Q&A: Retiring allowance dilemma
Question: I will be receiving a $44,000 retiring allowance. What would you recommend to do with it? My house is paid for and I will be receiving a great OMERS pension. My wife does not have a pension when she retires. I can take the whole amount and pay taxes on it or roll it into a RRSP. What would you do? – Brad H., Ontario
Gordon Pape answers: As far as I’m concerned, it’s a no-brainer. Put it in the RRSP. Why would you pay taxes on the money now when you can tax shelter it for years to come? When the time comes that you do need extra cash flow, convert the plan to a RRIF. You’ll be able to use the pension-splitting provisions of the Income Tax Act to shift part of the RRIF income and your OMERS pension to your wife, which should reduce the total tax payable significantly.