Tuesday, May 1, 2012

D's Numbers

The long awaited pension numbers have arrived and here they are:

Assuming D works till he is 65 years old, he is eligible to receive an annual retirement income of $31078 from his work pension plan.

They estimate his Canada Pension Plan (CPP) annual amount to be $12525.  And Old Age Security (OAS) to be $6481.

Total Annual Income:  $50084

This is a big deal for us.  All I can think about is the amount of money we don't have to save because of this news.  Believe me, we are grateful for that.  It was strange to see my name on the pension statement because the above totals do not reflect my numbers.  I'm just the spouse.

I am not expecting him to work till 65.  He wants to consider "retiring" around 55 and doing contract work to allow for more flexibility for travel.

Because contract work will pay more, we will be able to bank let's say half and it will help make up for not having 10 more years of contribution. 

In 3 years, D will have completed his financial responsibilities with respect to mortgage equalization.  He will be able to start taking a few more weeks a year off without pay.  It's all good.


  1. Are these numbers in current or future dollars? Somtimes they give you projections one way or the other. Also, you may want to check whether reduced benefits can be taken early. Depending on the reduction schedule, it can actually make sense to take it early in some cases.

    Either way, it's a nice chunk of money!

  2. Hi S.B.;

    These numbers are in current dollars. Are there a lot of plans that project in future numbers? What would be the benefit of it? I can only guess to make you realize the drop in buying power?

    Yes it can be taken early. We don't know what the reduction schedule is nor fully understand the options within the pension ie. how to buy cost of living adjustment etc.

    Apparently you have to pay into a "pool" in order to participate in COLA and top up spousal benefits if that is important (currently 60%)? D needs (translation "I need") to read the hand book.

    I know you are a big advocate of not underestimating the future buying power of money. Do you have any insights on the above?

  3. oops, "overestimating the future buying..." :)

  4. Current dollars are generally more useful, but future dollars can be helpful in some comparisons. The calculator provided by my pension plan and also by the (U.S.) Social Security Administration will give you both versions.

    Both numbers are estimates. Future dollars are based on estimates of your personal wage growth, or national wage growth in the case of social security. This is then discounted back to current dollars based on an estimate of inflation between now and when you start drawing your pension.

    Current dollars is good to get a sense of how much money it is relative to today's expenses. (e.g. "I think I could live on $60K a year.") Future dollars can be useful if you just need to compare a raw dollar amount. For example, if someone has a $2,000 a month mortgage when they retire and they want to know if their pension will cover it, then all they want to know is if it's at least $2,000 a month in future dollars.

    The important thing is just to always know which version you are using.

  5. Hi S.B.;

    I Knew I could count on you to provide a thorough answer! Thank You. I guess I don't think of future dollars enough.

    D has told me there is a calculator we can use to draft our early withdrawal table. I'm looking forward to playing around with it.

    Is your pension automatically indexed for inflation or is it something you have to "buy into"?

    It looks like our retirement plans (social and private) are fairly similar.

    I've always viewed your 401K to be like our RSP and your Roth IRA to be like our non tax account. And now your Social Security vs our CPP & OAS.

    Our biggest difference is still health care.

  6. My private pension is not adjusted for inflation once you stop working and there is no provision to change that. I could be wrong, but anecdotally it would seem that very few American pension plans adjust for inflation. However, as you may know, social security not only adjusts for inflation, but the adjustment is quite generous. And yes, healthcare is a huge difference.

  7. Hi S.B.;

    A cursory glance into D's pension enhancement program shows options for inflation adjustment, bridge benefits for early retirees and increased spousal benefits to a maximum of 66 2/3rd%.

    They recommend maxing out any RSP room first before applying for the program. The cost of the above options isn't given until you sign up. So I cannot say if it will be worth it.