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If you have a defined benefit plan, it’ll be important to create a plan for a laddered income in retirement. You should spend more earlier in retirement than later, so despite a defined benefit plan, your TFSA and RRSP are still going to be important tools to for your retirements savings.
If you have any further questions about this video’s topic or any financial planning questions in general, I encourage you to find a certified financial planner in your area or book a consultation with us to get your savings plan on track. You can learn more about our services at or email Info@Parallelwealth.com
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DISCLAIMER: The videos and opinions on this channel are for informational and educational purposes only and do not constitute investment advice. Adam Bornn is not registered to provide investment advice and as such does not provide recommendations – those looking for investment advice should seek out a registered professional. Adam is not responsible for investment actions taken by viewers and his content should not be used as a basis for investment trades.
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Defined Benefit Pension Plans: DO NOT Forget About Laddering Your Income In Retirement!
Defined benefit pension plans are a popular option for retirees looking to secure a steady stream of income after retirement. These plans are essentially retirement savings accounts where the employer contributes and manages the funds on behalf of the employee. While these pension plans offer a reliable source of income, it is important not to forget about “laddering” your income in retirement.
What is laddering?
Laddering is a technique used to ensure a reliable and consistent income stream for retirees. The technique involves structuring withdrawals from various sources of retirement income to create a predictable and steady income stream over time.
For example, a retiree may have sources of income from multiple streams, such as defined benefit pension plans, Social Security, and personal savings. Instead of just relying on one source, the retiree can strategically withdraw from each stream to create the desired income level.
Why is laddering important?
Laddering is important because it helps retirees avoid the risk of relying on a single source of retirement income. If that source fails or underperforms, it could lead to financial instability in retirement. For instance, if a retiree puts all of their retirement savings into a single annuity product and that company goes bankrupt, the retiree could lose their entire retirement income.
With laddering, retirees can ensure they have a steady stream of income even if one source fails or underperforms. It also provides flexibility to adjust the income stream over time, as life circumstances change.
How to ladder your income in retirement?
To ladder your income in retirement, retirees should first identify all sources of income, including pensions, Social Security, and personal savings. Once you have a clear understanding of all your income streams, you can create a list of prioritized withdrawals based on your income needs.
For instance, you may want to prioritize withdrawals from your defined benefit plan in the early years of retirement while delaying withdrawals from personal savings until later when the value has had more time to grow. Similarly, you may want to delay withdrawals from Social Security to maximize the benefit amount.
In conclusion, while defined benefit pension plans are a great option for securing a retirement income, it is important to not forget about laddering your income in retirement. This technique can help ensure a steady stream of income, especially when relying on multiple sources of income. By prioritizing the withdrawal sources, you can create a predictable and resilient income stream post-retirement.
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
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.
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 …
Location? Interested but do not own a computer. Retiring Dec 2023 and asking if possible to schedule a sit-down and make a plan!
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.
Don't take a huge home equity loan. Sell it and move to a cheaper country like the Phillipines or Thailand.
Awesome info – thank you!
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!
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.
How much additional money do you need saved if your DB pension plan is not indexed?
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
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.
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.
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!!
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.
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.
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.
Thanks Adam. I really appreciate your passion and wisdom! Take good care.
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.
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.
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
Great information. Thanks !