Buyout. It’s a term that many of us would be happy to hear. Just imagine – retiring early in exchange for a pension buyout from your company.
However, in order to get the most out of your buyout, you will need to consider several things:
- What type of retirement do you want? Will you have enough savings set aside to live comfortably?
- How much CPP and OAS (Canada Pension Plan and Old Age Security) are you entitled to? When will you start receiving it?
- Should you roll all of your pension money into a Registered Retirement Savings Plan? What are the tax implications if you do, or do not?
- How will rolling this money into an RRSP affect your marginal tax rate when you retire? Will you pay less in taxes, or more?
- What should you do if you don’t have enough contribution room to roll all of your buyout money into your RRSP? What are the tax implications in this scenario?
- Will you have adequate health and dental benefits as well as life insurance after you leave your job?
- What strategies should you use to reduce the taxes you pay? For example, if you receive a full pension, have RRSP and CPP income, your OAS may be clawed back. Is there a way to avoid this?
As you can see from the questions above, it’s important that you deal with these issues, preferably before you take a buyout. We’ve helped several clients deal with their buyouts, and we can do the same for you too. We’ll go over these questions and help you chose the options that work best for you.
Contact us for your appointment and make sure you get the most out of your buyout.