# Advice of retirment options (finance)



## skyhi (Sep 4, 2021)

Greetings everyone, I am new out here so please be nice. P 

I am retiring from my job at one of the big three auto manufacturers, and I am unsure of what route I should take to fund my retirement. 

I am 52, in good health, single, no kids, house paid for, only $40,000 in rrsp contributions (ie lots of room)

I have 3 options...

1) Take the pension offered by GM (Aprox $3400 per month bridged (ie once i start collecting old canada pension, etc my pension payout gets less so i will always make $3400 and will never take home more)

2) Take the commuted value of the pension ($737,000) to invest myself or through a financial advisor.

3) Transfer the commuted value to a copy cat annuity via a bank or insurance agency (some offering $10,000 cash back)

My thought process... (and struggles to decide)

-I am unsure of the long term stability of GM, thus impacting my pension.
-I believe the market is way over inflated and that the economy as a whole is due for a sizable downturn. (ie I would hate to have my money newly invested only to see it drop 30% or more and then have to rebuild.)
-Transfer the value of my pension to a annuity of say dejardins (who is offering the best rates atm)

Neither my pension nor a annuity would be indexed to inflation and that concerns me greatly. 

I am going to sell my house and either rent or downsize (my house will net as much as my pension) 

So I am asking for advice on what the best path forward for me would be... What would you do and why? How would you protect your money from inflation, a stock market crash or just play it safe and take the annuity/pension and invest the proceeds of the house? (what form and ratio would your investments take?)

thanks


----------



## cainvest (May 1, 2013)

So you're sitting on about $1.6M after house sale. What amount of $ do you plan (or at least need) to live on each year?


----------



## agent99 (Sep 11, 2013)

Sounds like you will have more than enough for your retirement.

I haven't given your choices much thought, but have a question. Do you feel you know enough to do your own investing? If not, finding a reliable company to manage your nest egg may be important.


----------



## skyhi (Sep 4, 2021)

i would end up with about 1.2 million after my house sale after taxes... I would need like 700 per week indexed to inflation.

I have some investing experience, but I am always learning and wondering what is better (reading more every day) that being said the stock market scares me atm as it is so over valued with printed money, how does one protect from losing too much if there is a crash this year?


----------



## cainvest (May 1, 2013)

skyhi said:


> i would end up with about 1.2 million after my house sale after taxes... I would need like 700 per week indexed to inflation.


So a quick rough calc with 1.2M starting at 37k a year (assuming half max CPP, full OAS taken at 65) your money alone (with a simple 1% return) would last you until you are 90. Of course a more detailed tax picture and/or list of other expenses would be needed for a better estimate.


----------



## ian (Jun 18, 2016)

From a purely financial perspective this is definitely the time to consider a commuted value. Interest rates are at their lowest, hence commuted values are at their highest. Much higher than they would be if short, medium and long term rates were a few percentages higher. This is not a recommendation that you take or not take the commuted value rather a statement of where the numbers fall at the current time.

Second comment would be that this may NOT the time to buy an annuity and you may not at the right age to consider one. Think of annuity prices as the opposite of commuted value numbers. The commuted pension values are high for the same reason that annuities are expensive. We decided long ago that we would not even consider an annuity before age 70, if ever.

Also consider that you are young. Locking into an unindexed stream of money now could be disadvantageous if we end up with a period of inflation. Your pension money is an asset. Your goal should be to keep the investment returns on that asset at least equal to (on an after tax basis) to the increases in your cost of living. Not doing so implies that your asset is loosing buying power each year this occurs. We are coming off ten years of low inflation. What happens in the next 10, 20 years is anyone's guess.

These are my thoughts. My only other thought is that you might want to seek out some good fee for service financial advice on how to move forward based on your financial situation and on your personal situation.

Whatever transpires, do a little research to understand some basics of investing and what an investment MER is. Keep in mind that your friendly bank advisor is probably someone with limited knowledge who is goaled and rewarded for selling you high MER products. Definitely not your best friend.

Finally there is your own sense of financial security that is at stake. Whatever choices you make you have to be comfortable with. What is good for you might not be good for me, or your work friends. The ONLY person who really cares about your money is YOU!


----------



## james4beach (Nov 15, 2012)

Just a few comments to the thoughts you mentioned, 



skyhi said:


> My thought process... (and struggles to decide)
> 
> -I am unsure of the long term stability of GM, thus impacting my pension.


I share this concern. Would the pension remain intact in the long term?



skyhi said:


> -I believe the market is way over inflated and that the economy as a whole is due for a sizable downturn. (ie I would hate to have my money newly invested only to see it drop 30% or more and then have to rebuild.)


