Carrick Talks Money: What do I do with my pension heading into retirement?

Jeff Gray, VP at Proteus, chats with Rob Carrick of The Globe and Mail, on Carrick Talks Money, about what to do with your pension heading into retirement.

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Rob Carrick: Jeff, I’m retiring after years of contributing to my company pension, what do I with the pension now?

Jeff Gray: Well you probably have a good idea because you’ve probably been thinking about it for the last year or two in terms of what my options are and what I should do. And if you’re in a defined benefit plan, you will know that you have the options of taking this amount of pension per month or I can take a commuted value of that money and invest it myself.

Rob: What if you’re in a defined contribution plan where there is no specific benefit promised and basically your retirement income depends on what you invested in and how well you have done.

Jeff: well there you are dealing with a pool of money and it’s a matter of how do I convert this pool of money into an income strain. And it could be taking all of it and buying an annuity or taking all of it and buying a life income fund or a combination of the two.

Rob: What’s a life income fund?

Jeff: A life income fund is like a pension account but you’re running it down as opposed to building it up. It’s still invested and it pays out a prescribed amount of money.

Rob: Okay, it sounds like a lot of people are going to need to work through this either with a financial planner or on their own. How far in advance of retirement do you suggest I start looking at these things?

Jeff: well, realistically, probably five years or more. It’s part of the whole process of “don’t leave it until the last minute” because your options are less than.

Rob: Five years, I like that. Thanks Jeff.