Comments on: Show Me the Money! (Part 2)

By: Suzanne

Suzanne — Thu, 07 May 2009 17:38:50 +0000

I have an employer matched plan at work, and am thrilled to watch the YTD balance rise. I contribute 5.5% of basic gross income (less tips/overtime, etc), which they match, totalling 11%. I can increase my portion another 7%, (which they don’t match) to a maximum of 18%. I contemplated doing this, but decided that I would work on my emergency fund and debt repayment first, since I am already saving more than the suggested 10% for LT savings. I have asked questions, but now have more specific questions to ask my Comp and Benefits rep. Years ago, I tutored briefly at my Post secondary institution, earning a very small matched pension contribution. Over the past five years, this small amount has increased substantially. When I inquired about rolling this into my current plan, I was told that the new plan had to be an exact ‘match’ in type of pension. Since I didn’t have a clue what any of that jargon meant, I just left it. I guess I should look into the matter again, now that I know a bit more. I just wish I had a longer working life to accumulate a pension (in my early 50’s, long time stay at home mom). Does anyone know if I can get half my former husband’s pension contributions accumulated during our marriage? We have been divorced 9 years, and I heard somewhere that could be an option open to me.

By: Christina

Christina — Thu, 07 May 2009 01:12:25 +0000

What if you don’t have a pension plan at work (ie. you work freelance or on contract)?

By: Cynthia

Cynthia — Wed, 06 May 2009 22:52:46 +0000

Wahoo, no comment about today’s blog, but Gail is coming to my CITY. WAHOO! Excited. Should buy my ticket before the word gets out. Not telling you where I live.

By: Kate 2

Kate 2 — Wed, 06 May 2009 22:23:26 +0000

Most employers that offer pension plans offer free seminars to explain them once a year or more. Go – you’ll be surprised at how much you can learn. The presenters are generally happy to answer questions, and usually know a lot about the various options and details. If your employer does not offer this, get together with collegues and ask for it!

By: Pol*

Pol* — Wed, 06 May 2009 18:38:28 +0000

neither me, nor my spouse have pensions through work, not many people I know do! But, we are contributing to RRSPs and hoping!

By: Sarah

Sarah — Wed, 06 May 2009 16:15:56 +0000

I wish there was a pension plan at my work available.. stupid thing is I work for a YIG which is a branch of Loblaws.. YIG’s are franchise stores.. we do not have pension plans.. BUT employees at the corporate stores get the option. and the 10% employee discount! just a bit of a rant lol
Guess I will have to stick to regularly funding my RSPs…

By: Jessie

Jessie — Wed, 06 May 2009 14:31:17 +0000

My Pension is a good one (I think).

You are eligable to enrol in the Pension two years after your hire date (which is 17 months for me and counting). There is a manditory employee contriubtion of 5% which is matched by the employer. Two years after the commencementof the Pension, it becomes vested (yahoo!).

So.. I wait. This October I will have the opportunity to discuss a raise in salary. I am guessing that it won’t be significant due to the economy, so my stratagy will be to ask to join the pension early.

By: Anne

Anne — Wed, 06 May 2009 13:30:05 +0000

This is for Kate:

When you take out your pension, you have to specify the type of payment you want. If you are married, the lawa requires that at least some of your pension be payable to your spouse if you should predecease him. However, there is a range of amounts that you can specify from 50% to 100% continuance. The amount you choose for your husband will affect the payments made to you, but in my opinion, the price is neglibible. So if you choose 75% of your pension to continue for your husband, the initial payments may be $25/month lower…but this seems to me a small price for knowing that your husband will have a pension. The percentage you select will depend on his resources at the time of your retirement.
hope this helps.

By: Anne

Anne — Wed, 06 May 2009 13:24:41 +0000

Bird in the hand?

My pension situation is under discussion at my work right now. I am 50. I collect a small defined benefit pension of $500/month from my former employer (I became ill and while ill was terminated). This pension will never go down but will increase when the 5 year performance of the plan exceeds 6%. $2000 of this payment is tax free under current tax laws.

