My Biggest Purchase Was Not A House

The epiphany about my biggest purchase only hit me a while ago. I was chatting with some co-workers about purchasing houses. Yes, I bought my house last century, so the price was not nearly as high as the prices are. My biggest cash outlay, however, was about 33% more than what I paid for my house.

Just to be clear, the most significant purchase was not a house, a holiday home (i.e. cottage) or any real estate.

If you guessed it has something to do with retirement, you are correct. I had not put that much money into my RRSP (nor did I have an RRSP that was that large). Thanks to the Pension adjustment I was unable to do so.

When I left Nortel, I was lucky enough to have been at Nortel long enough that my pension was worth a large amount of money. Thanks to my wife and Michael James, I luckily removed my money from the Nortel Pension before Nortel declared bankruptcy. This left me with a very large Locked in Retirement Account (LIRA) and a smaller RRSP. I then was able to buy into the Federal Civil Service Pension.  When I bought into the pension, I paid for all of the pension. It was for the period that I was allowed to transfer from Nortel. This is a program called Pension Buyback or Service Buyback.

This means that even though I have a federal pension, I paid for most of it, and this was my biggest purchase. More precisely, my defined benefit pension from Nortel paid for it.

The interesting part of the story is that the only reason I was allowed to buy into the Government pension was:

1. I started working for the government within two years of leaving Nortel.
2. Nortel’s pension is an “accredited pension plan” that the Government recognizes. The Government allows for transfer of funds and time from it into the Government Employees Pension plan.

I was very lucky that I qualified for part (1) of that statement (i.e. joined government within two years after being Laid off from Nortel), so again I fall bass ackwards into a good decision.