Lump sum or pension?

Q – I am thinking of early retirement in the first part of next year. I am able to receive an early retirement supplement (ERS) from my employer. This ERS can either be monthly payments that will equal $45,000 by age 65 or a lump sum payment at retirement of about $37,000. My question is with today’s market and interest rates is it a good idea to take the ERS as a lump sum and deposit it into my RRSP or to take the monthly payments of $375/month? I will not need to make any withdrawals from my RRSP for at least 5 years. – I.L.

A – We get variations of this question a lot. Our answer is always the same. This is a complex calculation and you are best to consult with a professional pension advisor who can look at your specific situation. However, as a general rule, we believe the bird in the hand is the better choice. There is no way of predicting what the returns will be from a lump sum investment. The pension payment is guaranteed. – G.P.