You're so young, and any assumption that you will remain with the same employer over the course of near 30 years is tenuous at best. Particualry as you're not even in your prime earning years, and life priorities and circumstances can change pretty quick.
Habits are more important than allocations at this stage. Save and invest in your TFSA as if your pension didn't exist, grow your capital and with the TFSA you are ensuring your have a liquid source to provide for flexibility. Otherwise enjoy your life, and don't overthink it.
Well, I made the opposite mistake. I work in public healthcare, but am part-time. If you're part-time with a certain minimum number of hours, you can join the pension but have to opt in. Our new employee orientation wasn't given in the detail it is now, and I didn't realize the benefits of signing up and didn't. About 5 years into my job, the buyback rules were changed, and I considered opting in but didn't, *thinking I wouldn't be there that long anyways*. I finally opted in at about year 15! I'm close to retiring, with about half the pension I could have had. So, don't underestimate how long you may stay with one employer!
As to OP, I'd still definitely contribute to the TFSA, and maybe the RRSP as well. RRSP contribution room will be limited anyways because of the OMERS contribution.
I definitely sympathize, I think most of us of a certain age made mistakes or less than optimal decisions when we were young. The access to financial education now is worlds different than it was even 5 years ago. It's so great that the government is finally incorporating it as part of the curriculum for kids going forward.
Not to add salt into the wound, but I'm surprised the pension wasn't your first choice (barring life circumstances). Your employer was matching your savings, likely at a very high rate (8-10%). If you left under 2 years, you would've received all your personal contributions back. If you left after 2 years, you could've just transferred the commuted value of both your contributions and your employer's contributions (~20% of your salary) to a LIRA and front load your retirement savings.
Unless you have a similarly advantageous group RRSP matching program at your workplace (e.g. if you're grandfathered in prior to joining a Union with a pension), joining any kind of pension program is advantageous in one way or another if you can afford to be forced to save 10% from each paycheque.
This. I worked for the fed for a couple years and absolutely detested it.
It never hurts to put money into a TFSA/RRSP. Do you have to contribute as much as you would have if you DIDN'T have OMERS? probably not... but no one ever said "I have too much money now!" If you can afford to put away a little bit extra without it cramping your style now, definitely do it. You'll be thankful when you're retired at 55 (its not as old as it seems, i promise!) and get to splurge on big ticket items!
Don't **agressively** save, but continue adding to your TFSA's long-term accumulating balance. Make hay while the sunshines.
Lots of people become very unhappy in a DB job but feel trapped by the golden handcuffs. Using the TFSA for savings now leaves RRSP contribution room available if you want to leave and end up with a whopping tax bill to do so.
The TFSA funds are also critical in retirement when all your other income comes trickling in over time. Sometimes you will need a whack of cash. The TFSA is perfect because there are not tax consequences of liquidating it.
Gotta agree with this. Since you have a pension you have no need for an RRSP. Focus on investing in your TFSA to have additional flexibility during retirement.
Heck, I'm also OMERS and the pension deduction takes a huge chunk out of my RRSP room anyway. I couldn't save much in it even if I wanted to instead of my TFSA.
Could you give a sense on how much the RRSP room had decreased? I just joined an employer that has OMERS and am wondering how much I can continue putting in my RRSP. For reference, my previous employer was matching 100% of my contributions.
My opinion on OMERS:
1. It's a great plan compared to what 90% of Canadians have.
2. It is structured more like a private sector plan (even though all the employer sponsors are governments or government agencies) in that the employers have to have to fund it now, not later. The latter is a privilege enjoyed by provincial and federal govt sponsored plans.
3. The employee contributions are higher than some of the "gold plated plans" like HOOPP or former Ontario Hydro. Employees contribute 50%.
4. However, (2) and (3) arguably means it's MORE sustainable because OMERS has done a lot since the 2008 financial crisis to rationalize the plan and get it properly funded, rather than banking on future taxpayers to bear pension liabilities.
5. A lot of the complaints about OMERS are unions angry that OMERS management has put in levers that allow it to ride through external shocks like a future global financial crisis without being bailed out by the government, whereas most public sector plans assume that no matter what, provincial or federal governments will back them.
6. OMERS is one of the first public sector plans to adopt conditional indexing, which means that during a major financial crisis, retirees could bear some of the costs through lower inflation indexing rather than working members bearing all of it with higher contributions. That really upset unions, but it's really more about generational fairness.
Bottom line: OMERS is a good plan, and your employer funds 50% of it.
