By Guest Blogger Sinan Terzioglu
My wife recently left a job where she participated in a defined benefit pension plan for a number of years. She was given the choice of deferring the pension (leaving the pension in place), transferring to another pension plan (if she would be participating in a new plan and it was permitted to transfer), taking the commuted value (lump sum) and investing it ourselves in a locked-in retirement account (LIRA) and/or taking a lump sum cash payment (taxable).
Needless to say we had a lot of factors to consider when deciding what the best decision was for us. Everyone’s goals and circumstances are different so it’s certainly not a one size fits all sort of decision. Some DB pension plans have additional benefits which further complicates the decision. For example, are payments indexed to inflation and/or are there medical benefits.
The certainty of regular monthly income for the rest of your life is very tempting. That said, there are no guarantees as many pension plans are underfunded and many corporate pension plans have gone bust over time. A defined benefit pension is basically like buying an annuity because both will give you income for life but when you pass away the remainder is lost. Some DB pensions allow payments to continue to a spouse for a certain period of time but at a reduced level. However, if/when the spouse passes the payments don’t continue for any kids or family members. This was a tough one for us to accept.
For my wife and I, it came down to the numbers. For example, suppose a DB pension plan offered you $2,000 per month for life starting at the age of 60 (not indexed to inflation which has averaged ~3% over the long term). You are 35 now and the commuted value is ~$170,000. You are able to commute the entire value to a LIRA and avoid paying taxes until withdrawals begin (earliest 55).
When comparing to an annuity you learn that a 60 year old buying an annuity in a registered account provides ~$10,000 a year for every $200,000 worth of annuities purchased. So to get an equivalent monthly cash inflow starting at the age of 60 you would need to purchase ~$480,000 worth of annuities. Now at this point you need to determine what rate of return you would need to grow $170,000 into $480,000 in 25 years. The compounded annual rate of return (CAGR) required is 4.24%.
Over the last several decades a diversified and balanced portfolio has produced a CAGR of 7%. Investing $170,000 for 25 years earning a CAGR of 7% would grow to ~$922,000 and continue to grow over time. This amount of money would produce consistent interest, dividends and capital growth.
If you pulled 4% a year that would give you over $3,000 a month and the money would still grow. If you pulled 6% a year that would give you ~$4,600 a month starting at the age of 60 without drawing down the principal. Also, a diversified portfolio consisting of dividend producing equities is like having an inflation hedge because dividends grow over time and often at a higher rate than inflation.
My wife was able to commute about half of her pension to a LIRA so we avoided paying taxes on that portion. The other half was paid out to us in cash so we had to declare it as income and pay applicable taxes. Many struggle with this part but for us it was a no brainer because we know we’d eventually have to pay tax on the pension income anyway and now we are able to invest the funds in our non-registered joint account which has several benefit. Plus, we’ll pay less tax over time because a portion of the non-registered amount can be paid as return of capital which is not added to taxable income.
Another big reason we decided to commute my wife’s pension is so we can have control. We are able to control the frequency of withdrawals and how much. If we choose to spend more in our early retirement years we have the ability to do so because we control the money.
An analogy I like is to think of a pension as if you are taking a fixed amount from a pile of money (not indexed to inflation). The pile never runs out but the pile and what you take from it never grows either. When you pass away the pile of money pretty much disappears. You can’t control how much you take from the pile nor when. However, if you commute the pension and invest it then the pile of money becomes yours and has the potential to grow throughout the rest of your life. When you pass away the pile of money is left for your family and continues to grow.
Sinan Terzioglu, CFA, CIM, is a financial advisor and licensed portfolio manager with Turner Investments, Private Client Group, Raymond James Ltd.
107 comments ↓
The borrowing and spending binge by Canadian households, businesses and governments (all levels) continues unabated. Growing the debt in the economy significantly faster than the economy itself grows seems to have developed into a way of life in Canada.
At the end of December, 2018 the total debt outstanding in Canada (bottom line of the Statistics Canada credit market summary data table) was $8.089 trillion. At the end of December, 2017 the total debt outstanding was $7.645 trillion. In the 1 year period from the end of December, 2017 to the end of December, 2018 it increased by $443 billion. This is an increase of 5.8%.
https://owecanada.blogspot.com/2019/03/canadian-total-household-business-and_14.html
First! Oh Yeah!!
Thanks for the great post, Sinan! I am learning so much for this website. Analyzing the DB pension, by comparing it to annuity, helps so much. And the dividends on diversified portfolio working as inflation hedge was an enlightening for me. Keep up the great work, Garth and the team.
Sinan you strike me as very a smart dude. I’m trying to figure something out.
Both Lionair indonesia and crash in Africa last week on the 727 max planes.
They had satellite data on both planes.
Yet that Malaysian plane on route to China that disappeared they have zero satellite info.
Do you think someone is fibbing on what really happened to the Malaysian plane?
Wow great article!
Another great post Sinan.
I recently left a Federal government job and took the transfer value. Best decision i ever made. Invested in a diversified portfolio of low cost ETFs that pay dividends every year. The most important part is that i’m in control and the funds can be transferred to a beneficiary upon my passing.I don’t think the vast majority of people realize how simple DIY investing is via ETFs. They trust [email protected], when in reality she doesn’t know whats going half the time. Its kinda sad. I try to educate people when finances and investing randomly come up in conversations and explain to them the benefits of DIY investing….most feel they can’t be bothered and would rather take selfies of themselves watching Netflix and post it on FB…….oh well, not my problem
The point which I perceive the most is that when there are several options to consider on the table one must decide the best way to proceed based upon their individual situation, and future needs. In other words, one size won’t fit all, but only what is best for them.
Great article – thanks!
I’m facing the same decision myself right now, thank you for the insight into CAGR. Good column!
Sinan,
I’m sure you and your wife have maxed out your RRSPs and TFSA limitations every year. But another interesting advantage in taking your commuted value is that not only does the portion you mentioned go into a LIRA reverting taxes, any room you may have left in your RRSP contribution can be filled with the taxable portion. The remainder, if you have room in your TFSA account, can fill those buckets as well. Perhaps your spouse has room in his/her TFSA account as well.
Great write up! Thanks for sharing! Lucky you could do a half and half approach there.
Can you do a write up on how to get money out of a LIRA? (early)
Thanks!
Great post, thanks! Quick question regarding commuted value. My understanding is that calculating the CV for a DB pension is a complicated question usually answered by actuaries. However, is there a semi-reasonable way to spit ball an estimate without an actuary?
For example, 30 years of deducting 24000/year (e.g. the defined benefit) from an investment earning 2% per year (some maintenance bond-type rate) would require approximately 540k if the final balance were to be 0. i.e. CV = 540k in this example?
