As a dedicated Jazz Aviation employee, understanding your retirement choices is extremely important. Whether you’re leaning towards a traditional occupational pension, intrigued by the cash-out option or see potential in a copycat annuity, make sure you have the right knowledge and expert advice.
Unpacking the Jazz Aviation Defined Benefit Pension Plan
As they approach retirement, Jazz Aviation employees will receive a statement regarding their retirement options. Basically, this is the path you decide to take with your pension:
A. Company pension: Traditional route
The traditional option is a workplace pension, which is a defined benefit pension scheme. It guarantees a set monthly payment – ​​for example, $5,000. “Defined” in defined benefit means that the amount is set in advance, while “benefit” simply refers to the monetary benefit that goes into your bank account every month. The benefit defined in this way is a specific payment.
B. Converted Value: Withdrawal Option
Some employees lean towards the “take the cash” approach. Basically, you can withdraw a lump sum amount in your pension – which can range from hundreds of thousands to well over a million dollars. This sum is intended to provide for you for the rest of your life, similar to a pension. However, there are nuances that need to be understood:
- Closed part: A LIRA, a locked-in retirement account, is money that cannot be accessed until a certain age, often 55. Most of the transferred value will be locked. The balance is not blocked.
- Part not blocked: Ideally, this portion can be contributed directly to your RRSP if your employer allows it. You must have a spare room for contributions. If there is no room in your RRSP, it will be treated as taxable cash.
Remember that the converted value is made up of two main parts: Part A (locked into a retirement account or LIRA) and Part B (ideally your RRSP or, in a less ideal scenario, cash after withholding).
C. Lifetime Copy: The New Challenger
A follow-up annuity or pension is an exciting new choice. This option involves transferring your pension to a trusted Canadian financial institution such as Sun Life. The institution then takes over the obligation to pay the pension, which must be identical to that which would be provided by Jazz Aviation. In other words, you get the same pension BUT you get it from Sun Life forever.
Why is this worth considering?
- Certainty of longevity: Not every employee is sure about the financial stability of their employer. Some people just don’t trust their employer. Switching to strong Cdn. financial institution, there is greater certainty that the pension will be paid for life. Additionally Cdn. insurers are supported by Assuris.
- Possibility of excess cash: There is often a cash surplus when switching to a follower annuity. For example, if your converted value is $1 million and Sun Life only needs $950,000 to pay the same pension, you will have a cash surplus of $50,000, which will be either after-tax money in your pocket or pre-tax money in your RRSP .
2. Decision making: Seek expert advice
Before making the decision to retire, it is invaluable to consult with experts like Bruce Youngblood. They offer invaluable insights and advice tailored to your unique situation.
Ready to explore further? click here to book a free 15-minute discussion with Bruce to find out what’s best for your financial future.
