# Do I sign up for pension?



## dadaswell (Jan 6, 2016)

*Second pension opportunity...should I sign up?*

Not good with these things, so hope you can help.

I am 61 years old and currently retired and collecting a defined benefit pension plan (OMERS). I recently started a casual employment position that offers enrollment in the OPSEU defined benefit pension plan. Contributions would be 9.4% of earnings up to CPP earnings max, and 11% therafter (although I don't think I will get into the 11% range seeing as how it is a casual position). I really don't know how much I will end up making in a year.

I don't know how long I will work...maybe a year or two or who knows...maybe as many as 10 years?? I still have young children in elementary and secondary school for at least 6.5 years, so no travelling style retirement for me at this point LOL!

Pension calculated like this: 
_Pension formula – the pension formula used to calculate your pension amount at age 65 is:
2% x best consecutive five-year average annual salary rate x years of pension service
minus 
0.655% x the lesser of your best consecutive five-year average annual salary rate or the YMPE averaged over the final five years x your pension service (to a maximum of 35 years)_

Survivor benefits: _If you die after you have started receiving an OPTrust pension, under the current terms of the Plan, your eligible spouse or eligible child (for as long as the child is eligible) will receive a survivor pension based on 60% of the pension you were receiving when you died. If you die before age 65, you would be receiving a CPP bridge pension in addition to your retirement pension. The CPP bridge ends on the date you would have turned 65. On that date, your survivor’s pension is adjusted to 60% of what you (the member) would have received upon turning 65._

Eligible child is defined as: 
_Eligible child – under the current provisions of the OPSEU Pension Plan, a child is eligible to receive survivor benefits if there is no eligible spouse or if the eligible spouse has waived his or her right to receive survivor benefits and if the child is under the age of 18, or if over 18, the child is in continuous full-time attendance at a secondary school or, immediately following secondary school, is attending a postsecondary institution to a maximum of five years._

Should I join this pension plan?? Please explain why or why not. Understanding finances is NOT my strength!! 
My wife thinks I should join. : ) She is 6 years younger than me, and as I mentioned, we have young school age children.

Thanks for your time and help!!


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## Retiredguy (Jul 24, 2013)

dadaswell said:


> Not good with these things, so hope you can help.
> 
> I am 61 years old and currently retired and collecting a defined benefit pension plan (OMERS). I recently started a casual employment position that offers enrollment in the OPSEU defined benefit pension plan. Contributions would be 9.4% of earnings up to CPP earnings max, and 11% therafter (although I don't think I will get into the 11% range seeing as how it is a casual position). I really don't know how much I will end up making in a year.
> 
> ...


I would definitely sign up for the pension.

If you work 5 years at 50000 you would have paid in .094 x 250000 = 23500 .... less income tax, lets say 25%, so your after tax contribution would be 17625.

This would provide you with a pension at age 66 of 2.00 - .655 = 1.345 x 5 years = 6.725 %. .06725 x 50000 = $3362 per year. Again lets use a tax rate of 25% so you'd be left with $2522 per year and the pension is indexed ! Also, your marginal tax rate may well be lower in retirement than the years when you were making the pension contributions.

I suspect there would be some reduction in the 3362 amount because it also provides a survivor benefit to your wife. Be careful to understand that the benefit does not go to your wife and then also to your under age children. Children would only be eligible if your wife declines to be the named survivor when you start the pension.

With your ages 61/55 unless for some health reasons now you expect a shorter life span, you can expect to live into your 80's and one of you to 90 or more.

You indicate you are collecting a OMERS DB pension. Do like it and aren't you glad now that you made the contributions overs the years?

If I could buy today a *indexed* pension which starts out paying me 14.3 % of what I contributed I would snap it up. (3362/23500 = 14.3%)

PS. Remember that the employer is also contributing to the pension and if you don't sign up and contribute you lose the benefit of their contribution.


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## dadaswell (Jan 6, 2016)

Retiredguy said:


> I would definitely sign up for the pension.
> 
> If you work 5 years at 50000 you would have paid in .094 x 250000 = 23500 .... less income tax, lets say 25%, so your after tax contribution would be 17625.
> 
> ...


