Defined Benefit Pension Plans: DO NOT Forget About Laddering Your Income In Retirement!

[@guderian7795]

I have a DB plan and I will have 4 streams of income at retirement. 1) DB 2) CPP 3) OAS 4) RRSP, my TFSA, not an income stream, will be my slush fund to pay for new cars and trips. I view my RRSP as a supplement to my DB plan and contribute mostly for the tax credit when I file.

[@ronbonora7872]

I agree!

[@laed3520]

Adam something that is missing from the FinEd retirement conversations around DB pensions is, the large reduction in RRSP room for us DBers. I maxed out my RRSP contribution each year after my divorce 2000 to 2013. But the my RRSP Room max was between 3k & 4k a year. So with a 5% return I had a nice little nest egg which I used to supplement my travel expenses in my Go Go years before Covid hit, from age 60 till 65 until my OAS kicked in. I started my OAS ($606) at age 65 but the Bridge payment ($999) drops out at age 65 from my DB pension and my net pension dropped by almost $400. Now my RRSP Room was no where near the 18% of Gross others are able to contribute. But I'm not complaining. It's just that no one on KZbin mentions these facts around DB pensions. I Love all the videos. It's great to get Canadian only content. I have heard many horror stories about people who took the Commuted Value for their DB pension. It takes a special person or Financial advisor to make it work. I sleep better at night knowing my DB Pension will be there each month. FYI I'm waiting till age 70 to collect my CPP (another DB Pension). I've already gone online to My Service Canada and applied for Jan 1 2024 to begin CPP, 7 months and counting.

[@ClaudeRacine]

So true, start spending money during your gogo phase. Thank you for the tip. It'll stay with me. 60 here retiring in 1.5 year.

[@msmoniz]

Thanks to this channel I've learned a lot what to plan for. I'm 47 in a job the past 15 years that I will retire from that has a DB pension plan, with currently just over $100,000 in my personal RRSP savings I still contribute too and will until it's time to turn it into a RRIF at retirement. Now I know thanks to this channel, best for me to start to melt down my RRSP with my DB pension as my initial retirement income streams and delay CPP till 65 or even later to maximize my income until my death. Thank you!

[@murraytown4]

Another great one Adam. Recently retired, I’ve quite a generous DB plan, a maxed out RRSP and (thanks to the pandemic) a close to maxed out TSFA and zero debt. I get laddering but struggle, however, with tax efficiency (and the psychology behind spending as my parents both grew up during the depression and were frugal). I know you’ve touched on transitioning from saver to spender, but tax efficiency is the thing, not wanting to pay one penny more than necessary in taxes.

[@ParallelWealth]

I hear ya. Based on what you mentioned here, a good plan will save you well into 6 figures of taxes. www.parallelwealth.com/planning

[@James_48]

I agree with Adam that a plan can develop the most tax efficient way to use your resources, but also, based on your resources, paying some tax and reaping the rewards of your life of saving should be something to look forward to. Don’t let the angst of paying some tax lead you to hoard money and not enjoy your retirement.

[@murraytown4]

Thanks Adam. I just may reach out. As a supplemental, an idea for a video is service buyback . It’s a very niche topic but very important for financial planning and DB members. There’s the right approach and the wrong approach. The wrong approach can be a very costly mistake, speaking from personal experience. Cheers.

[@diggernash1]

@@freedomlife3623 I made decisions that ensured my insurance was part of my career benefits. Why should I be punished for others not planning carefully?

[@micheldevost]

Thanks Adam. I really appreciate your passion and wisdom! Take good care.

[@jpdriver1967]

Defined benefit pensioner that also put into both tax deferred and after tax retirement accounts. I opened a brokerage account about 10 years ago to add the "third bucket." Will retire next year at 56.5 years old with part of my DBP no kicking in until 59.5. The key has been saving well beyond the DB plan and as a couple living below our means. Wife and I will use the buckets to travel extensively in our 60s. It has been out plan for 25+ years.

[@edhcb9359]

My wife’s job has a pension and mine has a 401k with a healthy match. I’m glad that we both don’t have the same thing, it’s better to be diversified. As far as commuted value, the only reason an organization does that is to save themselves money. They never do it to help out the retiree.

[@annesmith5192]

My plan let's you take larger payments at the beginning of your retirement and then smaller payments for the rest of it. The call it front loading. I'm not doing that. We have RRSPs.

[@sharongrant3608]

Great information. Thanks !

[@johnnyboyvan]

Almost retired. DB this July, Rrsps, Tfsas and not a single debt on my books including my condo. Oh and stupid mutual funds. I better see Adam soon. Waiting til I get all my numbers.😮

[@grantboucher2696]

i have a mortgage......i have a tenant in bsmnt...........defined Bp,, max. TSFA max RRSP cpp60 oas 65 still saving 1000 month go go I dont pay off mortgage never will

[@edmturk1971]

You will be OK.