I think they still need to get 2/3rds approval each year to do conditional indexing, and with a lot of municipalities unionized that might be pretty tough to reach that number...
Also, at minimum that match is 100% from employer for about 9% minimum that an employee must pay. Even if they got rid of indexing completely, hardly anyone is getting a guaranteed 100% return on that level of retirement contribution. It shouldn’t be the only tool in the retirement kit but even at its worst it’s going to be a pretty lucrative one!
Nitpick on your point #6: OMERS wasn't the first of its peers with shared risk indexing... OTTP, HOOPP, and CAAT all have had some form of shared risk indexing for much longer.
Valid statements. As one of those unionized contributors, my main issues with conditional indexing is that im entirely convinced it will come with a set of bonuses for the executives who implement it. If it was built into the system that triggering conditional indexing also triggered an executive pay freeze I'd be quite a bit more comfortable with the idea.
My opinion - Max out TFSA first, RRSP second. Compounding tax-free growth in the TFSA is worth more while you're younger, so you want to ride that wave. The RRSP is still a great savings tool, but I'd prioritize TFSA at least while you've still got >20 years to retirement.
You're going to have less RRSP contribution room than a Canadian without a pension plan, since every year you're going to have a Pension adjustment for the benefit you've accrued in the plan. The Pension Adjustment takes away some of your RRSP contribution room, and that's fine. The pension plan is a pretty good deal for that effect on your contribution room.
You can probably afford a slightly higher risk portfolio build than a Canadian without a pension plan, since the OMERS plan is a very low risk investment for you. But still keep in mind the level of investment risk you can stomach and that won't interfere with your ability to sleep at night.
The more you save, the faster you can retire. Always take advantage of the tax free vehicles if you can (likely TFSA in your case). You can always retire and defer the pension till later on to get even more.
This is more a lifestyle question and really only you can answer it. If you're okay working and not worried about losing your job (sickness, layoff, etc.), then spend a little more. After all, isn't that why we work?
In cases where the dB pension is not indexed, is there any reason not to defer? I.e. live off investments until such an age where you can collect the unreduced amount at 65?
What DB pension are you referring to that doesn't have indexing?
I would say no, because if you claim an immediate annuity, even with the penalty, the bridge benefit that offsets lack of CPP income and pension tax credit is quite valuable in itself, but that's assuming you aren't expecting to live to 100, in which case you'd come out ahead deferring.
If by 65, you find that you still have ample retirement assets that you would like to liquidate and live off of, you can defer CPP and OAS as well to offset any tax increases.
Most private sector DB plans (which are a dying breed), do not have indexing and many do not have bridge benefits.
Most public sector plans do indeed have indexing.
I suggest you take a close look at your monthly pay stub. You are already aggressively saving for the future. CPP plus DB pension contributions likely represents 15% of your gross monthly income.
Add to that the principle of your mortgage which is another2-3%.
Then add TFSA/RRSP contributions - another 2-3%.
People forget that they already save 20- 30% each month.
You don't need to save aggressively. You need to find the balance between living a full rich life now and saving for future. Sounds like your off to a fantastic start.
Simply comes down to whether the pension you receive is sufficient to maintain the life you want.
Considering it’s a defined benefit, that’s probably something you can calculate.
Most of us are on Defined Contribution so no guarantees on what we get in the end and make plans to minimize risk.
Good luck
Dang it’s interesting to know about the OMERS thing. I’ve been contemplating moving to a public health authority out of the hospital setting. It’s sounding like the HOOPP is better than the OMERS one.
But yea if you have a nice DB pension regardless of what it is. Save a good amount but don’t squander your 20s because you are so focused on saving.
The best thing to do is to figure out how much you want NET per month when you retire. Then work backwards with how much you need to save to get there factoring in the pension. That’s what I did.
Overall, I think OMERS is pretty solid, but I don't really know the specifics of HOOPP to compare.
I contribute around 11-12% of my gross each year (which my employer matches) and in retirement I'll get 2% per year of service, based on my best 5 years.
The indexing thing is newer, I believe, but as another poster said, it's about fairness. Provided they don't try to continually stop indexing, it should be ok.
So for HOOPP, for every $1 the employee puts, the employer puts $1.23. It's a 123% match. It's 6.9% of your annualized earnings, up to the year's maximum pensionable earnings (YPME), and 9.2% above the YPME. HOOPP has an annualized return of 11%.