Any insights would be much appreciated! Cheers.
if I opted for the transfer out option I also lost my medical benefit plus the extended health for myself and my wife. That’s worth a lot too. Lot’s to think about.
Without talking about Trump this is just boring…
#11 Phil on 03.14.19 at 5:25 pm
Great write up! Thanks for sharing! Lucky you could do a half and half approach there.
Can you do a write up on how to get money out of a LIRA? (early)
///////////////
terminal illness and a doctors note, but you don’t want that
“because we can control the money”
—————-
If you make “money” the center of your life, “money” will control you.
Commute it all, muy pronto, and spend it very quickly on a lot of fun. We are likely extinct within a decade anyway.
Prof. Guy McPherson, American scientist, professor emeritus of natural resources and ecology and evolutionary biology at the University of Arizona.
https://www.youtube.com/watch?v=zqIt93dDG1M
Great post. DB pensions though very nice, do come with a major drawback – lack of control with respect to taxation. You are taxed as ordinary income – while income in a non-registered plan can be structured as capital gains or dividends or return of capital with significant tax benefits. Plus you can neutralize capital gains with tax losses continually kicking the can to future years and pay no taxes.
In a high tax country like Canada, where the govt wants to take 50% of what you got – tax planning is critical.
I am facing the same decision myself, and as alluded to in the article, it’s more complicated for me because the existing pension I have is both fully indexed to inflation and also comes with medical benefits.
How would you suggest I account for both of those? What I’m thinking is to just add historical average CPI % to the withdrawal rate in the calculation to account for the indexing.
The medical benefits are a bigger problem. The best I can think of is to find the premium cost of a comparable medical plan and deduct that from the monthly amount I’d be able to withdraw @4% if I was managing the money myself.
What would you suggest, Sinan, or anybody else who wants to contribute?
Can the DB pension plan commuted value payout be denied?
As in, is there any protection under law where I am able to demand a commuted value payout?
Cheers, Russ
i did this last month. omers. kiss them good bye. no way i was ever leaving that money with them
#6 patty twinkle toes on 03.14.19 at 5:13 pm
Another great post Sinan.
I recently left a Federal government job and took the transfer value. Best decision i ever made. Invested in a diversified portfolio of low cost ETFs that pay dividends every year. The most important part is that i’m in control and the funds can be transferred to a beneficiary upon my passing.I don’t think the vast majority of people realize how simple DIY investing is via ETFs. They trust [email protected], when in reality she doesn’t know whats going half the time. Its kinda sad. I try to educate people when finances and investing randomly come up in conversations and explain to them the benefits of DIY investing….most feel they can’t be bothered and would rather take selfies of themselves watching Netflix and post it on FB…….oh well, not my problem
Hello, do you mind letting me know what your portfolio consists of ? How many different ETFs? How many different sectors ? 20 canadian 20 american 20 emergjng ?
Sinan, you are correct when you say ‘one size does not fit all’. While I certainly understand the advantage of commuting one’s pension (control over the money) that advantage can easily be offset by 1) spending the money; 2) making poor investment decisions & 3) unforeseen events that may force unfavorable financial choices.
The real issue from my perspective is the lack of any pension legislation to prevent pension funds from being underfunded or to prevent actual pension benefits to be reduced or end altogether. For people who are close to retirement or actually retired, this often translates to financial catastrophe. In addition there can be a negative effect on overall health.
It is past time that legislation to protect pensions was implemented so that pension plan debacles such as Enron, Nortel, Sears et al can no longer occur.
Sinan, you did the right thing. Congratulations for having the intestinal fortitude to follow through with the decision and the grey matter to work out the numbers. Suprisingly, this is beyond the capability of Joe Average Canadian. I did the calculations for my OMERS pension. I put everything (indexing, taxation, etc.) into a rather complex spreadsheet, ran it from 55 to 87 years of age. I only need to match 3.69% to get the equivalent. I expect to double that amount, and so far am closer to tripling it. Plus I get to “play” with the cash at any time should we desire.
I was in a similar situation. I hedged, took my contributions as LIRA which has averaged 6-7% since 2000 and is solid six figures. Left company cont. in DB which starts 2020 un-reduced with me under 65. Will split the DB with spouse to lower tax and take $2k pension credit each.
#15 Oilaphant – I agree with your thinking of adding the historical average CPI% to the withdrawal rate as well as finding a comparable medical plan and deducting from the monthly amount. Important to also consider harder to quantify factors and also how all this fits with your entire financial picture in case things don’t go as planned. — Sinan
#19 Oilaphant on 03.14.19 at 6:06 pm
The medical benefits are a bigger problem. The best I can think of is to find the premium cost of a comparable medical plan and deduct that from the monthly amount I’d be able to withdraw @4% if I was managing the money myself.
———————————————-
With either plan, IMHO read the fine print between premiums, deductibles, co-pays and maximum yearly payouts it may make more sense to self-insure by faithfully saving those premiums $$ each year in a separate account… depends on circumstances of course…
A good read. Thanks!
Great post Sinan,
Thanks!
# 22 – Linda
No legislation is going to help – the entire dB pension system save HOOP and maybe OTPP is bankrupt looking out 15 years. The young workers are being financially raped to help subsidize the older workers who retired over the last 10-15 years
It’s criminal and massive generational theft
The public sector unions and corporate elite are destroying society and most of the damage is at the expense of all Canadians under 45 or so
No amount of legislating will help a bankrupt system
The only question is how much most of us regular folks get stolen from us via dramatic tax increases and currency destruction
As we get ready to go to the polls in the first two weeks of May you will have a chance to vote
Keep in mind that next weeks budget debacle will be a test of true character
Those with integrity will vote for anyone but Mr T
Someone’s got to pay for all this – it’s theft on an exponential scale
hey Ace, sounds like you leapt too soon on the Boing thingy.
https://nationalpost.com/news/heres-the-terrifying-reason-the-737-max-8-is-grounded?video_autoplay=true
Right, It’s Not One Size Fits All
“Everyone’s goals and circumstances are different so it’s certainly not a one size fits all sort of decision.”
********************************
In this example, the person was apparently 25 years from retirement.
In this case staying with the pension might only make sense if it there was a good possibility of rejoining the plan or a very similar plan later.
In many government plans there are HUGE benefits if you can get 30 years in by about age 55 so that you can retire at 55 and the actuarial reduction for retiring 10 years early is (inexplicably) forgiven by a “magic” formula (age plus years of service = 85 typically) . I am not making that up, in fact I have personal experience.
One of the ways government DB plans pay for the magic formula benefits is to (Frankly) rip off those who leave the plan early and leave the money with the plan. Typically, if you left at 35 and left the pension in the government plan, the benefit rises by something less than 3% per year. Meanwhile, the pension plan is typically earning more like 7% and using the extra 4% to fund things like the magic formula benefit.
