Adam, you should consider a video talking about what a person should do if they're in their 20s or 30s. Back when I left companies, I would commute the pension and move it into my RRSP. In some ways I regret that today as I would have had a couple of DB plans along with the extra RRSP room. I'm sure some of your younger viewers would like to know what the considerations are.
Yes! Please, I would like to hear about this. My employer has db pension but I'm very sure I won't be here long enough to collect the full amount. I want to retire early, have RRSP room and do my own increasing. Take the smaller pension amount or commuted value? To add: how would you estimate how much you might expect in commuted value? I'd frankly like to count that amount as part of my savings!
Consideration as to whether or not to take your DPP as you retire. First, the decision on when to take our DPP came early in our retirement planning. Our considerations will be different than most based upon your financial situation. My wife and I were gov't employees who retired both at 55. My wife retired before I did and is also older with a larger pension. We decided that we would have all expenses besides everyday living paid off. Therefore, we worked to pay off our home, car and cottage before retirement. We also purchased a brand new vehicle 1 year before my wife's retirement with cash outright. This allowed us to not only help our children financially while travelling for 3 month every year, with tge exception of the covid years. Along with deferring my pension until 60, we live within our budget even in retirement. As far as taking the commuted value of our DPP, since we did not need my pension we did the math on both pension and taking my pension, once started long term was our best option. All this to say we did our homework early and looked at our plan frequently to make sure we were on track and adjusted if needed.
I have a defined pension and I've never heard that you could defer it. However, because I'm going to get half of my sick credits, it might not be a bad idea. Thanks for giving me something to ask about!
Hi - depending upon if I had 2 years of service or more than 2 years, and if I met the rule of eligibility for an non-reduced pension (yrs of service + age >= 80) is what determined my options to defer a benefit. If I was 65 or met the rule of 80 there is no opinion to defer and have to immediately take a benefit with a bridge to age 65 the month after my termination date. If I had less than 2 years of service I could take a refund of contributions or transfer to RRSP or another registered retirement plan (RPP). Terminating with 2 or more years of service but before meeting rule of 80 or age 65 - options are defer pension to age 65, defer till sometime between age 55-64 and take a actuarial reduce benefit or transfer commuted value to LIRA or another RPP. This payout is subject to a transfer deficiency holdback as well. Now point of all this is I only had the option to defer a benefit payment if I had more than 2 years of service, not yet 65 years old or my age plus years of contributory service in the plan totaled less than 80. So the option to defer I believe will be very limited for most plans. I was also on the board of another pension plan and rules were almost identical with only difference being rule of 85 instead of 80. But one should definitely know the specific rules and options in their plans for sure, just keep in mind all the intricate details when each option is available and not available.
I’m 53 and I have a defined benefit plan. I have reached out to my administrator to find out the commuted value. I’m considering leaving at 54 get the lump sum and maybe work somewhere else.
Thanks for your very informative videos. I have learned so much since finding your channel. I know you have said you have seen all kind of situations but I'm wondering if this scenario is one you have seen. I am 56 with 30 years pensionable service with the same employer. I am trying to decide between defined pension and commuted value. The company that manages the pension will not give any calculation of the commuted value. I have to give my notice of resignation (30 days) and wait 3- 6 months before I will know what the commuted value is. It is very difficult to make an informed decision when you don't have all the information. Is this something you have experience with? Thank!
This is standard. As for which would make more sense - unfortunately there is no way to tell until you get the CV numbers. From there you can make an informed decision. Sorry it isn't a more simple process.
I've got an RRSP and have recently started in to a career with a DB pension. I will not reach 35 years before I hit 65. This means there will be a penalty if I take my DB when I retire (planning for 60). I'm sure I'll be taking out of my RRSP to bridge the gap and avoid the lifelong penalties.
You might want to check on the formula that your pension uses to determine if you are entitled to an unreduced pension. There are sometimes multiple avenues to a full pension.
I retired with four, yes four, DB pensions, in different divisions and in a couple of cases, union locals, with the same employer. One was commuted out because Ont law gives the employer the option of cashing you out, whether you want it or not, if the value of the pension is below a threshold, and I got about 40K cash I could transfer to my RRSP. The other 3 pay roughly what one single pension payout would be with my last employer over the entire employment period. I lost several k per year by designating my spouse as beneficiary. In the end a DB pension is just a kind of life annuity and if you have a beneficiary it's effectively a joint life annuity. Later on my employer decided to offload management of two of my DB pensions, and they were converted to life annuities with financial institutions with identical terms.
I retired early ( and went back to work for a different employer) at 54. I took my pension right away and never considered commuting the value. So far I've collected $285,000 before taxes in 4 years. The market can be volatile and my RRSP and TFSA have taken a loss in the last 6 months. For me I went with the sure thing. The opportunity for gains was offset by the risk of loss. I'll be taking CPP at 60 and using that money for investment rather than my commuted value of the pension. My career involved risk, but if you take precautions it lowered the possibility of harm, I'm doing the same with my money.
