are comfortable with. Some advisors will say that you total equity holdings should equal (100-your age) percentage. 

Good luck in finding a good advisor. My strong preference would be for a fee only advisor who does NOT earn commissions on placing you money. When I looked for one there were a lot of duds out there who were only interested in how much I had and how quickly I could deposit it with them....all of which translates into their commission and trailer fees.


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## Brian K (Jan 29, 2011)

I kept my pension as a pension. The rationale that another retiree gave was that keeping it as a pension was another form of diversification. If he took the money, he would probably just have bigger piles in his present portfolio - so he is spreading out the risk and I thought that was a good argument for keeping the pension rather than the payout. I'm happy seeing the monthly pension deposited in my account as well as the dividends from my other investments.


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