The commute-versus-take-the-pension decision is far different if you are already 55 or more and the pension could kick in immediately.
Say, you are smart like most on this blog and (despite that) you are married. You are looking at early retirement at 55 and have $500k or more of your investments.
You might decide that a balanced approach is to take the security of the pension as a base income for life while you have your $500k to exert control over.
Surely, your kids will not be in need of the lost residual from your pension by the time you (and your spouse) are both passed away many years in the future?
Of course if this is a non-governemnt plan and the company is shaky and the plan under-funded, well then of course, take the money and run.
By the way, price out an annuity to replace your pension and I believe you will find that the offered commuted value, while large, will simply not purchase an annuity of the size of your pension. What does that tell you?
Given the lack of financial skills and the lack of discipline of most people, it would be simply unsafe to recommend that most take the commuted value if they are already close to retirement.
Imagine if people had the option to take a lump sum on their old age pensions and CPP. What carnage do people imagine would ensue? Such a thing has never even been dreamed of let alone proposed. The math on a GOVERNMENT DB is no different.
Great article Sinan!
” IF you make ” money” the center of your life “money” will control you.”
There are those that grab the bull by the horns to get the upper hand and earn the right to say ‘ money doesn’t run my life’. Others use the term as a poor excuse for their financial woes.
Good article, Sinan.
#19 Oilaphant on 03.14.19 at 6:06 pm
I am facing the same decision myself, and as alluded to in the article, it’s more complicated for me because the existing pension I have is both fully indexed to inflation and also comes with medical benefits.
How would you suggest I account for both of those? What I’m thinking is to just add historical average CPI % to the withdrawal rate in the calculation to account for the indexing.
The medical benefits are a bigger problem. The best I can think of is to find the premium cost of a comparable medical plan and deduct that from the monthly amount I’d be able to withdraw @4% if I was managing the money myself.
What would you suggest, Sinan, or anybody else who wants to contribute?
//////////////
personally I would stay with what you got.
Peace of mind is worth something too.
It’s not all about the money, and if you have some health issues the benefits might be worth their weight in gold.
Insurance company can drop you like a hot potato if you get too sick.
Just my two cents (with rounding equals zero)
i find this pension plan money management just a scam personally. people should just work and get paid and when they are gone they are gone, no pension no benefits. companies dont owe you anything and look after yourself, they pay you for work and you work and thats it. hearing this guy on CFRB about your entitled to a year of pay because you worked for a place and they like owe you more than the agreed to salary and benefits etc. i have no idea why anyone would hire anyone with these type of laws and regulations in place.
rent dont buy, just like women, the unknown risk of hiring someone that you will eventually fire, like everyone gets fired eventually, is unknown, no way, just sub contract everyone, thats what i think.
DELETED
Hi Garth
You were mentioned on CBC, Not unkindly.
https://www.cbc.ca/news/opinion/opposition-scheer-1.5055428
“Or that Harper’s Conservatives, having denounced Belinda Stronach for crossing the floor to join the Liberal government in 2005 (a betrayal of her constituents, we were told) happily received Liberal David Emerson, who crossed to join Harper’s government in 2006, and then booted Conservative MP Garth Turner from the caucus after he protested (speaking truth to power, really) that Emerson should seek a new mandate from his constituents, the way the party had argued Stronach should have.”
#36 – I read that today too. another great piece by NM.
makes me want to abolish political parties, or force proportional representation
#29 debtslavecreator
No legislation is going to help – the entire dB pension system save HOOP and maybe OTPP is bankrupt looking out 15 years. The young workers are being financially raped to help subsidize the older ….
Xxxxxxxx
What kind of tripe is this? Not a trace of logic or reason behind it, just more emotional blather. Thankfully there are educated people at the helm of these plans, and good governance behind them.
The plans you’ve mentioned and most other large plans are close to or fully funded. That means that if the plan wound down today there are enough resources to pay out all of the obligations of the plan. With tens to hundreds of billions under management they have access to opportunities that retail investors can only dream of, and extremely low management fees.
If your emotional outburst was a concern about demographics it might be warranted. Perhaps greater minds than those of a bank teller or loan officer have pondered this challenge and worked on a solution to keep the plans solvent. Or maybe it’s all a giant conspiracy like the ones posted on Zerohedge every 5 minutes.
Take Belinda Stronach…, Please!
Or that Harper’s Conservatives, having denounced Belinda Stronach for crossing the floor to join the Liberal government
*******************************
Belinda did damage to both conservatives and liberals and and showed no loyalty. She greatly and publicly embarrassed her then boy friend Peter MacKay with that move. Did she not also cause trouble for hockey Player Ty Domie?
The latest news is her father suing and basically renouncing her.
Sounds like renouncing Belinda is just plain smart.
I know and respect her. Find someone else to trash from your pedestal. – Garth
Sue for commuted value?
#20 Russ on 03.14.19 at 6:13 pm
Can the DB pension plan commuted value payout be denied?
As in, is there any protection under law where I am able to demand a commuted value payout?
Cheers, Russ
*******************************
Commuted value is either allowed by the terms of the plan or it is not. It is not a right.
Where it is given, there may be laws around the calculation. In my view the calculation is far too rich because it gives you enough money to replace the pension by investing 100% in safe bonds. It should give no more than enough to replace the pension by investing in a balanced fund – which is what pensions do.
Giving out rich commuted values is part of the reason pension funds got under funded.
There should be no such thing as commuted values. Pensions are supposed to pay from retirement at age 65 (should be fair reductions for retiring early or late) until death of both spouses. If you expect to die early, well you won’t need the money after that.
It gets harder to fund these things if there is the right for some people to take commuted values. That’s part of the reason they are going extinct.
The argument for keeping the DB Pension is that you get money every month and do nothing. Having it in a tax deferred account means having something to manage by you or someone else at a cost. At that age, do you need to be watching the markets? Also, keeping the pension protects you from yourself and others. Something that is more important as you get older and less able to understand things. Of course people in financial management tell you to commute the pension. They might get a cut to manage it!
The latest from Fake Business News:
https://www.bnnbloomberg.ca/bank-of-canada-to-hold-interest-rates-through-2020-td-1.1229018
““The [Bank of Canada] had been counting on a rebound in energy production to lift growth well above its trend rate next quarter; however, oil production is increasing at a slower than expected pace,” Kelvin said. “If final domestic demand growth remains near-zero, we don’t see a likely way for the bank to avoid multiple rate cuts.””
Given that there’s severe overcapacity in Alberta/Saskatchewan/BC O&G production which isn’t going away anytime soon, it seems like a foregone conclusion that the next BoC policy action will be rate cuts.
Excellent blog today Sinan, I am close to being vested in a D.B. pension fund but have struggled with the fact if it is actually worth it or commute and invest? The reality would be a huge loss at first. This article has provided me with a few options, thanks.
