When you retire, you must convert your workplace pension or savings plans into financial products that will produce income. There are clear rules about what you can and cannot do with your pension.
What are the rules for my pension plan?
1. If your company pension plan will make set payments to you:
· You have a defined benefit pension plan
· The company will pay you a regular monthly income based on the rules of your plan.
· You know exactly how much you’ll get, and when you’ll get it.
· You don’t have any decisions to make, and your plan administrator takes care of setting up your payments.
2. If your company pension plan will pay out your money in one lump sum at retirement:
· You may have either a defined contribution pension plan or a Group Registered Retirement Savings Plans (RRSP).
· For these types of plans, you have two choices:
- Set up monthly payments by buying an annuity.
- Transfer your pension money into a retirement income fund (RRIF). This is a special account from which you must withdraw a minimum amount each year.
Remember: There can be many choices to make and many rules for your pension
Before your retirement date, make sure you know how your particular pension plan works. Not all plans work the same.
Content in this section is provided in partnership with the Investor Education Fund, a non-profit organization promoting financial literacy to Canadians. To find out more go to GetSmarterAboutMoney.ca.