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Pension or LIRA? A decision (redux)

One of the few good (read fortunate) decisions I made was to remove my money from the Nortel Pension.I put the moneyinto a LIRA for holding purposes after I got laid off in 2008. I wondered (aloud) whether I had made the right decision. In hindsight, it was a perfect decision (i.e. Pension or LIRA ).

Show me the Money

pension or LIRA
Now that is some Ca$h (thanks to Bank of Canada)

For those who have read for a while, I had to decide whether to leave my Pension in my former employer’s pension fund. It was badly underfunded. The other option was to take a cash settlement and transfer most of the contents into a Locked-In Retirement Account (LIRA). Any remaining funds would be in cash.

I got a lot of advice from different folks. Did I feel confident enough to invest the money wisely enough to mimic the growth I might get in the pension fund? However, in the end, I did not trust that my former employer will:

  1. Exist in 5 years
  2. Whoever buys or takes over them will not replenish the pension fund shortfall.

So I have decided to take my money out and move it to a LIRA (and a small part to a TFSA and whatever else I can into my RRSP, thus the Pension or LIRA -> LIRA).

I tried to show as much diligence as possible in the documentation I had to submit because the default answer if I did not submit my request in time was to keep the money in the (underfunded) Pension. The investment counselor at the bank set up the LIRA checkover to ensure all the forms had the correct information. I then had Mrs. C8j check everything over as well. There is no point in making this big decision without being careful with the forms.

I mailed the forms using Registered Canada Post delivery, so I had a tracking number. This allowed me to know when the papers were delivered. Was I paranoid? Maybe, but again, it would be imprudent to trust regular mail with these forms.

Luckily, the forms arrived when they did. I got the money out a few weeks before the Pension announced a sizeable shortfall and started discounting all pensions. As background info, here is what Nortel’s demise looked like graphically.

pension or LIRA
Graphically, the Death of Nortel

Feel Free to Comment

  1. As employees approach the age of lock-in (age 55 in some situations) they question if they should leave before age 55 and unlock the money and put it in a LIRA. Tough question for a perhaps “gold plated” pensions…but these can fold too…. Not sure what the answer is.

  2. I see the cosmic forces of balance are at play. I took the LIRA and should have stayed with the company pension. Ah well, I don’t regret it even though financially I made the wrong choice.

  3. When I first read your advent calendar, I thought it said Wii, from Nintendo. Unfortunately, it’s a will. Mortality is knocking, Merry Christmas!

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