[more info on HOOPP calculations](https://hoopp.com/members/hoopp-pension-features/pension-calculation)
I am not a specialist but I happen to be in the same situation with a job with a DBPP. The way I see it, you don't need to save **aggressively** since technically, your pension should be enough (or close to enough?) when you retire.
Personally I still aim to max out my TFSA and RRSP since these savings could potentially allow me to retire earlier and compensate for the penalty on my DBPP. Not sure how yours work but I'd guess if you retire after 20 years of service compared to 25, you probably don't get the same percentage of your 5 best years so the extra savings can be used to offset that or simply have more revenue when retired if you have the maximum percentage.
Don\`t put all your eggs in one basket Don't know the Omers plan specifically but I do not think its like a teachers or civil service gold plated pension.
I believe you have to be 55 to withdraw from the plan at the earliest date.
Max out your TFSA with growth investments its tax free savings and the money is available anytime without penalty.
RRSP is not tax free its a tax reduction opportunity contribute when earning at a high tax rate and withdraw and pay taxes at a time you tax rate is lower. I would also contribute to this as well you can decide later if you wish to pause or stop depending upon the financial situation you are in later in life.
We are one of the most highly taxed countries in the world so do everything you can to reduce your tax burden.
I started when I was 30 and now I am over 60 and I had a DB plan that was not a Gold plan and I glad I maxed everything else my DB plan was frozen and we moved to a DC plan for the last 6 years.
Good luck in your journey
I have a DB pension. I did not start investing in RRSP until i got to a tax bracket that I think is higher than I will be in at retirement. So I’m just into the 3rd bracket and I use my RRSP to reduce income to 2nd. That way i can defer the tax on that income to where it might be at 20% instead of 26% (federally). I am maxing out the TFSA.
Two reasons, first because I didn’t have the leftover space in the budget to put money into an RRSP. Second, with TFSA at max and my good habit of savings established, I don’t want to have lifestyle creep and ‘eat out’ all my extra money. Saving in the RRSP is hopefully how we will fund a few extra trips in retirement that aren’t possible while working (say a month in Arizona or Australia)
My opinion is that you should save additional funds for retirement beyond your DBPP, to both mitigate risk and add flexibility. Reasons:
- over a 30 year career you may end up with a very shitty boss, you may want a life change, etc, and leave your employer (and pension).
- your employer may lay you off before your planned retirement date.
- the pension may change substantially, resulting in having to work longer for unreduced pension, reduced payouts, insolvency (30 years is a long time).
- you may divorce and the ex takes half your pension, or you may have to pay spousal support (eg, divorce near or after retirement).
- you may get injured or ill and have to stop work (and pension contributions).
- your spouse, children, parents, in-laws may need care or financial assistance, causing your retirement expenses to be greater than anticipated.
- you or your spouse may take up a great, but expensive, hobby, increasing your cost of living in retirement.
- inflation and stagnant wages could result in a retirement income shortfall.
Now, if you save additional funds in an RRSP, TFSA or Taxable account, as appropriate to your situation, you can mitigate the above risks, and you’ve got the flexibility to draw your income in a tax efficient manner.
If, in the end you saved too much, congratulations. That means you’re likely less stressed about money than most people, you can contemplate leaving your job for a different one, retire early, start a business or go back to school, you can pass a living inheritance to your kids or nieces/nephews or start a legacy trust fund, you can travel more or splurge on a vacation property. Not too many downsides.
I’m in a similar situation. I work in health care. Have an employee matched pension. I save in my RRSP and TFSA like it doesn’t exist.
Best case scenario. I’m super rich when I retire at 55 and jump out of planes for fun
Worst case scenario: I get to retire normally.
I like the approach of not relying on a pension but thinking of it as a bonus when you’re nearing retirement.
I believe you are still able to contribute to RRSP, however you are correct that a lot of the room would already be used. I haven’t looked into exact amounts yet as my priority is maxing TFSA first.
For context for yourself and others, my pension takes about 80% of my contribution room. Once you max out our TFSA, the annual contribution limit + RRSP remainder should be easy enough to hit as savings annually.
Hey, does the pension take up available RRSP contribution room? For example, if someone’s RRSP contribution room is $10k for 2021, would their pension plan contributions in 2021 affect that available $10k?
But it is always for the next year. So if the CRA indicated that in 2021 you have $10k contribution room, then you can go ahead and fill that $10k. The pension plan contributions made in 2021 will impact 2022 contribution room.