@@CGB65 I tell people don't take CPP at 60 unless you need the money to live on, or you really want to just spend it and won't be depending on it for survival. Reinvesting it must be compared to the "zero risk" investment value of letting it grow by deferring it. Which means the reinvestment scenario comparison is to, say federal bonds, not stocks. You won't get anything like the growth in effective payout by reinvesting it unless it's reinvested in high risk assets. Also the payout has uncapped inflation indexing, and this can be well worth maximizing as you move into your 70s and 80s.
@@JK-rv9tp The one thing about holding off on CPP is the percentage increase should be compared to the loss of income that you could have collected. Markets are not stable and if you invest the money collected you will most likely not be getting the same percentage as the increase of the CPP. The thing is as you get older you tend to be less active and need less money, plus you never know when you are about to die. If you die without collecting a dime your estate gets nothing. If you hold on to some of your RRSP and die your estate gets some money
@@garth217 Agreed, but if you're just going to reinvest the CPP payments instead of spending them, that benefit is moot. That's why I say take if you need it or want to spend it, but if you're just going to buy stocks, might as well leave it and let it grow with the govt's guarantee. Delaying it to age 70 for us will result in fully half of our 6 figure retirement income will be inflation protected guaranteed income through our 70s and 80s, and we can afford to deplete savings and don't have to worry anywhere near as much about a market crash's impact on our total income.
@@JK-rv9tp Well you're welcome to do what ever you want with your money. I don't plan on depleting my money because the government will guarantee me future money. The future is not guaranteed. I intend on living well during my early retirement years. My home has been paid off for 7 years. Zero debt
"I have a pension from the USS which is a defined benefit scheme. I have accumulated a total of £12,000 in my pension pot, which will provide me with an annual income of £1,030 when I retire. I left the USS after switching jobs. I am unsure if I should keep my USS pension, transfer it to my current pension provider L&G, or move it to a SIPP with Vanguard. Can you advise me on what would be the best option?"
Brett made a few good points with one of them being considering net Estate value as it relates to how much the taxes will be on it. Adam keeps pointing out that if one "draws down" the RRSP or RRIF in their 60's and before 70 that helps keep more money in ones pocket because Estate taxes are such that, as of this date, 50% of the RRIF or RRSP will be taken from the Canadian Government. So, defer all or as much as you can and in the meantime draw down your RRIF and RRSP to what Adam has said a few times in previous presentations to about 85% by 70yrs of age. Another very applicable and helpful presentation. Thank you Brett and Adam, once again.💯📈$🇨🇦
Drawing down on your RRSP early in retirement will save you on estate taxes, that's very true. But the fact is when you're dealing with estate taxes, you're dead. Sure you can get more money from CPP if you wait until 70, but its possible you may never collect a dime, or only collect for a few years. The crossover point is something like age 72 or 74..break even. The break even point doesn't take into consideration if you invest your CPP from 60 to 65 or 70..in my case I can collect $45,000 from 60 to 65. CPP is taxable as well. It's a personal decision. But its good to know all points of view
@@garth217 INdeed,all points of view are important. Its one thing to do the math on paper its another to look at individual circumstances and the psychology of individuals. A very dynamic topic that is for sure. Discussion about the break even point is important to mention. Scott, I as well retired early, say 45yrs of age. I kept investing in the stock market and worked to build it up substantially. The pension with a bridge will end at 65. I am in the situation that OAS will be fully clawed back if I take it at 65, and if I take CPP it will push me into a higher tax bracket and I will be heavily taxed. I am one of the fortunate ones in that deferring means being kept in a lower tax bracket and paying less tax, and if I continue to give the max allowed to animal, wildlife charities my money feels like it is put to effective use rather than going to the government. REally interesting about your 45,000 to 65. If you use the rule of 72 you could come close to doubling it, if you get a good yield of course.
@@MegsCarpentry-lovedogs Congratulations on having your investments work out so well. As one investment councilor from OMERS once told me.. " it's great that you get a pension that pretty much gives you 97% of your take home pay, but most of you go on to double dip but you pay a lot of taxes, that's a great problem to have".
