# Pension



## darrenb (Apr 20, 2014)

My wife has a 600,000 Pension which will soon pay 26,000 a year. It is inflation protected. In 10 years it drops to 20000 due to a bridge between 55 and 65. I think I can do better What do you think?


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## lonewolf :) (Sep 13, 2016)

Not sure of the question? If you take the 600,000 out & bought an annuity what would the payout be ? though would not get bridging though could buy deferred annuity which would pay more @ a latter date. Would have to talk to someone that sold annuities though to get qoutes & remember they will be biased as they will make a commission


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## Mukhang pera (Feb 26, 2016)

darrenb said:


> My wife has a 600,000 Pension which will soon pay 26,000 a year. It is inflation protected. In 10 years it drops to 20000 due to a bridge between 55 and 65. I think I can do better What do you think?


Not sure why you have started 2 threads on the same topic. It really does not promote your cause.

As for whether _you_ can do better, we here on cmf know nothing about you, your investment experience, etc. You have all of 2 posts to your credit. Duplicates at that.

I know someone who inherited his dad's stock market portfolio some years back. It was probably worth about $500,000 almost 30 years ago. It was all gone at the end of 8 years. In 2004, this same person inherited $350,000. I said to him: "You are not going to put in in the stock market, are you?" He replied, "Yes, I intend to. I have learned my lesson." Guess what? That $350,000 is now just a fond memory. But hey, I'll jump on board and opine that you can do better.


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## darrenb (Apr 20, 2014)

*I’m new*

I’m new to this forum so have patience and don’t be rude


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## Mukhang pera (Feb 26, 2016)

darrenb said:


> I’m new to this forum so have patience and don’t be rude


Being new to a forum does not mean that you can check your common sense at the door. And just where is the rudeness?


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## nobleea (Oct 11, 2013)

Just look up annuity calculators and enter 600K for your purchase amount. Some might offer inflation protection. You'll also have to pick between what happens upon the pensioner's death. Is that the end of the pension? Do the payments continue to you? Or just a percentage of it? All these are things that can be decided for pension payouts.

Just a quick look at the calculators shows that you could probably not beat it with an annuity.

Investing it yourself you could probably beat it, but run the risk of having market drops hit the value and then you're eating dog food. How much better? Maybe 30K/yr with no drop from CPP bridge.


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## darrenb (Apr 20, 2014)

Thank You


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## off.by.10 (Mar 16, 2014)

Mukhang pera said:


> I know someone who inherited his dad's stock market portfolio some years back. It was probably worth about $500,000 almost 30 years ago. It was all gone at the end of 8 years. In 2004, this same person inherited $350,000. I said to him: "You are not going to put in in the stock market, are you?" He replied, "Yes, I intend to. I have learned my lesson." Guess what? That $350,000 is now just a fond memory.


Do you know how they achieved that feat? It would be a good case study of what not to do. Short of gambling, it's hard to imagine. I suppose it could be simply a gambling problem applied to stocks.


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## Mukhang pera (Feb 26, 2016)

off.by.10 said:


> Do you know how they achieved that feat? It would be a good case study of what not to do. Short of gambling, it's hard to imagine. I suppose it could be simply a gambling problem applied to stocks.


I really don't know much of the details. Not something I ever felt I could ask about. Just listen to what I was told. 

Dad was a successful Toronto insurance broker. He built up a portfolio over his working years to see him and his wife through retirement. Dad passed away circa 1980 at about age 65. The person of whom I speak, had his own young family at that time. He and his mother (the widow), hatched a plan for my friend to assume management of the portfolio and they would all live off it. They must have considered there was enough there that the plan was realistic. That's why I am guessing at a corpus in the order of about $500,000 in 1980 money. He quit his job and went to work as family portfolio manager. He was then around age 30. It was about 8 years later that it was all gone. Fortunately, I suppose, mummy died just about that time and was unaware of what had occurred. My friend went back to school for job-specific training and took employment for the first time in years at age 40. Mummy also inherited a house in Lawrence Park. Sold in 1980 for $201,000. That money also went, as did the proceeds of a house she and her husband had in Arizona. My friend could, I suppose, be recruited to teach something like "Improvident Investing 101". 

My guess is that he liquidated dad's stuffy, staid investments, thinking he could achieve much higher rates of return. Perhaps buoyed up by an early success. Then when a big loss occurred, he became desperate to recoup. Well, you cannot do that by going back to conservative investments, can you? So he assumed more risk, and so on. All my speculation on my part, but probably not too far off.


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## lonewolf :) (Sep 13, 2016)

Do not compare pension payout to variable annuity, Would not touch variable as can lose money


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## james4beach (Nov 15, 2012)

off.by.10 said:


> Do you know how they achieved that feat? It would be a good case study of what not to do. Short of gambling, it's hard to imagine. I suppose it could be simply a gambling problem applied to stocks.


I think it's more common than you think. Remember, TV & media is not in the business of showing you how people _really_ do in the stock market; they are paid to make it look lucrative and advertise brokerages.

I've seen 2 or 3 people do that with smaller sums (blowing away 20K or 50K). People tend to make ad hoc bets without considering risk management. Then they trade in & out at the worst possible times; the stock market itself is to blame for this since big traders will bait you into doing this. Plus, many people really love buying tumbling stocks because they think they are cheap/good value.