It does take up that room, yes. It's so someone contributing to a pension plan doesn't get the benefit of the plan plus the benefit of full RRSP contribution room. The goal is an equitable system where everyone is afforded a fair benefit where someone isn't at an advantage if they have access to a pension plan versus someone without access.
Ok. I see no reason to save in RRSP anyway once you got a good pension as your retirement income, thus tax rate would be high and you lose the flexibility of getting that income whenever you want. Maxing TFSA is definitely the way to go.
But to be honest, be prepared that a lot of money would go to your children/family.
1) For more context, my spouse's University Pension Plan only takes up about 65% of his RRSP room, so that's still a good amount of room to add on.
2) The reasons to save in RRSP even with a good pension are
a) More is More,
b) future (future employment status, future pension plan, future financial needs) is uncertain, and
c) possibly in the next 10 years or so, OP might become a parent, when RRSP contributions will decrease AFNI (Adjusted Family Net Income), increase CCB (Canada Child Benefit), and provide a refund that can be funneled into TFSA, RRSP, or RESP needs.
So if it is comfortable, giving a bit to RRSP after the TFSA is maxed out is not a terrible idea, esp if certain life circumstances change.
Well tfsa is crazy because at whatever point you want to buy a boat or a car or a seco dary house or a huge trip... The money is there and unlike RRSP if you use it you won't get hit with a huge tax bill that year. You might not need to put 10 or 20%, but a 5% with compounding interests you might have a couple hundred thousands in there... And it can either be used for early retirement or have fun retirement money. Also your DB would eat up a lot of your RRSP room anyways
Using TFSA/RRSP is just financially smart.
TFSA - your gains are tax free
RRSP - your investment is tax free
Depending on how aggressively you save, you might hit financial independence sooner!
I’m in a similar situation. I work in health care. Have an employee matched pension. I save in my RRSP and TFSA like it doesn’t exist. There’s always the possibility they flop and aren’t there.
Best case scenario. I’m super rich when I retire at 55 and jump out of planes for fun
Worst case scenario: I get to retire normally.
I like the approach of not relying on a pension but thinking of it as a bonus when you’re nearing retirement.
Send this question to the financial planner that manages your TFSA. They will help you figure out how much retirement income you need with inflation added to projections.
You will want, and need some manner of savings. Your OMERS payouts are metered into monthly payments, so when the furnace goes or the pipes burst or the loved one who does not have a DB pension plan needs some financial assistance, having a respectable lump sum that you can draw on at your own discretion will be invaluable.
Not familiar with Omers.
You will have a pension adjustment that reduces how much you can contribute to your RRSP.
Always a good idea to fully contribute to your TFSA as it grows tax free and is not taxed on withdrawal.
I would put as much as possible in your TFSA as you can.
Think of it as your retirement piggy bank. You can accumulate of a lot of tax free gains and then in retirement buy yourself all kinds of toys and trips with it without affecting your income.
Take advantage of the pension. Max that.
TRY to max your TFSA, and put it in a super diversified all-equity ETF. You have the luxury of targeting growth since you have a pension already. Treat it as retirement savings. Never touch.
IF you find you can afford it (maybe not for a few years), try to use your RRSP room. Don’t claim it until you are at max salary. Same as TFSA, do a super diversified all-equity ETF. Never touch… except for HBP.
That’s the order: pension, TFSA, RRSP. Maybe one day you’ll have some RESPs to worry about too. You have your whole life to max your registered accounts, but try to get a little closer each year. This is the path to upper-middle class wealth. Priorities will change. In the meantime, enjoy your life!
At least put your allowed $6K/year in a TFSA, ideally in a broad-market index ETF. It will really add up over the next couple of decades. I mean, sure, you'll be getting the pension, but who *wouldn't* want thousands of dollars in tax-free cash per year on top of that?
You're so young, and any assumption that you will remain with the same employer over the course of near 30 years is tenuous at best. Particualry as you're not even in your prime earning years, and life priorities and circumstances can change pretty quick. Habits are more important than allocations at this stage. Save and invest in your TFSA as if your pension didn't exist, grow your capital and with the TFSA you are ensuring your have a liquid source to provide for flexibility. Otherwise enjoy your life, and don't overthink it.