39 yorkville renter on 03.14.19 at 7:35 pm
Yes – NM is a reporter I follow, don’t always agree but I find his discussion serious and well worth considering.
NM = Neil McDonald on CBC.
https://www.cbc.ca/news/opinion/neil-macdonald-1.1857885
@#37 Canadian Marriage Infidelity
Did you and Bongo get that Hotel room together like I suggested?
A well explained article Sinian
Thanks for the info.
I jumped from my crappy company pension plan after they spun us off to another company about 10 years ago,
I moved into a balanced and diversified LIRA.
Haven’t looked back….
For a “contrarian” opinion on Commuting DB Pension and taking CPP early or Late read:
Retirement Income for Life – Fred Vettese
it is about De-accumulation not how to invest and targeted at “middle income\wealth couples”, five basic axioms:
1. Reduce Fees…..he encourages DIY on your investments via ETFs to keep fees below 0.5%, In his approach your stash should be at it smallest by late 70’s and so not much to manage when you start to lose your mind.
2. Take CPP Late like age 70. It is Inflation protected guaranteed money and the return for waiting each year past 65 is worth it. This moves all the risk of you living to 100 onto the Government.
3. Around 70 If you have savings left in RRSP etc Buy an Annuity. Let the Insurance company have the risk of you living to 100.
4. Dynamic Spending : If Markets do well spend more, if things suck then spend less. Avoid two problems; running out of money or being too stingy living poor and dying with a big stash.
5. The Nuclear Option – Reverse Mortgage in your 70’s if things are too tight.
Good read.
Some of the worst advice possible. – Garth
What defines how much of the commuted value(Lump Sum) can be put into a LIRA and how much must be taken as cash payment?
#4 Smoking Man on 03.14.19 at 4:57 pm
Sinan you strike me as very a smart dude. I’m trying to figure something out.
Both Lionair indonesia and crash in Africa ….
They had satellite data on both planes.They had satellite data on both planes.
Yet that Malaysian plane on route to China that disappeared they have zero satellite info.
Do you think someone is fibbing on what really happened to the Malaysian plane?
——————-
the malaysia plane was before the new global satellite system just put in place by IRDM . It just happens to be one of my 2 stock positions (non etf). its new satellites covering everywhere. i told you all to buy it . i don’t imagine anyone did!
cnbc
Only a few months after SpaceX launched the last set of Iridium Communications satellites into orbit, the new network is helping deliver critical data to aviation officials.
The Federal Aviation Administration, or FAA, grounded Boeing’s 737 Max airplanes on Wednesday, after receiving data from air traffic surveillance company Aireon about the deadly crash of Ethiopian Airlines Flight 302.
Aireon’s system piggybacks on Iridium’s network of 75 satellites. Expected to become fully operational in a few weeks, Aireon can track airplanes anywhere on the planet. But the company’s data is already proving to be critical, as Aireon said in a statement to CNBC that “the system was able to capture information associated with Flight 302.”
While Aireon declined to make company officials available for an interview while the investigation is ongoing, the company said it is working with federal officials to provide them with raw data. Even though the Aireon system has not been fully rolled out, the company is able to provide investigators with information about an aircraft’s location, velocity, altitude and more.
To commute mine, I have to take it out 10 years before my natural retirement date. So I’d have to quit my job by 55. I’d like to be able to commute it after that.
BEWARE THE IDES OF MARCH!
Only hours away now. The days ahead will be historic and horrific.
PREPARE.
#49 crowdedelevatorfartz on 03.14.19 at 8:39 pm
A well explained article Sinian
Thanks for the info.
I jumped from my crappy company pension plan after they spun us off to another company about 10 years ago,
I moved into a balanced and diversified LIRA.
Haven’t looked back….
***************
Thanks for the info. Appreciated.
more nuts and bolts…
https://nats.aero/blog/2019/03/getting-ready-space-based-revolution/?utm_campaign=coschedule&utm_source=twitter&utm_medium=NATS
At the end of March, a revolution will begin in the skies over the North Atlantic, as for the first time in the history of air travel, earth orbiting satellites will be used to monitor and manage flights in near real-time.
It’s a move that is going to totally transform the service we can offer to oceanic air traffic, delivering a step-change in safety, capacity and operational efficiency, including significant savings in carbon emissions. It might sound like hyperbole, but this really will be one of the biggest technological advances in air traffic management since the introduction of radar 80 years ago.
It’s interesting to me that,from the tone of this post, Mrs. Sinan’s commuted pension has become family money. Didn’t she work to fund it from her pay? Wasn’t the employer’s portion also part of her remuneration? Isn’t it a truism that almost 50% of all marriages end in divorce? If that statistic is accurate, then what will Mrs. Sinan have to fall back on that is solely hers when she’s “old and grey”? Of course, the same could be said for a husband in the same circumstance, though his pension is likely to be much higher than hers.
I’m just playing Devil’s Advocate here. I recognize that our host believes all money should be blended family money and, in truth, as boomers my husband and I did what was expected in our generation. In fact after I returned to work when our kids were mid-teens, for the next 20 years not one red cent of my earnings was mine to spend as I wanted. It was devoted to making up for the lost years when we had no investments.
What am I missing here?
#30 ‘Debt’ – have to agree with #41 ‘Taxes’ regarding the current financial viability of pension plans. After the 2008 financial crisis, many plans were in arrears for various reasons including big losses during the GFC. For our plan, the board of directors implemented a higher levy to pay off the deficit, which had to be approved by CCRA as the amounts being deducted were higher than allowed under tax law. That higher levy in conjunction with a recovering market saw our plans billion plus deficit replaced with a fully funded pension plan. Of course poor market returns or other wallops like the 2008 GFC could see our plan returning to a deficit situation, but for the time being the vast majority of well managed pension plans are in good shape. Keeping them that way will be the tricky part, especially w/o any legislation to prevent pension plan contribution ‘holidays’, the siphoning off of ‘surpluses’ etc.
As for pension plans becoming underfunded due to a commuting ‘run’ on the plan, most plans that permit commuting in the first place have rules to prevent such a thing from happening. If necessary, the managing board will amend the plan rules so that commuting is no longer allowed.
#50 Dogman01 on 03.14.19 at 8:48 pm
For a “contrarian” opinion on Commuting DB Pension and taking CPP early or Late read:
Retirement Income for Life – Fred Vettese
it is about De-accumulation not how to invest and targeted at “middle income\wealth couples”, five basic axioms:
1. Reduce Fees…..he encourages DIY on your investments via ETFs to keep fees below 0.5%, In his approach your stash should be at it smallest by late 70’s and so not much to manage when you start to lose your mind.