@@garth217 Hi Scott, great to hear from you👍. Yes, ADAM said the same thing in a few of his vids last year or so. For those of us who have this issue of a large income and paying a lot of taxes as we try to figure out how to pay less, well, it is a good problem to have! LOL. Of course, I worked diligently to build up my investment portfolio's and deal with unexpected work issues making decisions that would be financially sound for the long run. Lots of twists and turns that life brings eh! You as well have sorted out your financial plan and CPP and work contribution years issue. Excellent that you have found the right path for you. I really have to credit Adam in how well he has helped to educate! I mean, what a gift he😇 is providing for Canadians😇. Amazing! Great to have our chats 👍🇨🇦
My Canada Post Pension defined benefit plan can be taken at age 55 without a penalty. I’m 54 and retiring next year. Are you saying that I can delay this to a later date and receive more ? I’ve never heard this before
My son quit his job of 10 years to return to university. He had 3 "streams" not the 2 mentioned in the video. Of course there was the LIRA and the cash that he could pay tax on or use existing contribution room. The other amount could be rolled into an RRSP without encroaching on contribution room or taken in cash and increase his contribution room through a pension adjustment reversal.
Is it better to take a guaranteed 10 year with annuity which pays more until 65, or the 5 year guaranteed pension plan where I would get the same fixed benefit at 65? I have no dependents or spouse. I will get a bridge for both options which stops at 65. The annuity is tempting but losing that and the bridge at 65 would be a bit of a shock to the budget. Advice?
🐝Adam, & Guest: When you take your DB pension in a LIRA, how does that LIRA gain interest, and also when you change it to LIF, and beyond? Does the LIRA automatically assumes the bank interest rate each year?🐝
My husbands defined pension, before the age of 65 includes CPP offset payable to age 65. I am having trouble finding out what this offset is, could you shed some light on the term? I so appreciate your videos.
Its known as a bridge benefit. It typically is very close to the estimated CPP that will be obtained at age 65. He should be very happy with this on his pension
Does your husband's pension plan have a website that will give him projections of his benefits based on some parameters you enter? If so on my plan it shows a benefit dollar amount for age under 65 and then another benefit amount for over 65 (which is lower amount than the previous because you lose the bridge benefit over 65). You can just subtract these two numbers to get the bridge estimate. In my case my bridge is around $585 so I can pretty much take CPP at any age after 60 as my age 60 CPP benefit is estimated at $754 and will replace the $585 bridge loss at age 65 from pension. So next question for me is at what age taking CPP gives me a larger estate value at estimate death age. Working though that question but it's looking like delaying CPP start date will always increase estate value up to around age 66 in my situation. Death age estimate I'm using is 84.
My pension plan is integrated with CPP so if I am taking a pension benefit before age 65 I automatically will get the bridge benefit as long as I meet rule of eligibility for an early unreduced pension benefit. I don't have an option to take the bridge or not take the bridge benefit. The plan is built that way to allow you to retire with full pension earlier in life and give you more cash now till other benefits kick in normally at age 65. I haven't hit 60 so still determining when the right time for my situation is to start drawing CPP. Because one of my overall goals is to maximize family income and by delaying I don't sacrifice income cash flow now (ie draw from savings until I take CPP), and 84 age of death is a guestimate I'm thinking of splitting the difference and drawing CPP at age 63 (60-66). That way I'm only half wrong or right but I will not know until I die or live beyond crossover point. Either way from my calcs its not going to be huge amounts of money on a per year basis (depending of course how far on either side I am away from age 84 when death happens). 😳 Need to stress it depends upon lots of factors or things important to you so what I've done is not necessary right for others however some reasons may resonate the same. By delaying you are also transferring some longevity risk to the government defined benefit pension plan as it's has automatic cost of living and I get the benefit of 7.2%/year increase (return on waiting to draw or lessening the impact of the 0.6% per month penalty).
Adam and Brett, thanks for the practical advice. Your video has prompted me to consider taking a lump sum instead of a monthly pension. As a result, I contacted the administrator of my plan (Willis Towers Watson) to request more information. I was told it would take 3 weeks. It has been almost 60 days. With each day that passes Inflation and interest are on the rise and my lump sum (presumably) is on the decline. Is there any governance provided to administrators (from the government) that defines how long the administrator has to respond with options (calculations from the actuaries) to a member's request?
PM, not sure there is - but that sounds frustrating. It shouldn't take much more than a few weeks to produce on their end. I would keep following up daily. I would also explain your reason for pushing for the number.
It took a long time for me to get in to a good job with a defined benefit pension. I will have 20 years when I hit 65. I am trying to decide if it is worth it to work to 70 to boost the pension and CPP.
One important thing to consider specific to your situation is how healthy are you and if you have any health issues of concern. If you are thinking and feeling you will live to the average life span of a Canadian then consider Adams presentations where he discusses the benefits of deferring CPP and or OAS and why and when you should not defer.