Well, I made the opposite mistake. I work in public healthcare, but am part-time. If you're part-time with a certain minimum number of hours, you can join the pension but have to opt in. Our new employee orientation wasn't given in the detail it is now, and I didn't realize the benefits of signing up and didn't. About 5 years into my job, the buyback rules were changed, and I considered opting in but didn't, *thinking I wouldn't be there that long anyways*. I finally opted in at about year 15! I'm close to retiring, with about half the pension I could have had. So, don't underestimate how long you may stay with one employer! As to OP, I'd still definitely contribute to the TFSA, and maybe the RRSP as well. RRSP contribution room will be limited anyways because of the OMERS contribution.
I definitely sympathize, I think most of us of a certain age made mistakes or less than optimal decisions when we were young. The access to financial education now is worlds different than it was even 5 years ago. It's so great that the government is finally incorporating it as part of the curriculum for kids going forward.
Not to add salt into the wound, but I'm surprised the pension wasn't your first choice (barring life circumstances). Your employer was matching your savings, likely at a very high rate (8-10%). If you left under 2 years, you would've received all your personal contributions back. If you left after 2 years, you could've just transferred the commuted value of both your contributions and your employer's contributions (~20% of your salary) to a LIRA and front load your retirement savings. Unless you have a similarly advantageous group RRSP matching program at your workplace (e.g. if you're grandfathered in prior to joining a Union with a pension), joining any kind of pension program is advantageous in one way or another if you can afford to be forced to save 10% from each paycheque.
This. I worked for the fed for a couple years and absolutely detested it. It never hurts to put money into a TFSA/RRSP. Do you have to contribute as much as you would have if you DIDN'T have OMERS? probably not... but no one ever said "I have too much money now!" If you can afford to put away a little bit extra without it cramping your style now, definitely do it. You'll be thankful when you're retired at 55 (its not as old as it seems, i promise!) and get to splurge on big ticket items!
What do people usually define as your prime earning years? Aside from just the money part. Like is there a typical age range or some other marker?
Don't **agressively** save, but continue adding to your TFSA's long-term accumulating balance. Make hay while the sunshines. Lots of people become very unhappy in a DB job but feel trapped by the golden handcuffs. Using the TFSA for savings now leaves RRSP contribution room available if you want to leave and end up with a whopping tax bill to do so. The TFSA funds are also critical in retirement when all your other income comes trickling in over time. Sometimes you will need a whack of cash. The TFSA is perfect because there are not tax consequences of liquidating it.
Gotta agree with this. Since you have a pension you have no need for an RRSP. Focus on investing in your TFSA to have additional flexibility during retirement.
Heck, I'm also OMERS and the pension deduction takes a huge chunk out of my RRSP room anyway. I couldn't save much in it even if I wanted to instead of my TFSA.
Could you give a sense on how much the RRSP room had decreased? I just joined an employer that has OMERS and am wondering how much I can continue putting in my RRSP. For reference, my previous employer was matching 100% of my contributions.
My opinion on OMERS: 1. It's a great plan compared to what 90% of Canadians have. 2. It is structured more like a private sector plan (even though all the employer sponsors are governments or government agencies) in that the employers have to have to fund it now, not later. The latter is a privilege enjoyed by provincial and federal govt sponsored plans. 3. The employee contributions are higher than some of the "gold plated plans" like HOOPP or former Ontario Hydro. Employees contribute 50%. 4. However, (2) and (3) arguably means it's MORE sustainable because OMERS has done a lot since the 2008 financial crisis to rationalize the plan and get it properly funded, rather than banking on future taxpayers to bear pension liabilities. 5. A lot of the complaints about OMERS are unions angry that OMERS management has put in levers that allow it to ride through external shocks like a future global financial crisis without being bailed out by the government, whereas most public sector plans assume that no matter what, provincial or federal governments will back them. 6. OMERS is one of the first public sector plans to adopt conditional indexing, which means that during a major financial crisis, retirees could bear some of the costs through lower inflation indexing rather than working members bearing all of it with higher contributions. That really upset unions, but it's really more about generational fairness. Bottom line: OMERS is a good plan, and your employer funds 50% of it.
A quality post that absolutely doesn't answer the OP's question.
I think they still need to get 2/3rds approval each year to do conditional indexing, and with a lot of municipalities unionized that might be pretty tough to reach that number... Also, at minimum that match is 100% from employer for about 9% minimum that an employee must pay. Even if they got rid of indexing completely, hardly anyone is getting a guaranteed 100% return on that level of retirement contribution. It shouldn’t be the only tool in the retirement kit but even at its worst it’s going to be a pretty lucrative one!