Here’s the problem that I’d love readers of this blog to comment on…I am now well enough to work full time. My new employer is affiliated with old employer and the pension is the same one. I have been given three choices: stop recieving the $500/month in order to rejoin plan and receive employer contribution of $250/month in addition to my own; keep receiving $500/month and stay out of pension plan, losing the $250 employer benefit or (and this is the scary one) move to a different payroll scheme in which I could keep the $500/month received pension, contribute to a different pension fund and receive employer contributions BUT lose life insurance and LTD coverage.

I am leaning towards option 2 (losing employer contribution but keeping $500 payment, life insurance and LTD) and just putting my share in an RRSP. I am terrified of losing LTD coverage.

My husband has a good defined benefit plan (with spousal continuation option) and we will be mortgage free at retirement. My little pension will continue and maybe get a bit bigger.

I’d really appreciate hearing some other perspectives on this situation. what would YOU do?

Thanks everyone!

By: Kate

Kate — Wed, 06 May 2009 13:20:17 +0000

Thank you so much for this post, Gail.

I have a defined benefit plan, but only just recently learned what that actually meant. Pensions haven’t been something I’ve paid much attention to until now, so the learning curve is steep.

We’re facing a situation where I will have a defined benefit plan, and hubby MIGHT, but his will likely only be calculated at half (he will likely be working 3-4 years, off for 3-4 years, working 3-4 years, etc.) He’s also 10 years older, and thus has less time within which to maneuver. If anyone has any suggestions for how to structure our retirement savings so that he’s taken care of, I’d love to hear them.

By: Gail

Gail — Wed, 06 May 2009 13:17:30 +0000

FG: Keeping the pension in place means you’ll be guaranteed an income and need not worry about the management of the funds. However, if you haven’t been with the company for a long time, that income may be very small, which is why some people chose the rollover. Long-lived employees in the right plan may also be able to arrange a lifetime survivor benefit for a spouse, and get inflation protection if their plan is indexed. And by opting out of the pension plan, you may forfeit other benefits such as dental, health and life insurance coverage.

Some people choose to rollover because you can delay when the funds are paid since you don’t have to mature the RRSP at 65. You’ll be able to control the management of the funds and select investments that best reflect your needs, which can be a pro or con depending on whether you want this job or not. And, upon your death, your spouse can roll the entire remaining value of the locked-in plan to his/her own RRSP or locked-in plan depending on pension legislation. A locked-in plan also provides greater flexibility for tax and estate-planning purposes.

Dinah, I think most people feel as you do, which is why we’re so willing to ignore this very significant part of our financial lives. It may also be why so few people choose to use an RRSP: we just don’t want to think about it.

By: dinah

dinah — Wed, 06 May 2009 12:50:05 +0000

for some reason pensions have always scared me and my eyes glaze over and i used to get ticked when i would see the deductions for my pension plan on my pay stub. i was indignant, “that was $65 i didn’t have to spend on stuff!”

nowadays, pensions still scare me and my eyes still glaze over, but now i love seeing the amount taken off on my pay stub.

i do need to learn more about my pension plan though.

i’ve always wondered about this though: i worked part time a few years ago and the company had a pension plan. my contributions were quite minimal…but what happened (s) to that money now that i don’t work there? does it just sit there and wait for me to retire? how will it know i’m retiring? i guess i should really phone them too…

By: Frugal Graduate

Frugal Graduate — Wed, 06 May 2009 12:47:16 +0000

Question for you Gail.
You noted finding out whether you can leave the pension intact, roll over into Locked in RRSP, etc. Is there a rule of thumb for determining which would be better: leaving it intact when you leave or rolling over to RRSP? The reason I ask is that twice I have left companies where I had a pension plan. For one for 5 years I left it there before finally rolling it over and with the other one as soon as I left, I rolled it over. With the 2nd one it made sense since I was there for less than a year but the other one was a few years worth (Ontario Teachers Pension) and I have wondered if I made the best decision – I just thought I would have better control. I am wondering too so that if this happens again I will be better prepared.