@@JungleEddie indeed. I think Adam talked about how CPP calculations work but also showed that it was a complicated process. I googled and found out that the last 5 yrs prior to receiving cpp has a significant impact with the CPP payment amount. "How does CPP get calculated? Use your statement of contributions to get your pensionable earnings for each year then divide that amount by that year's maximum pensionable earnings. Next, you multiply that amount by the average maximum pensionable earnings for the five-year period leading up to the year when you intend to start drawing CPP.Jan 26, 2022" Keep up the good work in finding out what best works for you.👍🇨🇦
@@MegsCarpentry-lovedogs Valid points. Its even more relevant if you retired early. I retired at 54..so I would have had 11 non contribution years even without my early low contribution years. For that reason I'll take CPP at 60 to remove 5 non contribution years from my estimate
@@garth217 Indeed, therse non contribution years are a concerning factor in your decision. The would draw down your CPP payments from the Cpp payment calculations. I guess you don't have a pension that has a bridge then? Because Adam explained a few times that if you are on a pension the 5 yr non contributory years are NOT applicable. I didn't really contribute a lot to CPP from 18 to 26yrs of age, and from 28 to 32. Then worked until 45. Of course I have an interesting situation in that I self taught investing on the stock market and did well, so this is a huge advantage by the time you get close to 65 yrs of age. So interesting how many situations have their unique twists and turns. 🤔👍
Unless you always planned to leave a DB plan early, cashing out is crazy. My guesstimate is my wife’s DB pension is worth about $1.7M if she lives to 85 (not including inflation adjustments). She will retire at 56. The most the commuted value ever reached was $680K at age 50, after that they no longer provide an estimate.
So for your wife I agree. But many plans incentivize to cash out and the numbers can make sense. Always get a planner to do an apples to apples to ensure...also make sure it's not an investment person running those numbers as they often lean to taking the CV
Great info! It would be nice to hear your discussion about bridge benefits, if the opportunity to have a public discussion ever arises! I work for the fed gov, and have a hard time wrapping my mind around it.
I have a defined benefit and a bridge benefit from work too, although not a fed employee. The bridge is supposed to replace the OAS that you won’t get until age 65, assuming you retire early. At 65 you’re supposed to get OAS and the bridge will stop. At least that’s how it works for us. Our bridge is a set dollar amount times the number of years worked, for me it is about $500, which is less than OAS will be.
Here's the definition of bridge benefit in our plan. I always thought it was CPP integration because that benefit is somewhat guaranteed whereas the OAS is a benefit that can be changed or clawed back by government (ie CPP is a plan funded by employees and employers not the government, unlike OAS). Bridge Benefit is a temporary monthly payment designed to supplement your basic lifetime pension until age 65, when other sources of retirement income normally become available.
Like Don E commented below about what a bridge benefit is about, one thing to consider pending your 'other sources of income" is do you have an RRSP/RRIF by the time you reach pension receiving time or age 65, which ever comes first? The bridge portion of your pension is temporary until age 65. After that you have to decide if you will 1) not take CPP; 2) not take OAS; 3) take only one or the other; 4) if you don't take cpp or OAs or only one of them, use your RRIF/RRSP savings and use them up, draw down is the term used and Adam explains what that means in several of his presentations. Remember, every year you defer your CPP you are building it up with a yield of 8.4'ish % and indexed to inflation as well. Bonds don't give you that type of yield and mostly risky stock investing will give you that type of yield, so a really wise choice if you can defer providing you have a cushion of RRSP/RRIF to use while you wait, or defer, for CPP/OAS. Lots to think about as you plan wisely. 📈$👍🇨🇦
@@David.Bergeron It is a concern for those who do not have a lot of savings in the first place, like an investment portfolio for example. Totally understandable to express your concern and point. Each situation is different. Ones health is very important to consider. Absolutely. And sometimes there is zero warning that you will leave this earth...a car accident, a heart attack, a stroke for a few examples. The point you are making is live each day like you may not live by tomorrow. Financially that means get as much money "in the now' as possible with no defer of cpp and OAS. It is a balancing act that is for sure and one where we do NOT control every little detail. You may have drawn down your RRSP but your TFSA is not treated tax wise at all like the RRSP/RRIF. So the Estate pays less to the government, more money in that sense stays with beneficiaries because if you kept the RRSP the government gets 50% of it right off the bat. Might as well draw down rrsp then, and ... why not take CPP and OAS as well if that suits your financial needs and health plan. Good point that you raised. 👍 Each person is different as well as mind set.🙏🇨🇦
Brett made out my DB pension plan with my minor investments and he found me more money 💰 than I anticipated. Much thanks. 😊
Great to hear! Our team does a great job maximizing your hard earned savings.
Thanks Adam and Brett! Very valuable discussion. I have a DB and this video gives me a lot to think about. Thanks again so much for this!!
You are welcome Kimmy!
Adam, you should consider a video talking about what a person should do if they're in their 20s or 30s. Back when I left companies, I would commute the pension and move it into my RRSP. In some ways I regret that today as I would have had a couple of DB plans along with the extra RRSP room. I'm sure some of your younger viewers would like to know what the considerations are.