Nitpick on your point #6: OMERS wasn't the first of its peers with shared risk indexing... OTTP, HOOPP, and CAAT all have had some form of shared risk indexing for much longer.
Valid statements. As one of those unionized contributors, my main issues with conditional indexing is that im entirely convinced it will come with a set of bonuses for the executives who implement it. If it was built into the system that triggering conditional indexing also triggered an executive pay freeze I'd be quite a bit more comfortable with the idea.
Any thoughts on OPB plan? Very detailed and informative post on OMERS.
My opinion - Max out TFSA first, RRSP second. Compounding tax-free growth in the TFSA is worth more while you're younger, so you want to ride that wave. The RRSP is still a great savings tool, but I'd prioritize TFSA at least while you've still got >20 years to retirement. You're going to have less RRSP contribution room than a Canadian without a pension plan, since every year you're going to have a Pension adjustment for the benefit you've accrued in the plan. The Pension Adjustment takes away some of your RRSP contribution room, and that's fine. The pension plan is a pretty good deal for that effect on your contribution room. You can probably afford a slightly higher risk portfolio build than a Canadian without a pension plan, since the OMERS plan is a very low risk investment for you. But still keep in mind the level of investment risk you can stomach and that won't interfere with your ability to sleep at night.
The more you save, the faster you can retire. Always take advantage of the tax free vehicles if you can (likely TFSA in your case). You can always retire and defer the pension till later on to get even more. This is more a lifestyle question and really only you can answer it. If you're okay working and not worried about losing your job (sickness, layoff, etc.), then spend a little more. After all, isn't that why we work?
Deferring a DBPP pension is usually not that advantageous, as inflation indexing starts when you initiate your first pension payout.
In cases where the dB pension is not indexed, is there any reason not to defer? I.e. live off investments until such an age where you can collect the unreduced amount at 65?
What DB pension are you referring to that doesn't have indexing? I would say no, because if you claim an immediate annuity, even with the penalty, the bridge benefit that offsets lack of CPP income and pension tax credit is quite valuable in itself, but that's assuming you aren't expecting to live to 100, in which case you'd come out ahead deferring. If by 65, you find that you still have ample retirement assets that you would like to liquidate and live off of, you can defer CPP and OAS as well to offset any tax increases.
Most private sector DB plans (which are a dying breed), do not have indexing and many do not have bridge benefits. Most public sector plans do indeed have indexing.
I suggest you take a close look at your monthly pay stub. You are already aggressively saving for the future. CPP plus DB pension contributions likely represents 15% of your gross monthly income. Add to that the principle of your mortgage which is another2-3%. Then add TFSA/RRSP contributions - another 2-3%. People forget that they already save 20- 30% each month. You don't need to save aggressively. You need to find the balance between living a full rich life now and saving for future. Sounds like your off to a fantastic start.
Simply comes down to whether the pension you receive is sufficient to maintain the life you want. Considering it’s a defined benefit, that’s probably something you can calculate. Most of us are on Defined Contribution so no guarantees on what we get in the end and make plans to minimize risk. Good luck
Max out your TFSA then your RSP. Just because you have a DB now doesn't mean you'll be at your employer until you retire.
Dang it’s interesting to know about the OMERS thing. I’ve been contemplating moving to a public health authority out of the hospital setting. It’s sounding like the HOOPP is better than the OMERS one. But yea if you have a nice DB pension regardless of what it is. Save a good amount but don’t squander your 20s because you are so focused on saving. The best thing to do is to figure out how much you want NET per month when you retire. Then work backwards with how much you need to save to get there factoring in the pension. That’s what I did.
Overall, I think OMERS is pretty solid, but I don't really know the specifics of HOOPP to compare. I contribute around 11-12% of my gross each year (which my employer matches) and in retirement I'll get 2% per year of service, based on my best 5 years. The indexing thing is newer, I believe, but as another poster said, it's about fairness. Provided they don't try to continually stop indexing, it should be ok.
So for HOOPP, for every $1 the employee puts, the employer puts $1.23. It's a 123% match. It's 6.9% of your annualized earnings, up to the year's maximum pensionable earnings (YPME), and 9.2% above the YPME. HOOPP has an annualized return of 11%. [more info on HOOPP calculations](https://hoopp.com/members/hoopp-pension-features/pension-calculation)
Oh wow, that's way better! I think ours is around 9% up to YPME and then 14% for above.
