Posted by Tim Stobbs on October 17, 2007
I’m confused. I mean very confused. Our company’s new owner has different pension plans than what I currently have. The good news is one of the plans is a group RSP that vests at once, so it doesn’t have the drawbacks of a traditional pension. I don’t have to wait until I’m 55 or later to use the money and I don’t lose I dime of cash if I quit at any time. So this is good for my early retirement planning.
The confusing bit is there is another plan that is a matching company stock purchase plan, which can be in an RSP or in a taxable account or a combination of both. On the one hand it’s going to be an investment I’m likely not to touch for a long time, so the only tax issue that is going to show up is when I sell. Paying captial gains is going to be half my current marginal tax rate, so if that is the case I would likely pay less tax overall if I didn’t put the money in an RSP. At the same time if I put the money in an RSP I will pay more tax, but I can defer it longer than the taxable account and chose when I want to take the tax hit. So what is the better choice? I don’t have a clue.
The problem here is there is too many variables. I might not do a withdrawal for 5, 10, or 15 years. It depends on how the company stock is doing will determine my pulling out my money. Also there is a rule if I take any money out of either account I lose my match for the next year. On top of this I can make the stock purchase RSP a spousal account as well.
My gut feeling in this situation is to split the difference with the stock purchase plans. Put half of the money in a RSP as a spousal account and then the other half in taxable account in my name (I can’t put the taxable account in my spouses name other wise this woud be an easy decision). Has anyone had a similar set of complex options to choose from? Is so how did you deal with it? Thanks for any insights you can provide.