Yes! Please, I would like to hear about this. My employer has db pension but I'm very sure I won't be here long enough to collect the full amount. I want to retire early, have RRSP room and do my own increasing. Take the smaller pension amount or commuted value?
To add: how would you estimate how much you might expect in commuted value? I'd frankly like to count that amount as part of my savings!
Consideration as to whether or not to take your DPP as you retire.
First, the decision on when to take our DPP came early in our retirement planning. Our considerations will be different than most based upon your financial situation. My wife and I were gov't employees who retired both at 55. My wife retired before I did and is also older with a larger pension. We decided that we would have all expenses besides everyday living paid off. Therefore, we worked to pay off our home, car and cottage before retirement. We also purchased a brand new vehicle 1 year before my wife's retirement with cash outright. This allowed us to not only help our children financially while travelling for 3 month every year, with tge exception of the covid years. Along with deferring my pension until 60, we live within our budget even in retirement. As far as taking the commuted value of our DPP, since we did not need my pension we did the math on both pension and taking my pension, once started long term was our best option. All this to say we did our homework early and looked at our plan frequently to make sure we were on track and adjusted if needed.
I have a defined pension and I've never heard that you could defer it. However, because I'm going to get half of my sick credits, it might not be a bad idea. Thanks for giving me something to ask about!
Hi - depending upon if I had 2 years of service or more than 2 years, and if I met the rule of eligibility for an non-reduced pension (yrs of service + age >= 80) is what determined my options to defer a benefit. If I was 65 or met the rule of 80 there is no opinion to defer and have to immediately take a benefit with a bridge to age 65 the month after my termination date.
If I had less than 2 years of service I could take a refund of contributions or transfer to RRSP or another registered retirement plan (RPP).
Terminating with 2 or more years of service but before meeting rule of 80 or age 65 - options are defer pension to age 65, defer till sometime between age 55-64 and take a actuarial reduce benefit or transfer commuted value to LIRA or another RPP. This payout is subject to a transfer deficiency holdback as well.
Now point of all this is I only had the option to defer a benefit payment if I had more than 2 years of service, not yet 65 years old or my age plus years of contributory service in the plan totaled less than 80.
So the option to defer I believe will be very limited for most plans. I was also on the board of another pension plan and rules were almost identical with only difference being rule of 85 instead of 80.
But one should definitely know the specific rules and options in their plans for sure, just keep in mind all the intricate details when each option is available and not available.
I’m 53 and I have a defined benefit plan. I have reached out to my administrator to find out the commuted value. I’m considering leaving at 54 get the lump sum and maybe work somewhere else.
Thanks for your very informative videos. I have learned so much since finding your channel. I know you have said you have seen all kind of situations but I'm wondering if this scenario is one you have seen. I am 56 with 30 years pensionable service with the same employer. I am trying to decide between defined pension and commuted value. The company that manages the pension will not give any calculation of the commuted value. I have to give my notice of resignation (30 days) and wait 3- 6 months before I will know what the commuted value is. It is very difficult to make an informed decision when you don't have all the information. Is this something you have experience with? Thank!
This is standard. As for which would make more sense - unfortunately there is no way to tell until you get the CV numbers. From there you can make an informed decision. Sorry it isn't a more simple process.
I've got an RRSP and have recently started in to a career with a DB pension. I will not reach 35 years before I hit 65. This means there will be a penalty if I take my DB when I retire (planning for 60). I'm sure I'll be taking out of my RRSP to bridge the gap and avoid the lifelong penalties.
You might want to check on the formula that your pension uses to determine if you are entitled to an unreduced pension. There are sometimes multiple avenues to a full pension.
I retired with four, yes four, DB pensions, in different divisions and in a couple of cases, union locals, with the same employer. One was commuted out because Ont law gives the employer the option of cashing you out, whether you want it or not, if the value of the pension is below a threshold, and I got about 40K cash I could transfer to my RRSP. The other 3 pay roughly what one single pension payout would be with my last employer over the entire employment period. I lost several k per year by designating my spouse as beneficiary. In the end a DB pension is just a kind of life annuity and if you have a beneficiary it's effectively a joint life annuity. Later on my employer decided to offload management of two of my DB pensions, and they were converted to life annuities with financial institutions with identical terms.
I retired early ( and went back to work for a different employer) at 54. I took my pension right away and never considered commuting the value. So far I've collected $285,000 before taxes in 4 years. The market can be volatile and my RRSP and TFSA have taken a loss in the last 6 months. For me I went with the sure thing. The opportunity for gains was offset by the risk of loss. I'll be taking CPP at 60 and using that money for investment rather than my commuted value of the pension. My career involved risk, but if you take precautions it lowered the possibility of harm, I'm doing the same with my money.
Thanks for your story Scott. This is my year. I am looking for tips from retired folks like you.
