You should have a retirement plan that accounts for the hope that you will have a long, healthy life ahead, as well as a will that outlines your wishes for when you die.
A lot can happen in the next five to seven years you plan to work. The change may be positive (a promotion) or negative (job loss). You could have health issues or one of your children could have financial trouble. All that to say, I would be more focussed on yourself than your kids, Ty. You can then consider gifting over time, ideally in tranches, as you age. If you give them too much too early, you run the risk of running out of money yourself.
At the same time, I appreciate that if your kids are in their 20s or 30s, they could probably use financial help now more than ever. They are getting started in their lives and the cost of home ownership is high.
The commuted value of a pension
If you have a defined benefit (DB) pension plan with your current employer, you probably don’t have the ability to take a lump sum payment from the pension (the so-called commuted value). You typically cannot do so until you stop working, Ty. If it is from a former employer, you may have the option to take a lump sum prior to a certain age, if the plan allows it.
A commuted value (the lump sum value) can be transferred in part to a locked-in retirement account (LIRA). To make sure it lasts, a LIRA has limits on annual withdrawals—just like the pension from which it came. Some of the commuted value may exceed the limits of what can be transferred into a LIRA. The pension plan administrators will calculate this for you. If there is an excess amount, it will be taxable to you. You may be able to shelter it from tax, though, by transferring it into a regular registered retirement savings plan (RRSP). However, you will need RRSP room. I suspect you may have little to no room, Ty, if you are a DB pension plan member and you have a tax-free savings account (TFSA).
If this is the case, the taxable amount could be taxed at a high rate if you take it during your working years. It will be added to your salary and other income sources and could be taxed at over 50%, depending on your marginal tax rate (which is based on your income for the year and your province or territory of residence).
Commuted value payments from a DB pension tend to be low when interest rates are high, as they are now. When rates were low a few years ago, commuted value payouts were higher than they are now. That is not to say that you should not consider a lump sum, Ty. It is a personal decision based on financial and non-financial considerations.
For one, if you have a short life expectancy, a lump sum may be preferable. This may provide a higher combined retirement income and estate value than a monthly pension payment that may not last long.
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