2. Take CPP Late like age 70. It is Inflation protected guaranteed money and the return for waiting each year past 65 is worth it. This moves all the risk of you living to 100 onto the Government.
3. Around 70 If you have savings left in RRSP etc Buy an Annuity. Let the Insurance company have the risk of you living to 100.
4. Dynamic Spending : If Markets do well spend more, if things suck then spend less. Avoid two problems; running out of money or being too stingy living poor and dying with a big stash.
5. The Nuclear Option – Reverse Mortgage in your 70’s if things are too tight.
Good read.
Some of the worst advice possible. – Garth
———————————————————–
Terrible advice.
@#114 joblo
The Knockout”
SNC Lavalin, where is CBC the National Broadcaster on this story?
https://buffalochronicle.com/2019/03/11/political-grandmaster-frank-iacobucci-is-at-the-center-of-snc-lavalin-kinder-morgan-scandals/
*******
Unbelievable.
The revelations in this news story should be Nation wide but the Canadian Media have been neutered.
It’s sad that a small US newspaper is coming out with this and not regional and national newspapers here.
Not Great is the new meme.
https://www.bloomberg.com/news/articles/2019-03-14/canada-2018-real-estate-slump-erases-c-30-bln-from-home-values?srnd=premium-canada
https://business.financialpost.com/investing/david-rosenberg-dont-let-blockbuster-job-numbers-fool-you-canada-is-one-rung-away-from-recession
https://business.financialpost.com/news/economy/why-central-banks-like-canadas-are-finding-it-hard-to-navigate-home
Nothing really to worry about, right? It seems to be world wide. It’s like watching a slow moving accident.
Yikes is right!
@#54 Trumpocalypse2019
“Only hours away now. The days ahead will be historic and horrific.”
+++++
No matter how crappy my day.
Your blackened, dismal, depressing outlook on life always amuses me…..
#52 bdwy sktrn
***Thanks for that intel.
Some of the worst advice possible. – Garth
Just curious Garth
What gives you a bigger headache?
People wanting free “stock tips”?
“Experts” giving advice?
Or the knuckle dragging “Deleted” crowd?
OR , “your’s truly” peppering your comment section with my incessant, babbling, rapier wit?
Now that iridium satellites were mentiond, and you have an hour to kill.
I may have or not posted this video here but i know i did elsware, video about 1st generation of iridium satellites and how all that came about, that were scheduled to go down fairly recently. Funny thing project was almost scraped at one point of time.
https://www.youtube.com/watch?v=6r9tAbaiXSg
Hi Shawn & W,
Thanks for the info. I’ll check to see if has the age 55 restriction, which I have already missed, or with a little luck maybe I’m in time to suck a little life outta the ol’ plan.
With the amount the employer and I put into it over the years the monthly payout at retirement doesn’t look like much, so someone did well on my money.
Sue for commuted value?
#20 Russ on 03.14.19 at 6:13 pm
Can the DB pension plan commuted value payout be denied?
As in, is there any protection under law where I am able to demand a commuted value payout?
Cheers, Russ
*******************************
Commuted value is either allowed by the terms of the plan or it is not. It is not a right.
******************************
Actually there is a federal law that prevents withdraws from pension plans except to equivalent plans. This is for your protection; generally you must move to a better, (ie still guaranteed benefits) , plan to be able to move. We just moved from a DC (good lord, the fees) to HOOPP (fully funded, BTW) and it was quite an exercise to convince the regulators the move would benefit staff.
#50 Dogman01 on 03.14.19 at 8:48 pm
5. The Nuclear Option – Reverse Mortgage in your 70’s if things are too tight.
Good read.
——————————————————-
Horrible advice. Don’t need to read anymore.
Maybe Fred’s day job affords him the opportunity others don’t have but for the rest of us, way to tie yourself down with a bunch of upfront fees and obligations while still paying house-related expenses. If it comes down to expecting to need one of these, why not sell? There’s tonnes of emotion likely wrapped in this decision but how much do you want to give up in the process?
Personally, I think the LIRA is a joke, because the amount is rarely enough to produce any significant income during retirement. Exceptions are: you were contributing for decades and the amounts are significant for a balanced portfolio or, you are a master trader and can manage the amount up through aggressive and successful stockpicking. Annuities, Whole Life, Segregations, all suck because the fees are excessive. Nothing beats a clean slate, buy stocks, collect dividends, don’t sell, reinvest dividends, pay taxes only after dividend tax credits apply. Rinse and repeat during your working life and you’ll have educated yourself on investing by osmosis. Conclusion , higher returns, lower fees, starve the beast, better retirement.
#54 Trumpocalypse2019 on 03.14.19 at 9:32 pm
BEWARE THE IDES OF MARCH!
Only hours away now. The days ahead will be historic and horrific.
PREPARE.
————————————————–
Been wondering, is that Eastern Daylight or Pacific time?
bdwy sktrn on 03.14.19 at 9:19 pm
#4 Smoking Man on 03.14.19 at 4:57 pm
Sinan you strike me as very a smart dude. I’m trying to figure something out.
Both Lionair indonesia and crash in Africa ….
They had satellite data on both planes.They had satellite data on both planes.
Yet that Malaysian plane on route to China that disappeared they have zero satellite info.
Do you think someone is fibbing on what really happened to the Malaysian plane?
——————-
the malaysia plane was before the new global satellite system just put in place by IRDM . It just happens to be one of my 2 stock positions (non etf). its new satellites covering everywhere. i told you all to buy it . i don’t imagine anyone did!
cnbc
Only a few months after SpaceX launched the last set of Iridium Communications satellites into orbit, the new network is helping deliver critical data to aviation officials.
The Federal Aviation Administration, or FAA, grounded Boeing’s 737 Max airplanes on Wednesday, after receiving data from air traffic surveillance company Aireon about the deadly crash of Ethiopian Airlines Flight 302.
Aireon’s system piggybacks on Iridium’s network of 75 satellites. Expected to become fully operational in a few weeks, Aireon can track airplanes anywhere on the planet. But the company’s data is already proving to be critical, as Aireon said in a statement to CNBC that “the system was able to capture information associated with Flight 302.”
While Aireon declined to make company officials available for an interview while the investigation is ongoing, the company said it is working with federal officials to provide them with raw data. Even though the Aireon system has not been fully rolled out, the company is able to provide investigators with information about an aircraft’s location, velocity,
…..
So that’s the deep state story, ok.
I’m still sticking with alien abduction.
Sinan,
Obviously you are a good husband and father who plans for the financial wellbeing of your family.
But, what happens if your wife finds a better looking guy.
Divorces you and sues you for halve your assets and custody of the kids?
Happens all the time.
Money brings out the worst in people.
#16 Ponzius Pilatus on 03.14.19 at 5:52 pm
“because we can control the money”
—————-
If you make “money” the center of your life, “money” will control you.