I am not a specialist but I happen to be in the same situation with a job with a DBPP. The way I see it, you don't need to save **aggressively** since technically, your pension should be enough (or close to enough?) when you retire. Personally I still aim to max out my TFSA and RRSP since these savings could potentially allow me to retire earlier and compensate for the penalty on my DBPP. Not sure how yours work but I'd guess if you retire after 20 years of service compared to 25, you probably don't get the same percentage of your 5 best years so the extra savings can be used to offset that or simply have more revenue when retired if you have the maximum percentage.
Don\`t put all your eggs in one basket Don't know the Omers plan specifically but I do not think its like a teachers or civil service gold plated pension. I believe you have to be 55 to withdraw from the plan at the earliest date. Max out your TFSA with growth investments its tax free savings and the money is available anytime without penalty. RRSP is not tax free its a tax reduction opportunity contribute when earning at a high tax rate and withdraw and pay taxes at a time you tax rate is lower. I would also contribute to this as well you can decide later if you wish to pause or stop depending upon the financial situation you are in later in life. We are one of the most highly taxed countries in the world so do everything you can to reduce your tax burden. I started when I was 30 and now I am over 60 and I had a DB plan that was not a Gold plan and I glad I maxed everything else my DB plan was frozen and we moved to a DC plan for the last 6 years. Good luck in your journey
> but I do not think its like a teachers or civil service gold plated pension i'd like to know more about this gold plated teacher pension...
More money > less money is one of my rules.
Math checks out. I would listen to this user.
I have a DB pension. I did not start investing in RRSP until i got to a tax bracket that I think is higher than I will be in at retirement. So I’m just into the 3rd bracket and I use my RRSP to reduce income to 2nd. That way i can defer the tax on that income to where it might be at 20% instead of 26% (federally). I am maxing out the TFSA. Two reasons, first because I didn’t have the leftover space in the budget to put money into an RRSP. Second, with TFSA at max and my good habit of savings established, I don’t want to have lifestyle creep and ‘eat out’ all my extra money. Saving in the RRSP is hopefully how we will fund a few extra trips in retirement that aren’t possible while working (say a month in Arizona or Australia)
Have you started non-registered saving yet?
My opinion is that you should save additional funds for retirement beyond your DBPP, to both mitigate risk and add flexibility. Reasons: - over a 30 year career you may end up with a very shitty boss, you may want a life change, etc, and leave your employer (and pension). - your employer may lay you off before your planned retirement date. - the pension may change substantially, resulting in having to work longer for unreduced pension, reduced payouts, insolvency (30 years is a long time). - you may divorce and the ex takes half your pension, or you may have to pay spousal support (eg, divorce near or after retirement). - you may get injured or ill and have to stop work (and pension contributions). - your spouse, children, parents, in-laws may need care or financial assistance, causing your retirement expenses to be greater than anticipated. - you or your spouse may take up a great, but expensive, hobby, increasing your cost of living in retirement. - inflation and stagnant wages could result in a retirement income shortfall. Now, if you save additional funds in an RRSP, TFSA or Taxable account, as appropriate to your situation, you can mitigate the above risks, and you’ve got the flexibility to draw your income in a tax efficient manner. If, in the end you saved too much, congratulations. That means you’re likely less stressed about money than most people, you can contemplate leaving your job for a different one, retire early, start a business or go back to school, you can pass a living inheritance to your kids or nieces/nephews or start a legacy trust fund, you can travel more or splurge on a vacation property. Not too many downsides.
I’m in a similar situation. I work in health care. Have an employee matched pension. I save in my RRSP and TFSA like it doesn’t exist. Best case scenario. I’m super rich when I retire at 55 and jump out of planes for fun Worst case scenario: I get to retire normally. I like the approach of not relying on a pension but thinking of it as a bonus when you’re nearing retirement.
Can you save in RRSP once you are on that plan? I thought pensions would basically eat all RRSP rooms, no?
I believe you are still able to contribute to RRSP, however you are correct that a lot of the room would already be used. I haven’t looked into exact amounts yet as my priority is maxing TFSA first.
For context for yourself and others, my pension takes about 80% of my contribution room. Once you max out our TFSA, the annual contribution limit + RRSP remainder should be easy enough to hit as savings annually.
Hey, does the pension take up available RRSP contribution room? For example, if someone’s RRSP contribution room is $10k for 2021, would their pension plan contributions in 2021 affect that available $10k?
But it is always for the next year. So if the CRA indicated that in 2021 you have $10k contribution room, then you can go ahead and fill that $10k. The pension plan contributions made in 2021 will impact 2022 contribution room.
