In today’s video, we are sharing Our Plan to Retire Early in 2024, which includes our Pension Plan. The question is, what should we do? This video is all about our plan to retire early and our Financial Independence Journey, especially what to do with Pension Plans during our Financial Independence Journey.
Do you have a pension plan? Do you have a plan to Retire Early? Let’s talk about our Financial Independence and Early Retirement.
Links discussed on this video:
►Financial Independence Books:
►Canadian Retirement Income Calculator:
►The Canadian Association of Pension Supervisory Authorities (CAPSA): (this opens a PDF file)
🔥 Financial Independence Retire Early (FIRE) Resources
►Start your Journey to Financial Independence by opening an account with Wealthsimple trade:
►Looking for an Independent Portfolio Research and don’t know where to start?
►Financial Independence Books:
💰 Our Net Worth Calculation Spreadsheet
►Download the FREE Net Worth Calculation Spreadsheet. Actually, this is the spreadsheet we use to calculate the Net Worth:
🙏 We are grateful to be part of YOUR Financial Independence Journey!
⌛ Use the chapters below to navigate our content
00:00 Our Plan to Retire Early
00:15 Financial Independence in Canada
02:10 Pension Plans in Canada
16:37 Why Financial Independence
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#retireearly #financialindependence #financialindependenceretireearly
⚠️DISCLAIMER
This is Our Financial Independence Journey. This is not a sponsored video; all content is our own opinion and experiences. We are not financial advisors, and the videos are for entertainment purposes only.
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LEARN MORE ABOUT: Retirement Pension Plans
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HOW TO INVEST IN SILVER: Silver IRA Investing
Our Plan to Retire Early and Pension Plan – What to do?
Retirement is a phase of life that most of us eagerly look forward to. After years of hard work, it is our chance to relax, travel the world, pursue our hobbies, and spend quality time with our loved ones. However, retiring early requires careful planning, especially when it comes to our pension plan.
So, what exactly is a pension plan? A pension plan is a retirement savings account offered by employers to their employees, providing them with a steady income after they retire. It is a valuable asset that ensures a comfortable life during old age. But, how do we make the most of our pension plan and retire early? Let’s delve into it!
Firstly, it is important to start saving for retirement at an early age. The power of compounding interest works wonders when given time. The earlier we begin saving, the more time our investments have to grow. By consistently depositing a portion of our income into our pension plan, we lay the groundwork for a financially secure retirement.
Secondly, diversify our investments. Putting all our eggs in one basket can be risky, especially when it comes to retirement savings. By diversifying our investments, we minimize the chances of losing all our funds. Experts suggest spreading our savings across different types of pension plans, such as 401(k)s, individual retirement accounts (IRAs), or annuities. Each investment option has its own benefits and drawbacks, so it is wise to consult with a financial advisor to determine what suits our individual circumstances best.
Another crucial step to retiring early is budgeting and frugal living. Controlling our expenses, eliminating unnecessary debts, and living within our means can free up extra funds that can be added to our pension plan. By making small sacrifices in our lifestyle today, we can enjoy greater financial freedom in the future. It is important to critically evaluate our spending habits and cut down on non-essential expenditures.
Furthermore, it is worth considering an additional source of income. Engaging in a part-time job, freelancing, or starting a small business can provide us with extra funds that can be invested in our pension plan. Not only does this accelerate our retirement savings, but it also keeps us mentally and socially active.
Lastly, staying informed about the latest pension plan updates and taking advantage of any employer-matched contributions or government incentives can significantly boost our retirement savings. Remaining up-to-date with changes in the pension scheme allows us to make informed decisions and take advantage of any opportunities to maximize our benefits.
Retiring early and enjoying a comfortable retirement may seem daunting, but with careful planning and the right mindset, it can be a reality. By starting early, diversifying investments, budgeting, seeking additional sources of income, and staying informed, we can contribute to our pension plan and retire early.
Remember, retirement is not only about finances; it is about fulfilling our dreams, spending quality time with our loved ones, and living life on our own terms. So, let’s start planning today and make our dreams of an early retirement a reality!
Check our Resources page, including books and free spreadsheets: http://www.firewego.com/resources
I’m also in a DB pension. I invest aggressively in index funds as well, but they didn’t do as well as the pension fund did in 2022. I’m going to stay until 50 so that I have a lifetime income stream. Mine isn’t indexed to inflation even if I stay to 50, so that’s not a factor for me. I just want an fixed income stream that I can count on to help counter longevity risk.
