If you’ve received an unexpected early retirement package, you may find your options to be confusing. A financial planner can help.
A financial planner can help you—ask and answer—these questions.
What are Your Cash Flow Needs?
If you have a choice in how to receive your retirement package, you will need to decide whether you need the cash flow that a salary continuation would provide or if you could afford to invest the lump sum.
Can You Delay Taking Your Severance Payment?
Since your payment is taxed in the year you receive it, you may be able to reduce your tax by spreading out payments over two or more calendar years if your employer allows this.
Can Your Lump Sum be Transferred Directly to an RRSP?
If you receive a lump sum payment, tax will be deducted by your employer. You may be able to reduce the amount of tax payable by transferring the payment directly into your RRSP.
What Will Happen With Your Group Life and/or Health Insurance?
Company benefits such as drug, dental and life insurance will continue during salary continuance. However, these benefits may not continue if you choose a lump sum cash payment. Upon leaving your group life insurance plan, you may be able to convert your group coverage to private coverage.
What are Your Pension Plan Options?
If you were a member of a pension plan, your plan administrator will send you a written summary outlining your plan options. You will have to select one of the options by a specific deadline. Sometimes you may not have very much time to make your decision.
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