Why is now the time to take advantage of the defined benefit pension conversion? The key factor here is the current low bond yields. Let’s look at the details.
The converted values are directly dependent on the bond yield. It’s like a seesaw: when interest rates fall, the converted values rise. Actuaries use a basket of bonds, but it’s a good indicator for individuals to understand the trend.
Bond yield as of August 28, 2024If you have a defined benefit plan and are considering taking a commercial value, now is a key time to act. Bond yields have fallen, which means commercial values have risen. If you received an estimate six months ago and you receive another one today, it is very likely to be higher.
Schedule a consultation with me via Zoom or call me at 1-888-554-6661 to discuss your options.
I posted a video on YouTube that explains the concept of connected value and bond yields in more detail. Watch it below:
Determining the time of arrival value
If you plan to take your adjusted value, timing is key. Avoid taking a large portion of your income on top of your full year’s salary. This could save you thousands, even tens of thousands, of dollars in income taxes.
One of the main obstacles to extracting added value is maximum transfer value. That’s a ceiling that generally means that one-third or one-quarter of your money will be in cash, which is subject to taxation. I’ve seen cheques up to $150,000 made out to Revenue Canada. Let’s work together to minimize this impact.
Is using computerized value right for you?
Commuted value works best for people who don’t need the money immediately. If you’re in debt and plan to use your Commuted Value to pay off a mortgage, car or credit cards, be prepared to keep working. Your money needs to grow, and we can help you build an investment portfolio to do that. However, if you’re planning on making a big purchase, like a yacht or a new car, this option may not be for you.
For professionals like locksmiths or accountants who plan to continue working, taking a compensatory value can be a smart move. You can leave your current company, start an investment portfolio, and watch your money grow. When you reach retirement age, you can start using that money.
Let’s talk!
If you are considering taking the restated value of your defined benefit pension, now is a great time to do so because of the low bond yields. For personalized advice, contact me, Bruce Youngblud, at Pension Solutions Canada. You can book a free 15 minute Zoom call with me or call me at 1-888-554-6661 to discuss your options.
