Turning 55
If I had a dollar for every conversation I’ve had with a couple after 55 that had an amazing pension benefit from BC Ferries, Teaching, Health Care, RCMP, etc. then I’d have maybe $20 over my 11 year career so far. Mainly because the majority rely on their pension and assume it’s all planned out already. Totally okay because 100% of the time it’s sometimes fine. If they only knew that BEFORE their 55th birthday they had an option to commute the value of their pension to a self directed portfolio and ensure their wealth could be passed on to their children or estate when they passed. If that were the case, I’d have a lot more fun conversations and far less “I wish we knew and why didn’t they say anything in our pension presentation” discussions.
The short answer is that they would like to keep their pension alive (fair) and in order to do that they need as much money in the pot as possible. The earlier you and your significant other die, the cheaper the pension cost is for them. If you move the value of your pension out of the pot so that it’s yours then they never have the chance to recoup the “wealth” you’ve built up over the years because it will go to your estate, not back into their pot once you and your significant other die. There are risks you take on by being in charge of your own pension funds and some things you should weigh with a professional but at the very least you should be making an informed decision. Knowing pulling it out is an option is a good start.
Next time you’re in one of those meetings, ask them what happens to your promised income if you and your partner pass after 10 years but your life expectancy was reasonably 20 years from retirement.
For those of you without pensions (and even with because I see people leave pension careers all the time ten+ years in), the earlier you start saving for retirement the better but knowing when to start if you haven’t hit other typical life milestones can be hard to figure out on your own. Save for a house or save for retirement or save for both? How much, what about TFSA’s should I save in those or RRSP’s?
The earlier you begin planning the better. Retirement is not something you want to procrastinate. As a 30-something it’s really not a fun conversation to be telling people older than you they’re going to need to leave the country or keep working and eat macaroni and cheese to live in their retirement years. Add telling them the reason why that’s the case is because they gave all their savings to their kids to help them out… less fun.
I like fun things, so please do yourself a favour and meet with a professional that can help you plan for your retirement long BEFORE you turn 55.