Even if you are leaving the job, you will be usually offered an option of leaving the accumulated pension funds in place. Alternatively, you can transfer the funds to a new pension plan. In either case, when you become eligible according to the rules of the pension plan and your age, you will start receiving a monthly income.

• You will continue to receive the payments for the rest of your life.
• If the pension benefit is indexed for inflation, it will grow as the cost of living increases.
• You don’t have to take any investment risk.
• Your spouse will continue to receive reduced payments of your pension even after you pass away.
• Your pension will pay out as promised, regardless of investment market dips.
• The monthly pension income is eligible for “pension income splitting” to reduce your household tax bill.

• The money within the pension plan is not liquid - you will receive your payments on a monthly basis.
• If the pension plan becomes insolvent, your pension might suffer.
• The pension income stops when you pass away (or when your spouse passes if you have one).

Alternatively, you could “commute” your pension entitlement to cash. With this option, the funds contributed to your pension plan to date would be transferred into a Locked-In Retirement Account (LIRA). The commuted amount is limited by the Maximum Transfer Value, which is set by the Income Tax Act. Any amount exceeding the Maximum Transfer Value will be paid out as cash, subject to taxes. To help reduce these taxes, you could then contribute a portion or all of these funds to a Registered Retirement Savings Account (RRSA), given that you have contribution room.

Another option for pension commutation might include using the funds to purchase a life annuity from a life insurance company, which would need to match your plan’s benefits. Whatever the case, financial professionals from Walton Financial will be happy to assist you with your pension commutation needs.

• If you “cash out” your pension, the money in your plan can be “unlocked” from the locked-in retirement account and used right away.
• You can manage the funds in your LIRA account directly, taking on as much investment risk as you want.
• If you commute your pension to a life annuity, you can avoid the risk of the pension plan becoming insolvent.
• When you pass away, 100% of the remaining balance in your account can be transferred to your beneficiaries.
• Depending on portfolio performance you could receive more money monthly in retirement.
• You can control more of the income you receive. This could be beneficial if you are going to continue to work or have other assets to draw from.

• You may not feel comfortable making investment decisions for your LIRA.
• The amount of your commuted value beyond the Maximum Transfer Value can be high, meaning that you might have to pay additional taxes in the year of transfer.
• You may be tempted to deplete the funds that have been set aside for retirement.
• Market dips can negatively affect your retirement income.