@@CGB65 I tell people don't take CPP at 60 unless you need the money to live on, or you really want to just spend it and won't be depending on it for survival. Reinvesting it must be compared to the "zero risk" investment value of letting it grow by deferring it. Which means the reinvestment scenario comparison is to, say federal bonds, not stocks. You won't get anything like the growth in effective payout by reinvesting it unless it's reinvested in high risk assets. Also the payout has uncapped inflation indexing, and this can be well worth maximizing as you move into your 70s and 80s.
@@JK-rv9tp
The one thing about holding off on CPP is the percentage increase should be compared to the loss of income that you could have collected. Markets are not stable and if you invest the money collected you will most likely not be getting the same percentage as the increase of the CPP. The thing is as you get older you tend to be less active and need less money, plus you never know when you are about to die. If you die without collecting a dime your estate gets nothing. If you hold on to some of your RRSP and die your estate gets some money
@@garth217 Agreed, but if you're just going to reinvest the CPP payments instead of spending them, that benefit is moot. That's why I say take if you need it or want to spend it, but if you're just going to buy stocks, might as well leave it and let it grow with the govt's guarantee. Delaying it to age 70 for us will result in fully half of our 6 figure retirement income will be inflation protected guaranteed income through our 70s and 80s, and we can afford to deplete savings and don't have to worry anywhere near as much about a market crash's impact on our total income.
@@JK-rv9tp
Well you're welcome to do what ever you want with your money. I don't plan on depleting my money because the government will guarantee me future money. The future is not guaranteed. I intend on living well during my early retirement years. My home has been paid off for 7 years. Zero debt
"I have a pension from the USS which is a defined benefit scheme. I have accumulated a total of £12,000 in my pension pot, which will provide me with an annual income of £1,030 when I retire. I left the USS after switching jobs. I am unsure if I should keep my USS pension, transfer it to my current pension provider L&G, or move it to a SIPP with Vanguard. Can you advise me on what would be the best option?"
Brett made a few good points with one of them being considering net Estate value as it relates to how much the taxes will be on it. Adam keeps pointing out that if one "draws down" the RRSP or RRIF in their 60's and before 70 that helps keep more money in ones pocket because Estate taxes are such that, as of this date, 50% of the RRIF or RRSP will be taken from the Canadian Government. So, defer all or as much as you can and in the meantime draw down your RRIF and RRSP to what Adam has said a few times in previous presentations to about 85% by 70yrs of age. Another very applicable and helpful presentation. Thank you Brett and Adam, once again.💯📈$🇨🇦
Drawing down on your RRSP early in retirement will save you on estate taxes, that's very true. But the fact is when you're dealing with estate taxes, you're dead. Sure you can get more money from CPP if you wait until 70, but its possible you may never collect a dime, or only collect for a few years. The crossover point is something like age 72 or 74..break even. The break even point doesn't take into consideration if you invest your CPP from 60 to 65 or 70..in my case I can collect $45,000 from 60 to 65. CPP is taxable as well.
It's a personal decision. But its good to know all points of view
@@garth217 INdeed,all points of view are important. Its one thing to do the math on paper its another to look at individual circumstances and the psychology of individuals. A very dynamic topic that is for sure. Discussion about the break even point is important to mention. Scott, I as well retired early, say 45yrs of age. I kept investing in the stock market and worked to build it up substantially. The pension with a bridge will end at 65. I am in the situation that OAS will be fully clawed back if I take it at 65, and if I take CPP it will push me into a higher tax bracket and I will be heavily taxed. I am one of the fortunate ones in that deferring means being kept in a lower tax bracket and paying less tax, and if I continue to give the max allowed to animal, wildlife charities my money feels like it is put to effective use rather than going to the government. REally interesting about your 45,000 to 65. If you use the rule of 72 you could come close to doubling it, if you get a good yield of course.
@@MegsCarpentry-lovedogs
Congratulations on having your investments work out so well. As one investment councilor from OMERS once told me.. " it's great that you get a pension that pretty much gives you 97% of your take home pay, but most of you go on to double dip but you pay a lot of taxes, that's a great problem to have".
@@garth217 Hi Scott, great to hear from you👍. Yes, ADAM said the same thing in a few of his vids last year or so. For those of us who have this issue of a large income and paying a lot of taxes as we try to figure out how to pay less, well, it is a good problem to have! LOL. Of course, I worked diligently to build up my investment portfolio's and deal with unexpected work issues making decisions that would be financially sound for the long run. Lots of twists and turns that life brings eh! You as well have sorted out your financial plan and CPP and work contribution years issue. Excellent that you have found the right path for you. I really have to credit Adam in how well he has helped to educate! I mean, what a gift he😇 is providing for Canadians😇. Amazing! Great to have our chats 👍🇨🇦
My Canada Post Pension defined benefit plan can be taken at age 55 without a penalty. I’m 54 and retiring next year. Are you saying that I can delay this to a later date and receive more ? I’ve never heard this before
My son quit his job of 10 years to return to university. He had 3 "streams" not the 2 mentioned in the video. Of course there was the LIRA and the cash that he could pay tax on or use existing contribution room. The other amount could be rolled into an RRSP without encroaching on contribution room or taken in cash and increase his contribution room through a pension adjustment reversal.
