# Short Term Pensions?



## Plugging Along (Jan 3, 2011)

I'm just to figure out how I should consider my pension. 

Background:

I just started a govenment job (>1 year ago), it has a db pension. To be honest, there the likely hood of me staying here is low. I will have a better idea with in the next 2 years, as I will know more about my career opportunities and possibility of advancing. 

I'm currently here for the lifestyle choice of worklife balance. When my children are a little older, then I may change my career path and go into independant consulting. 

Both I and my employee make DB contributions. Should I just leaves these out of my calculations for retirement as the amount is relatively low right now (under $10K I'm guessing)? Do I keep planning for my retirement as if I will not have much of a pension?

Any other considerations or questions I need to figure out before I can answer this?


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## MoneyGal (Apr 24, 2009)

Mathematically you are looking for the actuarial present value of the amount in your pension plan. 

However, if the amount is small, and especially if the contributions have not vested, then it is likely just as accurate - and perhaps more so - to value the amount as a lump sum present value. As in, just get the account balances.

FWIW, "actuarial present value" is the value today of a lump sum that would produce whatever benefit you would receive at retirement based on your contributions today and for the rest of your life. 

So, for example, if your current contributions would produce a pension of $1000 per year starting at your age 65, you would calculate the present value of a sum of money that would produce that stream of income at your age 65 for the rest of your expected lifetime (that's the "actuarial" part). 

APV is very sensitive to long-term interest rates.


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## Plugging Along (Jan 3, 2011)

MG: Thanks for the answer. The amount is so small that I would just the lump sum present value.

I haven't received a statement yet, but could I just base this amount on the contribution amount made by myself and my employer?


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## CanadianCapitalist (Mar 31, 2009)

In a typical Government pension plan, if you leave within the first two years all you'll receive is a return of your contributions only. After you've completed two years, you could just use the lump sum value in your pension statement as an estimate.


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## Eclectic12 (Oct 20, 2010)

CanadianCapitalist said:


> In a typical Government pension plan, if you leave within the first two years all you'll receive is a return of your contributions only. After you've completed two years, you could just use the lump sum value in your pension statement as an estimate.


True ... though a key thing to do is to get the details of the DB plan, particularly when it vests.

When I left a private company after 9+ years, the db pension had vested so I received both sets of contribution (i.e. mine plus employer). All of the options offered where the money left the db plan meant that part or all of the withdrawal was locked-in (i.e. no future withdrawals until retirement).

Plugging Along does not say whether the gov't in question is federal, provincial or municipal. The feds and province have different rules for unlocking part/all of a LIRA.
http://www.taxtips.ca/pensions/rpp/unlockingrpp.htm

As for planning - the safest is to assume zero pension or LIRA and you are guaranteed to have more than that. *grin*


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## Plugging Along (Jan 3, 2011)

I know the pension is vested after two years, and my intent is to stay there for at least that time. 

I wasn't as concerned with the rules of the LIRA, as I have begun to look into them. I was just trying to figure out my overall financial retirement picture.

Right now, because I'm pretty new to this job, I am errorring on the side of caution and not counting my pension as part of retirement plan, however after a few years, that amount will be a large chunk of change. 

Thanks for the info guys!


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