——————
Ponz, what are you getting at? Did you miss the point that this blog is all about money? Money represents all our needs: food? money, shelter? money, security? money, free will? money.
Our society has accepted money as the universal instrument of transfer. You may as well say if you allow your needs for security, food and shelter to be the center of your life, then these things will control you.
Most people who work 40 years don’t do it for the love of the job, they do it for… yes, money. Or need. Which also means money.
Financial ignorance is just a type of ignorance. Statements such as yours give ignorance an air of legitimacy or even honour to those who don’t care to learn.
The first step is understanding that freedom is the goal, and second, that you get there by paying serious attention to finances.
“Many struggle with this part but for us it was a no brainer because we know we’d eventually have to pay tax on the pension income anyway and now we are able to invest the funds in our non-registered joint account which has several benefit. Plus, we’ll pay less tax over time because a portion of the non-registered amount can be paid as return of capital which is not added to taxable income.”
1. One could be taxed at around 50% on the portion of the commuted value which can’t be commuted into LIRA. Gains and dividends in the non-reg account are taxed. At the end of the day the net value of cash you get will be less than had you been allowed to commute all of it to the registered account.
2. The claim about “paying less tax over time because return of capital” does not make sense. Yes, withdrawing from a registered account = taxes on your “capital”. All you are doing is delaying this tax as non-LIRA payout is taxed right away. Delay is hugely advantageous because the “tax” portion of the fund grows in the reg. account. Besides, the tax rate on withdrawal from the reg account will be lower.
Too all the couples that gave it a chance.
https://youtu.be/QTxrwYzl6f8
Why I took the Transfer Value out of a Federal DBP at age 47;
(Had to quit permanent position, and get rehired as casual/term then finally permanent again)
Survivor benefits are not that great: 50% rate goes to spouse and only 1/5 to child until age 18.
Once survivor benefits run out there is no legacy for the family. I have two Disabled kids so I’m thinking long term legacy for them.
The math for me using 5-6% growth a year, showed if I leave the Transfer Value fully invested until I would have normally retired at 57, I will only be giving up the bridging amount but have a portfolio of about 950K. How many 23K checks could I write with that.
The DBP ate up most of my RRSP contribution room to build a retirement fund outside the DBP.
The Transfer Value is basically half sheltered and would go into a LIRA the other half is taxable (or fill RRSPs). This left me with 593K to invest.
Income from Pension is taxed fully, I now shuffle money into TFSA’s, RESP’s, and S/RRSP’s. Slowly turning my non registered investments into sheltered products, and the remaining unsheltered investments are producing dividend and Capital gains as much as possible to reduce tax.
My DBP has a bridging amount (about1/3) that is taken away at age 65 to be replaced by CPP. Now my CPP will come in and will increase income.
If you die early like 55 and were planning on retiring at 65 the pension could be reduced by 5% year before age 65, and lose 10 years of benefits (2%/year) so another 20% hit. So if you started work & family at age 30 and were planning to work till age 65 to get the max 70% pension and lets say you have 100K income. You were planning on 70K/Year, but the spouse would basically get about 25K/year from age 55. (2%y X 25y= 50%) then minus 5%/y penalty over 10 year (-50%).
I am currently 50 years old working the same job, could retire as early as 53 after locking in the medical and dental benefits as a pensioner with a new small DBP of 8K/Y. But will likely work till age 55-60 at this position to allow further growth and lock in the Supplementary death benefit as a pensioner and build to another 22K DBP income. Have applied for what is called “leave with income averaging” to reduce my hours by 10% with a 10% cut in annual pay, since all models show we are done saving for retirement, just need to let investments mature over the next 7-10 years.
Over three years since I pulled the trigger on this plan, and we are on target, with both the job, and investments, retirement at our standard of living is almost assured at age 58 to 60 depending on returns.
Everyone should take the time to learn the pros and cons of taking the transfer value, get professional advice.
Also you should learn how investments work ahead of time so when you get this lump sum you can invest it wisely. I had some investments most of my life but being a single income family we had only had about 1 year of gross income invested before taking the transfer value, but we had confidence in a proper portfolio (we are a client of Raymond James) and had selected our investment adviser way before hand. If you have no track record of investments, and have managed money poorly all your life it will be hard to have confidence in pulling all your money out of DBP. You will have to be the Judge, for us it is working out very well.
Excellent Sinan. Thank You
Just started working for federal government. Thanks for this – it’s good to know there are options, that I’m not “locked in” to anything.
#50 Dogman01:
I picked up “Retirement Income for Life – Fred Vettese” when it came out, read it, and shelved it.
I appreciate other methods; you can always learn something, and Mr. Vettese is certainly no idiot. But, he proposes a path that does not suit OUR household methods.
The book seemed like propaganda for justification of his career, and that he was fighting headwinds to get people to listen.
Saying that – I’d suggest to anyone to read and understand as many retirement financial books as they can, and this is one as it proposes a “different path”, which may help refine your knowledge, and strengthen your understanding of why Garth pushes the methods he does.
#15 Penny Henny on 03.14.19 at 5:50 pm
#11 Phil on 03.14.19 at 5:25 pm
Great write up! Thanks for sharing! Lucky you could do a half and half approach there.
Can you do a write up on how to get money out of a LIRA? (early)
///////////////
terminal illness and a doctors note, but you don’t want that
—————————————————————-
There’s also a financial hardship exemption, but the amount you can withdraw is capped (30k ish iirc)
A horrible start in the Pacific to the Ides of March. My thoughts and prayers go to the victims and families.
The perp was a fascist Trump supporter, just one of millions of thugs out there ready to push this sort of craziness, as Trump himself threatens violence.
“”I have the support of the police, the support of the military, the support of Bikers for Trump — I have tough people, but they don’t play it tough until they go to a certain point and then it would be very, very bad.”
https://www.cnn.com/2019/03/14/opinions/trumps-thuggish-threat-of-violence-against-his-critics-lockhart/index.html
We have entered truly frightful times, and it will only get worse.
Spare some thoughts for today’s victims. And take time to strategically plan for your family’s safety.
This is coming everywhere.
PREPARE.
Canadian new home prices fall for the first time in nearly a decade
https://ca.finance.yahoo.com/news/canadian-new-home-prices-fall-for-the-first-time-in-nearly-a-decade-163258868.html
Valuable post.
Did the same over a decade ago when the large multinational got “bought out” by another behemoth. Best. Decision. Ever. The stench of benefits being decimated/”modified”, along with the DC phenomenon was at gag levels.
Pensions are no longer a sacred trust – and we’re living a lot longer, thus increasing the risk factor for corporate muck ups. Even the largest, most stalwart company is at risk. How many stories have we all read/heard about whereby retired workers have had their pensions reduced? And those not yet retired having seen them just “poof!” disappear?