Wow! This helps....thanks retiredguy!


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## kcowan (Jul 1, 2010)

I would retire. You are 61. Every year you work is a year less of retirement. If you are average, you will live to 80. So you have 19 years to go. 18-17-16! Sure you can make more pension for less time! Why bother?


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## dadaswell (Jan 6, 2016)

kcowan said:


> I would retire. You are 61. Every year you work is a year less of retirement. If you are average, you will live to 80. So you have 19 years to go. 18-17-16! Sure you can make more pension for less time! Why bother?


 A few reasons why I am working again:
I still have young children in public school, and an elderly mother who needs me close by, so I can't/won't just take off for weeks/months at a time when I feel like it.
My job is casual...I can say no if I don't feel like going in.
I like my job and the people I work with. 
It's an easy job, with no crazy hours.
It isn't a lot of hours, so it is not stressing me out or making me tired.
I am learning something new every time I am at work. Sure, it's not rocket science, but it is interesting to me.
For what I am doing, the hourly pay is good.


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## Retiredguy (Jul 24, 2013)

dadaswell said:


> A few reasons why I am working again:
> I still have young children in public school, and an elderly mother who needs me close by, so I can't/won't just take off for weeks/months at a time when I feel like it.
> My job is casual...I can say no if I don't feel like going in.
> I like my job and the people I work with.
> ...



We didn't talk about your CPP and although you'd didn't disclose all of your financial position I hope you DO NOT start your CPP until age 65.


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## kcowan (Jul 1, 2010)

dadaswell said:


> A few reasons why I am working again:
> I still have young children in public school, and an elderly mother who needs me close by, so I can't/won't just take off for weeks/months at a time when I feel like it....


That is enough for me. We did not start snowbirding seriously until MIL passed.


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## dadaswell (Jan 6, 2016)

Retiredguy said:


> We didn't talk about your CPP and although you'd didn't disclose all of your financial position I hope you DO NOT start your CPP until age 65.



Unfortunately, it's too late. I took it at 60. I took it for a number of reasons:

I didn't know that I was going to be able to go to work again....long story. I retired from my first job at 60, which was mandatory.
Life expectancy in my family is historically not good...tons of heart disease etc.
Related to that, my wife will be collecting very close to the max, so my survivor pension for her would be minimal. Thought I should collect and bank it while I can, just in case the family history kicks in!
Higher CPP @ 65 might push me over the clawback levels for OAS, even with my pension reduction (_I think_).
I've got those young kids at home that I have mentioned. They are expensive..LOL!

Really, and I've said it before: I am not well informed in terms of financial planning etc. If it weren't for my DB pension, I would be in trouble. My wife will have one, too...thank heavens.

I read this site out of curiousity, and have learned a few things...some unfortunately, too late. I took my best guess regarding my CPP choice, and had a little help from a financial planner my wife has access to through work. (No, we are not investing regularly with him, so I don't see any financial gain for him here.)

Don't suppose I can reverse my decision re: the CPP??

Okay, break it to me. How much did this cost me?


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## dadaswell (Jan 6, 2016)

kcowan said:


> That is enough for me. We did not start snowbirding seriously until MIL passed.


Snowbirding...I wish!!! So does my wife! I have read with interest some of your threads on PV. Maybe someday....I hope!! Then I will start asking you for advice on that! Then again, you can pass along some now if you like!


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## Retiredguy (Jul 24, 2013)

dadaswell said:


> Unfortunately, it's too late. I took it at 60. I took it for a number of reasons:
> 
> I didn't know that I was going to be able to go to work again....long story. I retired from my first job at 60, which was mandatory.
> Life expectancy in my family is historically not good...tons of heart disease etc.
> ...


I believe you can only cancel CPP within one year. If you think both you and your wife will be in OAS Clawback territory (presently it starts at $75K each) at age 65 you'll need to seriously consider, with some analysis, delaying OAS to age 70. I expect you're going to be very financially secure with your significant DB pension(s). May you also enjoy good health!