Believe it would encroach on the RRSP room if he rolled it over. But as u say he can get a pension adjustment to increase that room.
Commuted value drops a lot as interest go up. Usually you only have 1 year to make your option to take the commuted value.
Great video!!
Is it better to take a guaranteed 10 year with annuity which pays more until 65, or the 5 year guaranteed pension plan where I would get the same fixed benefit at 65? I have no dependents or spouse. I will get a bridge for both options which stops at 65. The annuity is tempting but losing that and the bridge at 65 would be a bit of a shock to the budget. Advice?
Commuted value age limit to cash out is age 50 for federal government employees
Seen up to 65 on some gov't pensions. All of them are different, but 50 is common.
🐝Adam, & Guest: When you take your DB pension in a LIRA, how does that LIRA gain interest, and also when you change it to LIF, and beyond? Does the LIRA automatically assumes the bank interest rate each year?🐝
My husbands defined pension, before the age of 65 includes CPP offset payable to age 65. I am having trouble finding out what this offset is, could you shed some light on the term? I so appreciate your videos.
Its known as a bridge benefit. It typically is very close to the estimated CPP that will be obtained at age 65. He should be very happy with this on his pension
@@garth217 Not close to his CPP payment. Does this amount get deducted off his CPP if he takes it early?
Does your husband's pension plan have a website that will give him projections of his benefits based on some parameters you enter? If so on my plan it shows a benefit dollar amount for age under 65 and then another benefit amount for over 65 (which is lower amount than the previous because you lose the bridge benefit over 65). You can just subtract these two numbers to get the bridge estimate. In my case my bridge is around $585 so I can pretty much take CPP at any age after 60 as my age 60 CPP benefit is estimated at $754 and will replace the $585 bridge loss at age 65 from pension. So next question for me is at what age taking CPP gives me a larger estate value at estimate death age. Working though that question but it's looking like delaying CPP start date will always increase estate value up to around age 66 in my situation. Death age estimate I'm using is 84.
@@DoneByD so you did not take the CPP at 60 but took the bridge? The website is for employees only and the statements are not very clear.
My pension plan is integrated with CPP so if I am taking a pension benefit before age 65 I automatically will get the bridge benefit as long as I meet rule of eligibility for an early unreduced pension benefit. I don't have an option to take the bridge or not take the bridge benefit. The plan is built that way to allow you to retire with full pension earlier in life and give you more cash now till other benefits kick in normally at age 65.
I haven't hit 60 so still determining when the right time for my situation is to start drawing CPP. Because one of my overall goals is to maximize family income and by delaying I don't sacrifice income cash flow now (ie draw from savings until I take CPP), and 84 age of death is a guestimate I'm thinking of splitting the difference and drawing CPP at age 63 (60-66). That way I'm only half wrong or right but I will not know until I die or live beyond crossover point. Either way from my calcs its not going to be huge amounts of money on a per year basis (depending of course how far on either side I am away from age 84 when death happens). 😳
Need to stress it depends upon lots of factors or things important to you so what I've done is not necessary right for others however some reasons may resonate the same. By delaying you are also transferring some longevity risk to the government defined benefit pension plan as it's has automatic cost of living and I get the benefit of 7.2%/year increase (return on waiting to draw or lessening the impact of the 0.6% per month penalty).
Adam and Brett, thanks for the practical advice. Your video has prompted me to consider taking a lump sum instead of a monthly pension. As a result, I contacted the administrator of my plan (Willis Towers Watson) to request more information. I was told it would take 3 weeks. It has been almost 60 days. With each day that passes Inflation and interest are on the rise and my lump sum (presumably) is on the decline. Is there any governance provided to administrators (from the government) that defines how long the administrator has to respond with options (calculations from the actuaries) to a member's request?
PM, not sure there is - but that sounds frustrating. It shouldn't take much more than a few weeks to produce on their end. I would keep following up daily. I would also explain your reason for pushing for the number.
It took a long time for me to get in to a good job with a defined benefit pension. I will have 20 years when I hit 65. I am trying to decide if it is worth it to work to 70 to boost the pension and CPP.
One important thing to consider specific to your situation is how healthy are you and if you have any health issues of concern. If you are thinking and feeling you will live to the average life span of a Canadian then consider Adams presentations where he discusses the benefits of deferring CPP and or OAS and why and when you should not defer.
