Pension withdrawal

CdnAmerican · Post by **CdnAmerican** » Sun Oct 20, 2013 12:55 pm

(I'll repeat this for people new to this thread.) I am a USC in a company pension plan. When I quit my job, I have the opportunity to pull out my money into a LIRA. I have contributed a little less than half of the money in the pension - that is, if I have contributed $15K, the pension plan (including company match and increase in value) would be worth $35K.

I would also have the opportunity, when I quit, to simply leave the money in the pension until retirement.

My question is: If I pull out the money and put it into my own LIRA, do I then for IRS purposes claim the increase in value in the pension beyond my own contributions? (If so, the implication would be that I'm probably best off to leave the money in the pension plan until retirement, unless I can offset this small windfall.)

Thanks!

nelsona · Post by **nelsona** » Sun Oct 20, 2013 9:49 pm

All monies from pension plans are fully taxable by IRS at withdrawal, whether they are later converted to LIRAs or not.

So, it doesn't matter what you do after leaving the firm in terms of IRS: whatever you get from this pension is 100% taxable.

CdnAmerican · Post by **CdnAmerican** » Mon Oct 21, 2013 12:23 am

Thanks - that's very helpful. So the decision I will have is whether to a) pull the money from the pension fund at resignation (at which point it's all taxable), or b) leave it in there until retirement (at which point the portion that is not from my initial contributions would be taxable). Do I have b) correct?

nelsona · Post by **nelsona** » Mon Oct 21, 2013 9:14 am

That is not what I said.

I said EITHER way, everything is taxable whenever you take it.

When I said in the other thread that your contributions are not taxable, I mean they are not taxable NOW when you make them (ie. Year-by-year while working). That is something you should be making sure of now: reducing your wages by the amount you contribute to your pension.

But once in the pension, when it comes out, in whatever form, it is fully taxablein both Canada and US.

CdnAmerican · Post by **CdnAmerican** » Tue Oct 22, 2013 12:11 am

OH, now I see my mistake. I did not realize that money contributed to a Canadian pension was deductible on my US taxes. I assumed it was more like an RRSP, which would not be deductible on my US taxes (now I hope I have that right).

I have not made enough money for this deduction to have made a difference so far, so that's good news, I suppose.

nelsona · Post by **nelsona** » Tue Oct 22, 2013 10:39 am

A company RRSP contribution IS deductible on your US taxes, by the way. It is private RRSP contributions which are not deductible.

I will provide further guidance on what choices a USC has in terms of treatment of companyt pension contributions on this thread. There is a choice, and there may or may not be a "best" approach.

More soon... watch this space.

hehling01 · Post by **hehling01** » Wed Oct 23, 2013 4:38 am

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hehling01 · Post by **hehling01** » Wed Oct 23, 2013 4:38 am

[quote="hehling01"]The Sea Wolves were once feared as brutal pirates of the north seas. Now, however, they are one of the principal races of Limsa Lominsa, most often seen employed as sailors or seamen. In keeping with the old ways, the Sea Wolves bear names taken from the ancient Roegadyn language.[/quote]

CdnAmerican · Post by **CdnAmerican** » Tue Dec 31, 2013 1:41 am

Just a bump - nelsona hinted to "watch this space" for more info re: company pension treatment/planning, so I wondered if there was any new info in that regard :)

nelsona · Post by **nelsona** » Wed Jan 01, 2014 6:53 pm

Not new info, just choices you need to make.