What’s the best way to take retiring allowance?

Question: I expect to get a sizable retiring allowance ($150,000) in a year or so. I know I can contribute $2,000 per year from 1972-1995 to my RRSP. Should the full sum come to me and should I do this or should the funds go directly from my employer? – D.C.

Answer: You are correct in assuming your tax-free RRSP rollover is $2,000 for each year or part-year you were with your employer up to and including 1995. So since you were with the company from 1972-95, you have 24 years of eligible service, which allows you to roll $48,000 into your RRSP.

You are also allowed to roll over $1,500 a year for each year or part-year up to and including 1988 for which no money was vested for you in a company pension plan or deferred profit sharing plan. If that applies in your case, you have an additional 17 years of credits, worth $25,500. So you could be allowed as much as $73,500 in RRSP rollovers.

Note that this is over and above any regular contribution to which you’re entitled. If you arrange to have the money rolled directly into your RRSP, you’ll avoid having any tax on that amount deducted at source. You’ll need to complete form TD2. If you reive the money directly, you can make the RRSP contribution within 60 days after year-end. But there will be a source deduction, which of course you will recover when you file your tax return.