On August 18, 2018, I made big decision personally and financially, and changed careers slightly, going from working for the Federal Government to working for a Municipal Government. Below, I get into the reasons why, including how it's the best decision for my family. The financial part of the decision was secondary to the family decision but still important. Below I broke down the pros and cons of making the move.
The sub-title, "pension transfer" will throw you off because in reality the pension I currently have does not transfer. I will be getting bought out of my current pension resulting in roughly half going into a "Locked in Retirement Account (LIRA) and the other half cash. The cash portion I can do what I want with but I will be keeping a close eye on the tax implications (more on that later). The LIRA I will be depositing half my pension into will be self directed and I will be choosing where the money goes and what the money does. I like self directed investing because I have studied and read enough that I feel comfortable investing my own money and saving 2-3 percent not paying someone else is always a smart decision. I haven't decided exactly how I am going to be splitting the other half of the payout but I can tell you that a decent size will be going to my self directed RRSP to offset the taxes. The other amount I will be most likely adding to the mortgage as I have a percent of it in a home equity line of credit (HELOC). Since I renewed my mortgage with a HELOC attached, the interest rates have increased 4 times and my current interest rate is 4.20%. Compare that to my fixed mortgage at 2.49% and you'll agree, I need to focus on paying that down.
Oh taxes... As I get older and dive more in depth into personal finance and money, taxes always show their ugly but necessary face. Now obviously taxes pay for important infrastructure upgrades, police/fire/ambulance as well as so many great community programs but it sure seems like we pay a ton in taxes every year doesn't it? My plan for my pension buy out is to pay as little in taxes as I can. The only way I can do that is to offset the amount of money coming in with my RRSP contributions in 2018. I will have until March 1, 2019 to contribute to my 2018 RRSP and since I have 0 dollars contributed into my RRSP as the focus has been on the TFSA's, I will have plenty of room. I am going to meet with an accountant in early winter and determine what my best options are as far as legally saving money from the tax man.
The new job I am moving into comes with a salary increase aswell. I will be making roughly $300 dollars more a paycheck which is a very nice little raise for doing the same job with a new company. I am going to set my cheques up so an extra $500 a month goes directly into my families RESP plan and I can help my kids pay for University, College or Trade program. Later this month I will be writing an article explaining RESP's and how amazing they can be for your child's future.
Overall the job will be roughly the same. Having my pension bought out after 8 years of work and being able to still put in 25 years of work for a "second pension" is going to be amazing because I will be investing my "first pension" in a way where I will have 2 when I retire around 55 years old.
One of the keys to financial management and personal finance is to keep looking for that bigger better deal cause theyre out there, we just need to keep finding them.
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