We couldn’t get our mitts on the pile fast enough and never looked back. It sits safely tucked away, growing.
As you say Sinan, individual situations vary, but this issue is well-deserving of serious attention and review with a finance professional.
#4 Smoking Man on 03.14.19 at 4:57 pm
“Sinan you strike me as very a smart dude. I’m trying to figure something out.
Both Lionair indonesia and crash in Africa last week on the 727 max planes.
They had satellite data on both planes.
Yet that Malaysian plane on route to China that disappeared they have zero satellite info.
Do you think someone is fibbing on what really happened to the Malaysian plane?”
Google ‘Iridium’ ‘Aireon satellite network’
Check out IRDM:NASDAQ. Shares have doubled since I bought them in July.
Try to keep up.
I agree with Sinan.
It’s always better to control your own financial destiny.
Less actual money in your possession today is better than the “promise” of a future larger payout by a corporation.
A bird in the hand is worth two in the bush.
Take the money and run.
https://www.youtube.com/watch?v=5V6btl0ASu0
Retirement planning is such a dog’s breakfast of options and different scenarios.
Looking at our situation, Ms. IH will likely live past 90, every day past 80 for me would be a gift. Portfolio is going to need funding right to 65.
What will probably happen for us is semi retirement at 60, full retirement at 65, and then start drawing down the RRSPs from there.
I’ll be taking CPP at 60, wife might wait till 65 for CPP and to start her pension since all the Women in her family went past 90 – some well past. This, unless there is some good reason to to otherwise.
We’d like to keep funding Ms. IH’s TFSA’s while retired too, it might get another 25-30 years worth of growth AFTER retirement! This is just to pass on to the kiddies (who’ll actually be wrinklies by then haha!)
Trump’s latest little victory:
https://www.theglobeandmail.com/world/article-north-korea-considering-suspending-talks-with-us-unless-washington/
Better make those concessions and go back and try to bargain with them again.
Now the USA is reduced to giving concessions to and bargaining with little tin pot dictators of economy-less countries, as if North Korea was China or Russia and the USA actually had to engage with them on an equal footing.
It’s North Korea. Sheesh. Just shut down their borders, sanction them, resume military exercises in the South and tell Lil’ Kim to go eat his smelly socks.
What a joke……
#71 Smoking Man on 03.14.19 at 11:19 pm
bdwy sktrn on 03.14.19 at 9:19 pm
#4 Smoking Man on 03.14.19 at 4:57 pm
Sinan you strike me as very a smart dude. I’m trying to figure something out.
Both Lionair indonesia and crash in Africa ….
They had satellite data on both planes.They had satellite data on both planes.
Yet that Malaysian plane on route to China that disappeared they have zero satellite info.
Do you think someone is fibbing on what really happened to the Malaysian plane?
——————-
the malaysia plane was before the new global satellite system just put in place by IRDM . It just happens to be one of my 2 stock positions (non etf). its new satellites covering everywhere. i told you all to buy it . i don’t imagine anyone did!
cnbc
Only a few months after SpaceX launched the last set of Iridium Communications satellites into orbit, the new network is helping deliver critical data to aviation officials.
The Federal Aviation Administration, or FAA, grounded Boeing’s 737 Max airplanes on Wednesday, after receiving data from air traffic surveillance company Aireon about the deadly crash of Ethiopian Airlines Flight 302.
Aireon’s system piggybacks on Iridium’s network of 75 satellites. Expected to become fully operational in a few weeks, Aireon can track airplanes anywhere on the planet. But the company’s data is already proving to be critical, as Aireon said in a statement to CNBC that “the system was able to capture information associated with Flight 302.”
While Aireon declined to make company officials available for an interview while the investigation is ongoing, the company said it is working with federal officials to provide them with raw data. Even though the Aireon system has not been fully rolled out, the company is able to provide investigators with information about an aircraft’s location, velocity,
………………………….
So that’s the deep state story, ok.
I’m still sticking with alien abduction.
__________________________________________
Wow “Alien abduction” how deep do you get into that bottle every night Old Man?
Know wonder this pathetic blog is Called “The Greater Fool”
Jesus Old Man, get some help for god sake.
@ Drahma Bum
Bird in a hand os worth two and a half birds in a bush, science sad, i meen dude from YouTube, that’s a same now days…
https://youtu.be/hup_8uDXJx8
#87 Ace Goodheart on 03.15.19 at 10:40 am
Trump’s latest little victory:
————————————
Yep, Trump’s vanity is getting gamed and played like a “mysteriously wonderful” violin while in NK, every day without a weapons factory visit from a flight of B-2 Spirit bombers or an internal uprising / coup due to even more crippling sanctions is a day in the bank for KJU who gets to play rock star statesman and savior of his people.
Food for thought
https://www.alhambrapartners.com/2019/03/13/the-fed-proposes-a-repo-facility-qe5/
#38 Canadian Infidels on 03.14.19 at 7:19 pm
DELETED
It’s odd that these racist guys have been posting here recently at the same time that mass shooting took place in New Zealand, where almost 50 Islamic worshippers were murdered by an anti-immigrant mass shooter of Austarlian origin.
I wonder if those deleted comments were calls to action to engage in violence, or if the racist Sons of Odin were part of this xenophobic violence which radicalized that murder suspect?
Good on you for deleting their racist posts. Racism, religious intolerance, xenophobia and mass shootings for “nationalism” have no place in Canadian society.
Yes, they were calls to action against Muslims and Jews. Hateful, vile. – Garth
The Soldiers of Odin are an anti-Muslim hate group. They were founded in Finland by a self-identifying neo-Nazi who has been found guilty of racially motivated assault. It’s well documented that the Canadian organization has attracted white supremacists and neo-Nazis.
Several political parties and figures in Canada have disavowed the support of the Soldiers of Odin, like the United Conservative Party in Alberta. Others have found associating with the Soldiers of Odin to be a setback to their political aspirations. There is a growing recognition of what the group represents.
The statement by the RCMP that the Soldiers of Odin are not a concern is incorrect. The Canadian Anti-Hate Network and others have documented overtly racist statements targeting Muslims and other groups, and posts celebrating or encouraging violence.
https://www.antihate.ca/tags/soldiers_of_odin
Canada’s RE sales falling off a cliff. Wyle Coyote moment for RE in Canada. Remember that rollercoaster video about Vancouver RE out there? It was popular many years ago but really should get attention now.
Down she goes and everyone better hold on to their hats! Predictions to the downside are irrelevant at this time. Lower, lower, lowest but banks will get more and more reluctant to throw good money after bad.
I’m watching for financing failures of projects under construction.
