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Canajun Finances Home » Take the Pension or Leave it? #Redux

Take the Pension or Leave it? #Redux

In 2008 I was trying to decide whether to keep my money in the Nortel Pension Plan or extract it, I luckily made the right decision (and took the money out). Re-reading some of these tales I told helps my confidence that I have made good financial decisions.

One of the options I have as part of my severance is what to do about my pension.

Nortel’s pension was a Defined Benefit (up until January 1 this year), it is now a different plan (and my old pension has been capped).

This was a red herring. The type of Pension had little to do with my final decision.

The options I have are:

  1. Leave my money in Nortel’s pension scheme and start drawing from it at either age 55 or later.
  2. Take the money out and put it into a Locked In Retirement Account, or at least the portion that the government allows.

Nortel’s pension plan is underfunded by a large amount. I also have passed a point so that I can draw from the pension when I am 55.

This is the crux of the decision I had to make. The point was that we already knew the Nortel Pension was underfunded. The decision was to remove the money, for two reasons. Worry about the liquidity of the Nortel Pension, which was well-founded. The second reason was spite, I hated Nortel at the time (as did my wife).

I have heard many folks contemplate taking their pensions out so they or their agent can reinvest the money. My decision was done due to a possible failure of the pension plan, if your pension plan is safe, why would you want to remove your money?

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Feel Free to Comment

  1. The one time I was faced with this decision, I took the money in an LIRA. I then invested in a stock that returned 1000%, so that was lucky.

    Anyway, at that time, I only had about 3.5 years in at the company, and was moving on. I was 30 years old, and would have had to wait a long time to start drawing from the pension. The amount would have been small, and I like managing my own money. So, I took the commuted value of the pension.

  2. I would consider the future solvency of the company. If you expect it will be insolvent before retirement, then take the money & run, even though you lose the employer contribution, and the potentially greater benefit.

    The LIRA should allow you to choose the investments within it, so you can build your retirement nest egg with products you are satisfied to own.


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