@@MegsCarpentry-lovedogs I have a lot of zero cpp years so contributing max cpp for 5 additional years would greatly impact the amount received.
@@JungleEddie indeed. I think Adam talked about how CPP calculations work but also showed that it was a complicated process. I googled and found out that the last 5 yrs prior to receiving cpp has a significant impact with the CPP payment amount. "How does CPP get calculated?
Use your statement of contributions to get your pensionable earnings for each year then divide that amount by that year's maximum pensionable earnings. Next, you multiply that amount by the average maximum pensionable earnings for the five-year period leading up to the year when you intend to start drawing CPP.Jan 26, 2022" Keep up the good work in finding out what best works for you.👍🇨🇦
@@MegsCarpentry-lovedogs
Valid points. Its even more relevant if you retired early. I retired at 54..so I would have had 11 non contribution years even without my early low contribution years. For that reason I'll take CPP at 60 to remove 5 non contribution years from my estimate
@@garth217 Indeed, therse non contribution years are a concerning factor in your decision. The would draw down your CPP payments from the Cpp payment calculations. I guess you don't have a pension that has a bridge then? Because Adam explained a few times that if you are on a pension the 5 yr non contributory years are NOT applicable. I didn't really contribute a lot to CPP from 18 to 26yrs of age, and from 28 to 32. Then worked until 45. Of course I have an interesting situation in that I self taught investing on the stock market and
did well, so this is a huge advantage by the time you get close to 65 yrs of age. So interesting how many situations have their unique twists and turns. 🤔👍
Unless you always planned to leave a DB plan early, cashing out is crazy. My guesstimate is my wife’s DB pension is worth about $1.7M if she lives to 85 (not including inflation adjustments). She will retire at 56. The most the commuted value ever reached was $680K at age 50, after that they no longer provide an estimate.
So for your wife I agree. But many plans incentivize to cash out and the numbers can make sense. Always get a planner to do an apples to apples to ensure...also make sure it's not an investment person running those numbers as they often lean to taking the CV
Great info! It would be nice to hear your discussion about bridge benefits, if the opportunity to have a public discussion ever arises! I work for the fed gov, and have a hard time wrapping my mind around it.
I have a defined benefit and a bridge benefit from work too, although not a fed employee. The bridge is supposed to replace the OAS that you won’t get until age 65, assuming you retire early. At 65 you’re supposed to get OAS and the bridge will stop. At least that’s how it works for us. Our bridge is a set dollar amount times the number of years worked, for me it is about $500, which is less than OAS will be.
@@huejanus5505
My bridge is close to 900 and is to offset CPP if taken early
Here's the definition of bridge benefit in our plan. I always thought it was CPP integration because that benefit is somewhat guaranteed whereas the OAS is a benefit that can be changed or clawed back by government (ie CPP is a plan funded by employees and employers not the government, unlike OAS).
Bridge Benefit is a temporary monthly payment designed to supplement your basic lifetime pension until age 65, when other sources of retirement income normally become available.
Like Don E commented below about what a bridge benefit is about, one thing to consider pending your 'other sources of income" is do you have an RRSP/RRIF by the time you reach pension receiving time or age 65, which ever comes first? The bridge portion of your pension is temporary until age 65. After that you have to decide if you will 1) not take CPP; 2) not take OAS; 3) take only one or the other; 4) if you don't take cpp or OAs or only one of them, use your RRIF/RRSP savings and use them up, draw down is the term used and Adam explains what that means in several of his presentations. Remember, every year you defer your CPP you are building it up with a yield of 8.4'ish % and indexed to inflation as well. Bonds don't give you that type of yield and mostly risky stock investing will give you that type of yield, so a really wise choice if you can defer providing you have a cushion of RRSP/RRIF to use while you wait, or defer, for CPP/OAS. Lots to think about as you plan wisely. 📈$👍🇨🇦
@@David.Bergeron It is a concern for those who do not have a lot of savings in the first place, like an investment portfolio for example. Totally understandable to express your concern and point. Each situation is different. Ones health is very important to consider. Absolutely. And sometimes there is zero warning that you will leave this earth...a car accident, a heart attack, a stroke for a few examples. The point you are making is live each day like you may not live by tomorrow. Financially that means get as much money "in the now' as possible with no defer of cpp and OAS. It is a balancing act that is for sure and one where we do NOT control every little detail. You may have drawn down your RRSP but your TFSA is not treated tax wise at all like the RRSP/RRIF. So the Estate pays less to the government, more money in that sense stays with beneficiaries because if you kept the RRSP the government gets 50% of it right off the bat. Might as well draw down rrsp then, and ... why not take CPP and OAS as well if that suits your financial needs and health plan. Good point that you raised. 👍 Each person is different as well as mind set.🙏🇨🇦