Advice on involuntary early retirement
You’ve got to make a few decisions about what to do
with the money you receive in your retirement package, also
known as a severance package. In some cases the severance
package is paid as a Retirement Allowance.
Usually the size of your package will depend on length of
service or if you are a senior executive, what you have negotiated.
One of your first decisions is, if you have a choice, do
you take a lump sum or a continuation of salary? In answering
this you have to consider your own circumstances in terms
of need for funds.
And you have to think of the tax consequences, primarily
whether or not you can get a tax deferral.
You also have to consider what you will do with any pension
money you may have with your employer. You will likely have
several options, depending on the type of pension plan, how
long you have had it and how much money is involved.
There may also be a Retiring Allowance involved, in which
case direct transfer to an RRSP would be appropriate.
If a lump sum payment is made by the employer as retiring
allowance (i.e. reported as income due to loss of office),
you may transfer a portion or perhaps all of this payment
to your RRSP or DPSP if certain conditions are met.
As you may have gathered from these few paragraphs above,
dealing with severance can be a complicated process and
generally
requires expert advice. If you’d like to speak to some
one who can help, click
here to find the RBC financial planning professional closest
to you.
Important information about our financial planning services can be found at the bottom of our
homepage.
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