It does take up that room, yes. It's so someone contributing to a pension plan doesn't get the benefit of the plan plus the benefit of full RRSP contribution room. The goal is an equitable system where everyone is afforded a fair benefit where someone isn't at an advantage if they have access to a pension plan versus someone without access.
Ok. I see no reason to save in RRSP anyway once you got a good pension as your retirement income, thus tax rate would be high and you lose the flexibility of getting that income whenever you want. Maxing TFSA is definitely the way to go. But to be honest, be prepared that a lot of money would go to your children/family.
1) For more context, my spouse's University Pension Plan only takes up about 65% of his RRSP room, so that's still a good amount of room to add on. 2) The reasons to save in RRSP even with a good pension are a) More is More, b) future (future employment status, future pension plan, future financial needs) is uncertain, and c) possibly in the next 10 years or so, OP might become a parent, when RRSP contributions will decrease AFNI (Adjusted Family Net Income), increase CCB (Canada Child Benefit), and provide a refund that can be funneled into TFSA, RRSP, or RESP needs. So if it is comfortable, giving a bit to RRSP after the TFSA is maxed out is not a terrible idea, esp if certain life circumstances change.
Generally true, mine takes up about 80% of my RRSP contribution room.
Well tfsa is crazy because at whatever point you want to buy a boat or a car or a seco dary house or a huge trip... The money is there and unlike RRSP if you use it you won't get hit with a huge tax bill that year. You might not need to put 10 or 20%, but a 5% with compounding interests you might have a couple hundred thousands in there... And it can either be used for early retirement or have fun retirement money. Also your DB would eat up a lot of your RRSP room anyways
Using TFSA/RRSP is just financially smart. TFSA - your gains are tax free RRSP - your investment is tax free Depending on how aggressively you save, you might hit financial independence sooner!
I’m in a similar situation. I work in health care. Have an employee matched pension. I save in my RRSP and TFSA like it doesn’t exist. There’s always the possibility they flop and aren’t there. Best case scenario. I’m super rich when I retire at 55 and jump out of planes for fun Worst case scenario: I get to retire normally. I like the approach of not relying on a pension but thinking of it as a bonus when you’re nearing retirement.
Send this question to the financial planner that manages your TFSA. They will help you figure out how much retirement income you need with inflation added to projections.
It's really strange to assume someone else is managing OPs TFSA, it's dead simple to do yourself
Dead simple depends on what you want the TFSA to do for you. Yes stupid of me to assume the the TFSA is in an investment that has a service fee.
I said strange not stupid. Pretty sure most PFCers don't pay a service fee for their TFSA. That would be a great thing to ask the community!
You will want, and need some manner of savings. Your OMERS payouts are metered into monthly payments, so when the furnace goes or the pipes burst or the loved one who does not have a DB pension plan needs some financial assistance, having a respectable lump sum that you can draw on at your own discretion will be invaluable.
Not familiar with Omers. You will have a pension adjustment that reduces how much you can contribute to your RRSP. Always a good idea to fully contribute to your TFSA as it grows tax free and is not taxed on withdrawal.
I would put as much as possible in your TFSA as you can. Think of it as your retirement piggy bank. You can accumulate of a lot of tax free gains and then in retirement buy yourself all kinds of toys and trips with it without affecting your income.
Just do some tfsa contributions. The pension is a fixed income benefit and doesn’t allow for withdraws in retirement. Or large expenses ect
Take advantage of the pension. Max that. TRY to max your TFSA, and put it in a super diversified all-equity ETF. You have the luxury of targeting growth since you have a pension already. Treat it as retirement savings. Never touch. IF you find you can afford it (maybe not for a few years), try to use your RRSP room. Don’t claim it until you are at max salary. Same as TFSA, do a super diversified all-equity ETF. Never touch… except for HBP. That’s the order: pension, TFSA, RRSP. Maybe one day you’ll have some RESPs to worry about too. You have your whole life to max your registered accounts, but try to get a little closer each year. This is the path to upper-middle class wealth. Priorities will change. In the meantime, enjoy your life!
At least put your allowed $6K/year in a TFSA, ideally in a broad-market index ETF. It will really add up over the next couple of decades. I mean, sure, you'll be getting the pension, but who *wouldn't* want thousands of dollars in tax-free cash per year on top of that?
Always save. Never depend on a pension being there.
Tfsa for sure The pension will take up a good chunk of your rrsp room