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## BigMonkey (May 31, 2016)

Retiredguy said:


> I would definitely sign up for the pension.
> 
> If you work 5 years at 50000 you would have paid in .094 x 250000 = 23500 .... less income tax, lets say 25%, so your after tax contribution would be 17625.
> 
> ...


Really good analysis Retiredguy, but I'm not sure whether the pensioner would really receive the 6.725%? I believe there is usually a CPP bridge component for defined benefit plans.


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## Retiredguy (Jul 24, 2013)

BigMonkey said:


> Really good analysis Retiredguy, but I'm not sure whether the pensioner would really receive the 6.725%? I believe there is usually a CPP bridge component for defined benefit plans.


My analysis factored in that it was a post age 65 pension with the bridge dropped out. A pre age 65 pension would have been 2% per pensionable year. So a 5 year pension would be 10%. The bridge is .655 per year x 5 yrs = 3.275%. So my 6.725% is correct.


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## zzzdreamerzzz (Feb 25, 2018)

*my humble view*

I just want to say that I got more info from this thread than I did from anywhere else. This site rocks!


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## Retiredguy (Jul 24, 2013)

Retiredguy said:


> I believe you can only cancel CPP within one year.
> 
> Update:
> 
> I see on another site that Dogger1953 says you can only cancel within 6 months. Dogger is the CPP expert so accept his info and ignore mine on this point.


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## dadaswell (Jan 6, 2016)

Retiredguy said:


> I believe you can only cancel CPP within one year. If you think both you and your wife will be in OAS Clawback territory (presently it starts at $75K each) at age 65 you'll need to seriously consider, with some analysis, delaying OAS to age 70. I expect you're going to be very financially secure with your significant DB pension(s). May you also enjoy good health!


Hello again Retiredguy. Thanks for all of your advice regarding this. I'm wondering why you think I should delay my OAS until 70? My CPP amount won't change at that point, my pension is reduced at 65, and I don't have any RSP'S to withdraw at that point. Isn't the clawback going to be the same at 65 or 70 for me? I know I would be able to collect more OAS at 70 if I wait, but won't the increased amount just be clawed back anyway?

Thanks again!


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## Retiredguy (Jul 24, 2013)

dadaswell said:


> Hello again Retiredguy. Thanks for all of your advice regarding this. I'm wondering why you think I should delay my OAS until 70? My CPP amount won't change at that point, my pension is reduced at 65, and I don't have any RSP'S to withdraw at that point. Isn't the clawback going to be the same at 65 or 70 for me? I know I would be able to collect more OAS at 70 if I wait, but won't the increased amount just be clawed back anyway?
> 
> Thanks again!


Obviously I don't know the exact details and sources of all your income. If your income is all DB/CPP pension and that puts you over 125K then yes you're never going to receive any OAS at 65 OR 70. If however it is investment income on top of your pensions that causes the OAS clawback, then my thinking is consider delaying taking OAS to 70 and be entitled to the larger amount, and you can, at that time, consider spending some of the investment principal or maybe giving the kids early inheritance, to reduce your income and then receive some/all of the OAS benefit. Obviously at 70 you may have a lot of years left to financially plan for but its absolutely 5 years less than when your 65! 

The OAS clawback threshold is indexed and presently starts at 75000 (actually 68000 plus full OAS) at the rate of 15% and you completely lose it at 125000.


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## dadaswell (Jan 6, 2016)

Retiredguy said:


> Obviously I don't know the exact details and sources of all your income. If your income is all DB/CPP pension and that puts you over 125K then yes you're never going to receive any OAS at 65 OR 70. If however it is investment income on top of your pensions that causes the OAS clawback, then my thinking is consider delaying taking OAS to 70 and be entitled to the larger amount, and you can, at that time, consider spending some of the investment principal or maybe giving the kids early inheritance, to reduce your income and then receive some/all of the OAS benefit. Obviously at 70 you may have a lot of years left to financially plan for but its absolutely 5 years less than when your 65!
> 
> The OAS clawback threshold is indexed and presently starts at 75000 (actually 68000 plus full OAS) at the rate of 15% and you completely lose it at 125000.


Okay, now I am clear! Thanks so much...and you are right....won't have any investment income by then :dejection: I got wiped out and further pilfered in a divorce awhile back.


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