[@ronbonora7872]

if rates start increasing you will pay off the mortgage.....LOL

[@wcg66]

I’m hesitant to agree to cashing out a pension for commuted value. Like I said on your other video on the topic, it requires a lot of discipline to not have go-go to no-go in a short period of time! It might make sense for your clients specifically because they are likely the few who are going to have the discipline to continue the plan, especially if you guys are there to keep them on it. It seems with the Ontario teacher’s plan, the commuted value option disappears at age 50. Since most are likely to retire after that age, it’s not an option for a good chunk of DB pensioners. If the Federal government plan doesn’t support this, it’s also likely a minority of people who even have the option at retirement age. Obviously it might be too late for some couples, but my philosophy is that even with a spouse with a pension, the other spouse should save for retirement as if they might be the sole bread winner. Some pension plans have collapsed and people’s prosperity with them.

[@ronbonora7872]

I agree!

[@brassj67]

I did have 2 DB pensions from the UK but my first one was with T&N, part of Federal Mogul who went bust over asbestos claims. There was a shortfall in the scheme of 900 Million British Pounds or $1.55 Billion Canadian and the scheme was bought by Legal & General, Needless to say the pension I will get from Legal and General will be about 50% of what I would have gotten. My other DB pension is healthy though and I have a healthy RRSP and TFSA as well as a full UK state pension, CPP, OAS and precious metals. Don't rely on DB pensions as they are not guaranteed. It is basically a promise from the organisation you work or worked for that they will pay you x amount of money from retirement age for the rest of your life but if that organisation goes bust, you could potentially lose everything

[@8G00SE8]

If a defined benefit scheme goes bust you'll get what the Pension Protection Fund (a government bailout program) offers as a minimum, hopefully not 50% less! DB pensions are only secure if they're from the government really, military, civil service ones.

[@allan6021]

I’m recently retired with a DB pension but I have 2 parents with moderate dementia and I’m their essential caregiver, so being able to “go-go” is a no-no. Besides, my wife is self-employed and won’t be retiring any time soon. I do see the benefit of that plan because my parents did that.

[@Sonia-cd6rt]

Nice video,can u please elaborate on how do you create a 10 k or 20k income from home equity? Thanks

[@caperboy1169]

I have a defined retirement plan, I didn’t put a single penny in it. It was all the company I was contracted to, Union pension ,I also have RRSP

[@Kuwandi]

Please talk about the Commuted Value - being ROLLED OVER TO A TRADITIONAL IRA … I need the money from pension to pay income taxes due to job loss I have no income now to pay the Hefty Income tax so I’m looking to tap my Pension NOW but not all of it only 13k for INCOME TAXES - so I wanted to take the Bulk PAYMNT And rollover to an Ira …I do not want to take out a LOAN TO PAY MY INCOME TAXES …

[@donnastere5312]

Location? Interested but do not own a computer. Retiring Dec 2023 and asking if possible to schedule a sit-down and make a plan!

[@faryalminhas]

Hi! I’m in my 20’s and contributing to a defined benefit plan currently. Can you talk more about how we should be saving in things like TFSA, RRSP’s in ADDITION to the defined benefit plan? For instance, should the rest of my savings be directly going into both a Tfsa and an RRSP? Or is one better than the other? I would love to hear more about it from the front end of things, if you could make a video about it that would be great!!

I have the same questions!

[@ParallelWealth]

There are a few factors that guide this- not a one size fits all. Do you own a home or will you need some of these savings for a home purchase? What is your current income level? Do you have any other debts? What percentage of money you can save above the DB plan is for retirement versus short to mid term savings? Let's say you make 70k and have a DB plan. You own a home and want to build up more for retirement. Then look to a RRSP. If you still need to buy a house then use a TFSA (and 35k to RRSP if you qualify for first time home buyer). If you need flexibility or money is mid term, then TFSA.

@@ParallelWealth interesting; I was under the impression that it would be more beneficial, tax wise, to max out a TFSA before the RRSP because it's non taxable when money is taken out of it. So I interpreted this as "no matter the time horizon or purpose, always max the TFSA first, and you can always use that TFSA in retirement as an income source; once the TFSA is maxed, start contributing to the RRSP". I chose a different strategy and whatever I save, put two thirds into the TFSA and 1 third into the RRSP.

[@bloodstoneian]

This is a great question! Obviously rarer to be in this situation but i definitely would like to see more discussion about it. Since someone with a DB will have an income in retirement I always thought the focus should first be on TFSA, because your income in retirement may still not be in the lowest tax bracket. I suppose really the message from this video is that it's important to put money aside beyond just what's saves in the pension.