Getting real close to 2024 now …. I can't wait to 2026 which is my own date 🙂
We are in a similar situation…we have made up our mind yet. Our DB pensions are indexed to inflation by ,60% so makes the decision challenging…curious to hear where you land
I had a DB plan and in relation to retiring early, I believed it made sense to take the commuted value particularly if you are much younger than the point in which you will be able to utilize the pension payouts. The main driver behind this is the if you leave the money in the db plan, the date between leaving the job and taking payouts, the money remains stagnant without any additional growth. It does not typically index with inflation until payouts begin, and new money is being added to it. So for example, if you were to quit at 40 and you can't take payouts until 55, that is 15 years of stagnation. So in that case, I would personally take the CV and then grow it through a broad based index fund which would average about 8 to 9% per year. In my opinion that compounded return is likely to be more favourable. The only way I would consider leaving it with the plan is if I am very close to an age where payouts begin. Obviously it's up to a person to determine what "close" is. For me, I would say less than 5 years. And even then, I'd have to consider my approximate longevity of life, passing it on to heirs etc.
I have thoughts but they are too much for the comments of a YouTube video. I will email you separately. I get it–it's a big decision.
I have a DBPP (military), collecting it now, and it's indexed. My wife has one too (not military). Those are our anchors. I had another employer which had a DBPP and I cashed that out when I stopped work there at 55. My choice was to wait until 65 to collect the monthly payment or take the cash. I took the cash. 1/3 went to taxes, 1/3 went to a LIRA and 1/3 went to my pocket – which went to investments. I retired at 60 and turn 65 this year but will wait to open up the LIRA when age 70.
Because interest rates were lower at the time (2014), the cash-out amount was calculated roughly as the anticipated annual payout at 65 x 18. today, that number would be lower due to higher interest rates.
I will be better off with the LIRA payout than the DBPP if I had kept it. Through all the market turmoil over the years, we are still better of leaving that plan. Now, that is easy to say with two DBPP paying us. Please consult with a CFP to help in making your decision – because it is a critical one. One other option is to continue to work until age 50.
Cheering from the bleachers!
I had a DB pension—it wasn’t large but enough to make a difference from month to month. When I left my employer, I commuted my pension. It is now in a lira where I have invested in an income based strategy—I am currently making as much per month as I would if I kept my pension in place. In my case, this has worked well for me.
Sooooo no, I dont have experience with yanking a pension, but I am in your similar boat of having a defined benefit plan. Its definitely not super simple to figure out for us alternative financial people. I am currently forced to contribute to mine 12 percent a pay period. My pension plan is not cost of living or inflation adjusted. Another thing is that the rate I'd get is based on the highest 3 consecutive years in the final 10 years of my contributions. My early retirement would be 50, but if I continue to be working at this employer I'd get "normal" at 53. By the rule of 4% the value of my projected pension at that age is 600k, which is pretty valuable to me! I have to figure out how to wrangle all this because no way do I want to work there full time until then (14 years), but I don't mind the idea of working part time (Still counts toward contribution years) if I can figure out how to do that without hurting my compensation amount. the formula is 80 points between age and service years to get normal, so even if I stop working there SOME day I'll hit that number. The longer I work there the closer that is. If at some point I stop working there I could also refund my money, and what I'd get is my contributions and their match (equal), but then obviously no pension. All this to basically say, I totally 100% am in your same boat of trying to figure out what the value of this is and how it fits into my goal to do some kind of early retirement/alternative life. I do NOT know the answer. Right now it is what it is and I don't think its bad for me to have this situation.
Not all defined benefits pensions are guaranteed to be indexed to inflation. My mother worked for one of the Big 5 banks and discovered that. And yes, because she was single at retirement, if she passed away, there would have been nothing to leave to her estate. I am glad for multiple reasons she is still alive collecting her measly pension amount. Not all DB pensions are generous. My possible advice to you would be to find out if you are allowed to top up your pension plan yourself to qualify for the indexing. Just a thought. Regardless, I am confident you two will do just fine investing the proceeds on your own should you need to choose to.
That was fun,do it again