Europe is in a major RE boom. Mortgages with FIXED rates of 2% or less with 30 or even 40 year amortization and there’s still room to the upside. Brexit is having an affect on prices and volume but several EU countries have golden visa or other incentives for foreign buyers who are coming and buying. Polar opposite to what is happening in Canada right now.
#57 LP on 03.14.19 at 9:52 pm
“It’s interesting to me that,from the tone of this post, Mrs. Sinan’s commuted pension has become family money. Didn’t she work to fund it from her pay? Wasn’t the employer’s portion also part of her remuneration? Isn’t it a truism that almost 50% of all marriages end in divorce? If that statistic is accurate, then what will Mrs. Sinan have to fall back on that is solely hers when she’s “old and grey”? Of course, the same could be said for a husband in the same circumstance, though his pension is likely to be much higher than hers. … What am I missing here?”
*********************************************
I’m pretty sure that what you’re missing here is that all assets belong to both people in the marriage. You know all those stories where high income earners lose half their net worth when they divorce? That’s how marriage (and depending on the province, even being common-law) works, and pensions are no different, whether commuted or not. I work for a company where wages are fairly average, but the pensions are good. I’ve heard of multiple stories of coworkers (both men and women) being shocked by what they owed to their ex-spouses due to the high value of their pension.
RE: Retirement Income for Life – Fred Vettese
A more through review here: https://www.moneysense.ca/save/retirement/retirement-income-for-life/
As I said contrarian but exposing yourself to differing perspectives allows you to:
“read this drivel, throw it into the hopper of your brain, then come up with your own opinion. It’s called, um, thinking.´- Garth Turner
JimH- thanks for the comments on IRDM. This hasn’t been on my radar, but now is- it seems to have legs and momentum. I’m never a fan of buying at the high, so will do a deep research dive and start tracking.
Opportunities abound and Elon is a world-changer
RCMP take over investigation of United Conservative Party ‘irregular financial contribution’ allegations
Alberta election commissioner identified ‘potential violations’ outside his jurisdiction
Charles Rusnell · CBC News · Posted: Mar 15, 2019 3:00 AM MT | Last Updated: an hour ago
https://www.cbc.ca/news/canada/edmonton/alberta-rcmp-investigation-ucp-financial-contributions-1.5057255
#85 dharma bum on 03.15.19 at 9:47 am
I agree with Sinan.
It’s always better to control your own financial destiny.
Less actual money in your possession today is better than the “promise” of a future larger payout by a corporation.
A bird in the hand is worth two in the bush.
Take the money and run.
https://www.youtube.com/watch?v=5V6btl0ASu0
____
Lots of good posts from Mr. D Bum lately. I’m trying to get my Auto Worker BIL to see the benefit of seizing a bird rather than crossing fingers and leaving them to roam free in the bush and hope to get a couple of them later. Don’t think it’s going to happen.
BIL won’t likely be living a long life, his pension has a crap survivor benefit, and the wife has worked little for even less her whole life, and would get bottom end CPP. They haven’t saved a dime, and won’t sell the house for a Mil where they live either.
Some folks just don’t have the brain for money and that’s the end of it.
#86 IHCTD9 on 03.15.19 at 10:04 am
“I’ll be taking CPP at 60, wife might wait till 65 for CPP and to start her pension since all the Women in her family went past 90 – some well past. This, unless there is some good reason to to otherwise.” Wifey should start collecting CPP at age 60 as well—no matter her longevity—due to the time value of money.
https://en.wikipedia.org/wiki/Time_value_of_money
https://en.wikipedia.org/wiki/Net_present_value
This solution illustrates the power of compounding—even just five more years of it. :)
https://en.wikipedia.org/wiki/Compound_interest
https://en.wikipedia.org/wiki/Exponential_growth
#100 Gravy Train on 03.15.19 at 12:55 pm
#86 IHCTD9 on 03.15.19 at 10:04 am
“I’ll be taking CPP at 60, wife might wait till 65 for CPP and to start her pension since all the Women in her family went past 90 – some well past. This, unless there is some good reason to to otherwise.” Wifey should start collecting CPP at age 60 as well—no matter her longevity—due to the time value of money.
https://en.wikipedia.org/wiki/Time_value_of_money
https://en.wikipedia.org/wiki/Net_present_value
This solution illustrates the power of compounding—even just five more years of it. :)
https://en.wikipedia.org/wiki/Compound_interest
https://en.wikipedia.org/wiki/Exponential_growth
____
This stuff hurts my brain. I think when the time comes, I’ll let the experts decide what to do and roll with that!
Re: #6 patty twinkle toes on 03.14.19 at 5:13 pm
Me thinks it will be other people trying to educate you when everything crashes. Maybe you should have bought long term bonds instead of those ETF’s.
395 Talking Pi
Good point, thanks. As frequently happens, sometimes I miss the obvious.
https://www.castanet.net/news/Penticton/251618/Huge-layoffs-at-Moduline
#101 IHCTD9 on 03.15.19 at 1:30 pm
“This stuff hurts my brain. I think when the time comes, I’ll let the experts decide what to do and roll with that!” Sorry, I didn’t mean to hurt you! :)
Having control of your own retirement–priceless.
Ask the Stelco union how they liked the company looking after their pensions?
Many companies ‘borrow’ from the pension fund. When they go teats up, everybodys retirement plans are in jeopardy
#80 Tater on 03.15.19 at 8:15 am
#15 Penny Henny on 03.14.19 at 5:50 pm
#11 Phil on 03.14.19 at 5:25 pm
Great write up! Thanks for sharing! Lucky you could do a half and half approach there.
Can you do a write up on how to get money out of a LIRA? (early)
///////////////
terminal illness and a doctors note, but you don’t want that
—————————————————————-
There’s also a financial hardship exemption, but the amount you can withdraw is capped (30k ish iirc)
**********************************
There are ways to withdraw money from a LIRA early but the regulations on this vary from province to province.
Do an internet search for “unlocking LIRA” + your province.
I had a small defined-contribution pension that I pulled out of the company’s terrible mandatory registered plan under Sunlife when I was laid off. Because government regulations require the money to be transferred to a LIRA, if before retirement age, I had no choices.
However, a few years later, AB regulations allowed any LIRA totaling less than $11,000 to be transferred to a non-locked RRSP. Transferring to an RRSP which offers me more control and flexibility over the money was the better choice.
AB regulations also allow withdrawal from a LIRA for:
– shortened life expectancy (terminal illness or disability)
– becoming a non-resident of Canada
– financial hardship (low income, foreclosure, medical costs, and two other conditions).
If age 50 – 65, AB also allows a one-time option of unlocking 50% of the money as cash or transferring to an RRSP with the remainder converted to a LIF.
Most provinces have similar options to the above but age requirements and allowed amounts can vary amongst provinces. It would be worthwhile to check what regulations apply in your province.