Things have changed. First its name, which is now Arcelor Mittal Dofasco; but there are a lot of other changes going on. The Market Value Adjustment or MVA is deeply negative, the first time in history, and many are left wondering about their jobs or are considering early retirement options with a heart breaking MVA adjustment. But don't get too down just yet. There may be a silver lining here. The Supplemental Retirement Income Plan, the SRIP, works inversely to the MVA. So when the MVA goes down, your monthly SRIP goes up. If you have a few years before you hit 65, then it may be the very best time to have us evaluate your early retirement offer. Especially if you have a spouse earning lower income. Talk to us about your options and we can run through the calculations to help you make an informed decision. We've done this a lot.
Deciding when to retire should be more than just an emotional "I've had it" feeling. It may be high time to move on but let us do the math for you first. Evaluating a retirement option, whether early or not, takes a lot of consideration and planning. The one thing you don't want to do is end up blowing through all of your savings in a few years because you weren't prepared.
After the decision has been made, we take it from there. We will prepare all of the forms and work with the pension department for you to make everything as smooth as only years of experience can make it. We will help you make the right choices to minimize tax and get you quickly on the road to a stress free retirement. Whether you want to stick with the company that runs the pension, try different strategies, or look at some guaranteed or annuity options, we can work with you to pick the investment choices that fit you. We will work hard to make sure that your transition from paycheque to pension will be easy.
Many couples find that only one is really involved in the financial planning process leaving the other very uninformed and ill-equipped. We encourage families to come to the meetings together and we will help you and your spouse gain a greater confidence to make educated choices. We will be here for you and your family in the event of a death and make sure that your estate is handled smoothly and carefully.
When you make the decision to retire, you are giving up your regular paycheque and making the transition to living on the money that you have worked so hard for. We make it easy. We will set up your accounts so that you will receive an income that suits you, whether monthly or bi-weekly, and you can even pick the date. Here's where your money will come from:
If you were hired before 1980, Fund 1 will provide the largest portion of your retirement income. You could elect to use this money to purchase an annuity, but be careful. In order to get a regular, fixed income, you give up any control over the money after you purchase. This may or may not be the best choice for you. You may also take the entire amount in cash -- not a good idea since you would owe about half of it to the government in taxes. The third option is to transfer it tax free to your RRSP. This is by far the most popular route, since you keep control and can still get regular income.
Fund 2 is a bit trickier. You can still transfer it tax free but this amount has to go to a Locked In Retirement Account, (LIRA), or to a Locked In Income Fund, (LIF). Either way, you've probably guessed that the 'locked in' part is going to mean restrictions and you are correct. There are limitations to what you can do with a locked in account but if you know the rules, (and we do), then we can work around them and with them for you.
Deferred Profit Sharing Plan, DPSP
Amounts saved within the DPSP can be used at any time, but if you want to be really tax efficient, you will transfer it to your RRSP tax free and work with your income needs in other ways. Unless you plan carefully, your retirement year will be very expensive in terms of taxation. We can help you there.
Group RRSP can be transferred to your individual RRSP just as your Fund 1. It will then be part of the 'pot' to give you income in retirement.
5 & 10 Weeks
Dofasco retirees are entitled to transfer the unused portion of their 5 & 10 weeks' vacation pay to a regular RRSP or they may choose to take it in cash. Any amount taken in cash will subject to withholding tax at source, so you won't receive the whole amount. You may also have to pay additional tax on this money at the end of the year depending on your tax bracket, so make sure you consult us before making a choice. We may be able to spread the tax liability out for you so that you pay less. The other alternative is to transfer the amount as a retiring allowance to your RRSP. This is a special, one-time opportunity that won't use up any of your RRSP contribution room.