I think the market (and economy) often feels scary or overpriced, in this way. This will pretty much always be a fear, and markets are notoriously unpredictable. Even professional analysts can't predict market direction. So personally I would not place too much emphasis on this kind of feeling.

Also, the market is not the same as the economy. In any case, it's just about impossible to predict.


----------



## skyhi (Sep 4, 2021)

Would it be smarter to diversify by taking the pension or annuity and investing the house proceeds, or would investing it all in the market with competent advisor be the better path? Its tough to make a decision... How does one temporarily protect their investments if one thinks a large market correction is imminent?


----------



## Deanfeb (Feb 5, 2021)

skyhi said:


> Would it be smarter to diversify by taking the pension or annuity and investing the house proceeds, or would investing it all in the market with competent advisor be the better path? Its tough to make a decision... How does one temporarily protect their investments if one thinks a large market correction is imminent?


going towards the Annuity path .. Think the Pension would allow a cash portion ( taxable) and other portion to a lira , verify that..


----------



## sags (May 15, 2010)

Just some random thoughts as a retired GM hourly employee.

When I retired the commuted value choice wasn't available. We would have to quit and break all ties with the company. My commuted value was only $250,000 because they didn't include the 30 and out benefit or the cash value of ancillary benefits........health plan, life insurance etc. which I would have forfeited.

Today you can take the full commuted value of $737,000 *and keep all your benefits*, which are administered by the well funded union trust fund.

Bear in mind....that your pension will be reduced to $2,000 a month at age 65, so although you still receive about $3400 a month from pension, CPP, and OAS......you only need to replace the $2000 monthly to equal your pension. You get the CPP and OAS regardless of your pension benefit.

Also bear in mind, that the survivor benefit is only $1300 a month (should you meet someone) and there is no provision for leaving the pension as an inheritance to anyone. (should you want to)

Cost of living increases were negotiated away in the recession. The union may be able to negotiate them in the future but that is not guaranteed.

The pension fund is in good shape. It is fully funded, and I doubt there is going to be any problems going forward.

It is a tough decision and I know people who did both, depending on their financial circumstances.

I think of the monthly pension benefit as a monthly 2,000 % return on my money (of which I paid $0 except for deferred income I never got or missed).

Since I invested nothing (sort of).........$2,000 a month return is pretty darn good.

It is creative thinking......but it makes me less miffed about not having the choice of a commuted value.

If I had the choice you have today........I would almost certainly take the money but invest it very carefully with a high emphasis on preservation of capital.

But my spouse also has a DB pension we would retain to pay the bills and everyone has their own unique financial situation to consider.

Good luck on your choice.......and whichever you decide enjoy your retirement. It has been a long haul and you deserve it.


----------



## ian (Jun 18, 2016)

sags said:


> Just some random thoughts as a retired GM hourly employee.
> 
> When I retired the commuted value choice wasn't available. We would have to quit and break all ties with the company. My commuted value was only $250,000 because they didn't include the 30 and out benefit or the cash value of ancillary benefits........health plan, life insurance etc. which I would have forfeited.
> 
> ...


You invested in your pension. Years of work. 

The value of the DB pension was calculated in your total compensation package...wages, pension, benefits. Your employer and your union negotiators both calculated it down to the penny on an hourly basis. It was not free...you earned it.


----------



## agent99 (Sep 11, 2013)

skyhi said:


> How does one temporarily protect their investments if one thinks a large market correction is imminent?


One option, is to invest in a select group of solid blue chip Canadian stocks that pay dividends. Banks, utilities, telecoms and the like. 
They too will go down in market value in a correction, but they very seldom reduce their dividends. No worries when the divvies keep flowing in. The stock prices will recover along with the economy. 
Dividend etfs are an option, but with those you get the good with the bad. Better to have about 10 good stocks. 
Adding some fixed income may be prudent. Not many choices though.ñ


----------



## londoncalling (Sep 17, 2011)

I act as a trustee on a pension fund. The feds recently changed the calculation formula for commuted values. In effect, it has allowed pension funds to pay a lower commuted value then a few years ago. This was to encourage plan members to leave their money in the fund. I took a LIRA from a small pension about a decade ago. The amount was very small as I was only an employee for about 5 years. If you have zero interest in investing it is best to leave it as a pension. You can also invest the proceeds of your home when you sell it. If you are concerned about the funds solvency you can usually get that information from the funds annual reports.


----------