[@mvmacneil]

Awesome info - thank you!

[@ParallelWealth]

Glad it was helpful Mike.

[@mvmacneil]

@@ParallelWealth , going to be watching all your videos on defined benefit plans. Thanks for all. Cheers!

[@Moluccan56]

Oh, for a minute you were talking about a Defined Contribution Pension Plan. The kind that you get in a private company, not the kind you get as a provincial or municipal government employee. DCPP is affected by the markets.

[@llamudos9809]

Have DB, DC, SIPP, Premium Bonds, ISA, Rental income. Plan Plan Plan!

[@rickbannerman1457]

How much additional money do you need saved if your DB pension plan is not indexed?

[@ParallelWealth]

All depends how much income you need and how much your DB plan is. What video today - don't look at assets as silos

[@sharky0]

with defined benefits pensions also having bridge payments until 65 when oas and cpp kick in, would it make sense to burn through RRSP savings after the bridge, but before you take oas and cpp to reduce RRSP tax drag, and benefit by % increases to CPP.

[@ParallelWealth]

Will depend how much in RRSP. Likely supplement bridge as well

[@sharky0]

@@ParallelWealth I hear you... like you said, many defined benefits holders don't deposit more money, or not significant amounts... The TFSA in my view is the best secondary tool for a defined benefits holder to gain flexibility for spending on trips, gifts, and retirements goals... once tfsa is maxed, and only then would rrsp be more attractive?

[@MegsCarpentry-lovedogs]

@@ParallelWealth Yes, Adam, thanks for the reminder on drawing down the RRSP, considering to change it to a RRIF first though, and keeping track of how much is in the RRSP in the first place. The more RRSP one has then one has to look at calculating how many years it will take to draw it down to zero before Cpp and oAS kick in after 65.

[@kennethboehnen271]

Don't take a huge home equity loan. Sell it and move to a cheaper country like the Phillipines or Thailand.

[@VSLK27]

This is weird though, unlike my co-workers who joined the company way after me, I'm grandfathered on DB plan and I don't contribute a single cent under DB. My other co-workers who fall und Defined Contributions see their contributions on their payslips with the company match it up to 7%. So are there any different DB plans out there? I can retire at 62 with a full pension under DB and the company will bridge me for the difference on CPP.

[@ParallelWealth]

Susana, you have a tradition (old school) DB plan. Be very thankful and enjoy retirement when it comes. Just make sure to save outside your DB plan too!

[@VSLK27]

@@ParallelWealth Yes 100% so thankful. Been watching your channels and learning a lot, thank you for your generosity in sharing your knowledge.

[@MegsCarpentry-lovedogs]

Adam, I appreciate how you pointed out to start saving. Its better to start at any age rather than not at all. We are so "hard wired" to not spend when shifting into retirement and into the go go phase. This hard wiring is quite something to work on shifting. Your video's help put a healthy perspective on wise reasons to look carefully at a retirement plan. Thank you. 💯🇨🇦🍁

[@chucknoblet98]

Do you financially benefit yourself personally by suggesting your clients take commuted value? Do you receive compensation based on assets under management? What is your compensation structure? Annuitization is the best hedge against longevity risk and if you don't have enough annuitized cash flow, taking commuted value is an extremely bad idea.

[@gypsies0184]

That's one opinion. Another opinion is that annuity providers ALWAYS win. I'd rather take the win myself. And leave something to my heirs. (and I'm not sure how he'd benefit by advice given for free on a KZbin video ... "make sure your professional considers this ..." does not sound to me like he's trying to benefit personally.

[@ParallelWealth]

We charge a fee to assess best option or a fee for financial plan. I don't care what you end up doing. Our job is to show best option. Your assessment is fairly inaccurate regarding CV. If you have the option do your homework.

[@jeffseto6558]

Everyone’s situation is different. Taking a CV makes sense if you have enough RRSP room or else you will pay a lot of taxes. Plus you must be confident, or have a trusted investment advisor, because remember you will need to keep up with inflation + mgmt fee AND make a decent enough return. I will leave my DB with the fund manager and let them worry about paying me.

[@GT-tm1ft]

Farris, you should've listened to the video a bit more closely, watched the video he linked regarding commuted values and checked out his website. All the answers are there.

[@CustomComments]

Advisors will get paid on the commuted value and the assets under management. Having said that taking the commuted value makes sense for some people who are concerned about longevity. Often DB comes with a reduced payout for spouse and as such if you have a concern about your longevity it can make sense to take the commuted value.

[@edpoletto8048]

In a DB plan the company makes the contribution is my understanding. A DC plan you have an option to contribute more money to it.

[@ParallelWealth]

You contribute to a DB as well