# Percentage to allocate to Pension with Savings rate



## latebuyer (Nov 15, 2015)

I believe this question may have come up before, but I can't remember the result. What i'm wondering is should I allocate a dollar amount to my pension when calculating my savings rate or should I consider my savings rate independent of the pension. I've been saving 15% (independent of the pension) but not sure if that is too much or too little. I wouldn't mind bringing it down a bit, but not sure.


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## Rising Tide (Jun 5, 2019)

Good question - I've been thinking this same thing lately. From what I've seen I think most planners say include the amount you contribute to your pension in your savings rate, but I'm like you, and have a separate savings rate I like to keep up with.

Why do you want to bring your savings rate down?


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## christinad (Apr 30, 2013)

This year I had a 3000 special assessment which is fine and i've saved it up. However, now i've learned there may be another 3700 special assessment. If i save up the money for this this year, I probably won't reach my savings goals which includes a mortgage prepayment. I could take it out of my emergency fund but i've worked so hard to build up the fund that I don't like to take money out of it. I feel guilty when I don't reach my savings goal but I guess I have to accept sometimes its not possible. It just feels like stuff is always coming up.


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## AltaRed (Jun 8, 2009)

I would include personal contributions to a DB* contributory plan (and maybe even CPP) in my savings rate, but necessarily the employer's contributions. One doesn't really know if they are going to collect for sure. Ultimately, there is no black and white answer.

* Especially so for generous DB plans that have a high contributory rate like OTTP and similar.


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## Rising Tide (Jun 5, 2019)

AltaRed, would you say then that it would be ok for someone with a solid DB pension to save minimally on their own, provided their contribution to the pension is a decent amount?

Obviously different for everyone, but based on the OP one could reduce their additional savings rate if they were in that position?


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## AltaRed (Jun 8, 2009)

As with everything, it depends. An Ontario teacher working an entire career and participating in the OTTP can probably not save much if anything extra and have an acceptable retirement.

The 'depends' part is IF one is a member of that plan for a full career of perhaps 30 years. How can one be sure that will happen.......until it happens? I think everyone (with a good DB plan) should at least fully fill their TFSA room with Cdn dividend paying blue chips just in case one's career is cut short, or health, or......

I had a decent, not exceptional DB plan with 27 years of service, but I invested heavily anyway especially in a non-reg account. Was a good thing since my wife and I split shortly after retirement and that non-reg account made all the difference in a division of assets. IOW, poo can happen and it's nice to have a buffer.


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## Plugging Along (Jan 3, 2011)

Instead looking at it from an input of a savings rate percentage, I have looked at it from an outcome perspective. I started late into a dB pension, it’s average, not great not bad. I never anticipated that I would be around long enough to collect an amount that makes up a large portion of my retirement. So my view may be different.

I have know about how much we want to retire. I calculated about how much my pension would be at the earliest time I could take it (with penalty) and without penalty. I have absolutely no intent of working to 65 or later so I didn’t with the full pension calculations. From there, I calculated how much I would need from our other accounts, and that’s what we target in putting in. We know how much we need to it in if we decide to work the longer time periods and for the min time periods
Our. We don’t always meet our savings goal for the more aggressive time peiRiod, but as long as I put in enoughto meet the goal for the longest date I was to retire I am fine with that.


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## Gruff403 (Jan 30, 2019)

latebuyer: I counted my DB pension into the savings rate plus CPP. I even counted the amount of my mortgage payment that went to principle. DB is now the fixed income portion of my portfolio and RRSP, TFSA and Unregistered account contains only equity (mainly dividend paying blue chips and ETF's)

Risingtide: Absolutely save what you can into other accounts even if you have a solid pension. TFSA before RRSP depending on what tax brackets you are now and what you anticipate being in at retirement. I stopped contributing to RRSP and saved up the contribution room until last year of work and made one final RRSP contribution since I knew I would be dropping a full tax bracket. It wasn't a lot because of Pension Adjustment but helped. Never rely on one asset class but diversify your investments over many (real estate, pensions, stocks, cash)


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## Rising Tide (Jun 5, 2019)

Totally agree Gruff. I haven't been including DB contributions into my savings rate so have been saving as much as (reasonably) possible as well. I'm also focused on the TFSA first - I like the tax free status, and RRSP withdrawals would increase my taxable income on top of pension payments.

If I include pension contributions sometimes I wonder if maybe I'm saving to much, but I'm happy with it.


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## OptsyEagle (Nov 29, 2009)

My method is quite simple. Since I have a good handle on my personal expenses and don't tend to impulse buy or even have big desires for material things, it makes saving quite simple. I would earn my income and then pay my well managed expenses. If you earn it and you don't spend it, the difference is savings. You could make an eloquent equation out of that and it would probably be more useful for you then the ones Einstein did.

As this money would build up in my bank account, above what I needed for the current month AND my minimum balance I like to see there, I would simply transfer it to various savings accounts. I usually aimed and succeeded in maxing my RRSP, so the first tranches usually headed there. Today, the next account would be a TFSA and then the rest has no choice but to go into a non-registered margin/cash account.

By the time I was thirty, I was so far ahead of my peers on savings that I did not sweat the issue of whether I put more away one year then the next. The only real goal I had was to max the RRSP, since I assumed it at the beginning of the year, to predict my taxes owing, etc. I was self-employed most of my life and therefore I was in charge of withholding tax from my incomes.

This system only works for people who don't have a big list of things they want to buy or places they want to go. The main reason I did not have this list was because, firstly, I don't have most of the desires others have for material things and I don't get as much excitement out of doing many of the things others like to do. 2ndly, my finances were in such good shape, at such a young age, if I wanted to buy something or do something, I just did it. It never had time to make it to any bucket list.


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## latebuyer (Nov 15, 2015)

I recall Carl Richards (author of 1 year financial plan) saying to save as much as you reasonably can which is what Gruff says as well. This is probably good advice in bad years like I have now where I have uncontrollable expenses. Maybe it is most important to be consistent in how you are calculating savings rate, in which case I would probably just count what I put in tfsa and rrsp and just have to accept in these off years I may not reach my goal. :-(

Actually I think I may include CPP, my pension is non contributory. I would probably just include it to feel less guilty during off years if I have a special assessment but I am actually going to build up a fund for this so hoping it won't be a problem in the future.

Thanks for the discussion.


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## edip (Jun 3, 2017)

We both have defined benefit pensions, one government and one private company but we started later at 35 as we emigrated at 33 to Canada.... Now, as the house is paid off and RRSPs, TFSAs are full we still plan to save my wife full salary plus 15-20% of mine as we don't really need more than we have plus our saving lifespan is shorter than somebody born here... If we have too much money at 57-58 when we want to retire we can leave them to my daughter as we were lucky enough to have what we wanted... We got the house we like, we go on vacations 1-2 times a year outside of the country.... I think there is no point to spend more at this point... 

We also put all savings in stocks as I think we can tolerate a higher risk relying on the DB pensions... We'll try to get more conservative when we'll be around 55.... Good or bad plan? I don't know, but we'll see.


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