F.I.R.E. and some small amounts of a pension from a previous job

[dogfaceman]

Hello all.

I'm a federal public servant and am planning on retiring at around age 50 without a full pension. This is more than 15 years away. I have about 4 years of service.

I have two amounts available from a previous job, an $11k RPP amount that is locked-in and a $6k amount of past contributions that can be given to me in cash or transferred to my current pension or RRSP.

What is the best option for me here? Should I transfer all of the $11k RPP amount to my current RPP, or put it into RRSPs and purchase index funds?

Should I cash out the $6k and pay half in tax, transfer it to my RRSPs and purchase index funds, or transfer it to my current RPP? I should add I don't really "need" the cash-in-hand at the moment.

Thanks in advance.

 

[jjp297]

@dogfaceman

What is the best option for me here? Should I transfer all of the $11k RPP amount to my current RPP, or put it into RRSPs and purchase index funds?

Option 2 since you will be able to pull the money out of the RRSP, you won't be able to pull the money early form the pension.

Should I cash out the $6k and pay half in tax

Can you not put it all into your RRSP?

 

[dogfaceman]

@jjp297 I can transfer it directly to RRSP, sorry for the wording. I was thinking that was the best option because I could take the tax deduction as well.

 

[jjp297]

@dogfaceman It's already in a pension account, there is no deduction.

 

[dogfaceman]

@jjp297 Right, my bad.

 

[dogfaceman]

@jjp297 Just to follow up, I was also leaning towards putting the money into my RRSP, especially because my pension will be greatly reduced if I don't put in a full 35 years.

It seems like a waste to get an equivalent of 1.5 years of service if I will lose 60% of it later (or whatever the percent is).

Would you agree with this?

 

[jjp297]

@dogfaceman Yes.

 

[fleurdelis]

@dogfaceman Retirement is about cash flow security. I'm retired with a teacher pension for perspective.

Consider comparing the benefits tied to the pensions. Do they both have full inflation adjustments? If the older pension is partial but new one is full then transfer. Look for other benefits such as health etc... Is the old pension more or less secure? A corporate pension may be less secure long term then government. Think Sears and Nortel.

A teacher friend of mine transferred her pension from Province A to B and lost some inflation protection.

I know FIRE is 15 years away but you need to run some income scenarios and see how taxes play a role. Having a good pension(s) combined with RRSP income and eventually some OAS and CPP could push you into higher tax brackets. You need to know the brackets to be tax efficient during FIRE. If you think you will be in same or lower tax bracket then transfer cash into RRSP, you can control withdraw.

Figuring out how all your FIRE income sources work together is a trick so consider a fee only CFP at some point. If you have a partner plays a role as well for income splitting etc..