Over the years, I've warmed up (a bit) to the mutual fund companies and bank "advisors". One service they provide is protecting people from themselves. It sounds bad to say that, but I think it's true for some people. Using a discount brokerage to DIY can be dangerous.


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## Calmoney (Dec 19, 2013)

A defined benefit pension plan that is inflation protected is a GIFT. If you are with some level of government it is virtually guaranteed, those cheques flow into your bank account no matter what. You would normally also get some sort of subsidized benefit package until you are 65 as well, possibly even life insurance. When you add in CPP and possibly OAS, you have a great income stream. With this pension income you still qualify for loans, leases, etc, should you need them. Now you could be a little more risky in other investments and up your ratio of equities to income.


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## like_to_retire (Oct 9, 2016)

Dale said:


> ....Now you could be a little more risky in other investments and up your ratio of equities to income.


Alternatively, you could lower your ratio to equities, since there isn't the need to take risk.

ltr


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## twa2w (Mar 5, 2016)

james4beach said:


> I think it's more common than you think.....
> 
> I've seen 2 or 3 people do that with smaller sums (blowing away 20K or 50K). People tend to make ad hoc bets without considering risk management......
> 
> Over the years, I've warmed up (a bit) to the mutual fund companies and bank "advisors". One service they provide is protecting people from themselves. It sounds bad to say that, but I think it's true for some people. Using a discount brokerage to DIY can be dangerous.


I have dealt with several lotto winners in the million dollar range. Money all gone within 5 years. In one case the fellow had a condo to show for it, a nice set of golf clubs and a sports car. So based on the prices at the time about 1/4 of the money.

In terms of diy. Internal studies at the banks show that people who transfer money to their discount brokerage are often( up to 40%) still sitting in cash 3 to 5 years later. Either they get busy and forget, or they get overwhelmed by choices and get paralysis by analysis and can't commit to buying anything. Fear if being wrong.


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## kcowan (Jul 1, 2010)

Dale said:


> Now you could be a little more risky in other investments and up your ratio of equities to income.





like_to_retire said:


> Alternatively, you could lower your ratio to equities, since there isn't the need to take risk.
> 
> ltr


Yes these are both viable choices and depend on who benefits from the residual estate.


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## Pluto (Sep 12, 2013)

darrenb,

No I don't think you can do better. partly because you have not laid out a viable plan on how you would achieve a better return. You have to have a realistic plan or blueprint on precisly what securities you would buy to achive it. then ask for critique of the plan.


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## ian (Jun 18, 2016)

I would keep that pension as long as you believe the plan is secure and well funded. It makes a good leg on your overall retirement strategy.

When comparing db payout to annuities just remember that the annuities will typically be less attractive. The DB represents the population. The annuity rate represents the population of people who believe that the will live longer lives. After all, who who buy an annuity if they thought, for whatever reason, their lifespan would be in say, the early or mid seventies.


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## Retiredguy (Jul 24, 2013)

darrenb said:


> My wife has a 600,000 Pension which will soon pay 26,000 a year. It is inflation protected. In 10 years it drops to 20000 due to a bridge between 55 and 65. I think I can do better What do you think?


Your post is very short on details and information about your overall financial picture. My short answer is take the pension and if it has a full JLLS option take that unless you have your own DB pension.

Most DB pensions with a commuted value option require that you lock the money in a LIRA. I obviously don't know the details of the pension your wife has but if 600K is the commuted value, do you really believe that she can just sign off on the pension and you'd have 600k to do with as you please? If that's the case think income tax immediately on 600k added to her income and the 600 will quickly become about 325 before you invest it.

Years ago now I had the option to take a commuted value of 869K on my DB pension. 320K was taxable immediately and the remainder had to go into a LIRA. I had always planned to take the pension, and gave the cv value option about a second's thought before took the pension. I have no regrets and even in hindsight it was the right decision. My wife and I are good savers and investors such that we have significant non registered stock portfolios(div income) and of course topped up TFSA accounts. My DB pension **may** provide some indexing and so far, over the years it has increased about 25%. Soon I will lose over 10K (Bridge benefit) from my pension but will start my CPP , about 13K.

Be honest with yourself. Can you say that if your wife had not been compelled to have pension deductions that you both would have had the discipline to save and invest the amounts each and every paycheque so that she would have 600 K in an RRSP. I presume you're also about 55. Unless you can tell us that you've had significant success over the years saving and investing with much better returns what makes you think you'll suddenly do better with a larger sum? I suspect that the stress of a big loss for you both would be far greater than your enhanced happiness of "doing better" than the pension would have provided. It is a huge risk as you go into your retirement years. Its been said a bird in hand is worth two in the bush....... and I would say a DB pension is worth three in the bush!

As an aside, am I correct in thinking your wife is taking a penalty if she takes the pension at 55.... something like for each year under 60 she loses a certain percentage. Something doesn't seem right about the numbers you quote.


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## nobleea (Oct 11, 2013)

Retiredguy said:


> As an aside, am I correct in thinking your wife is taking a penalty if she takes the pension at 55.... something like for each year under 60 she loses a certain percentage. Something doesn't seem right about the numbers you quote.


Most teachers can retire at 55 with full pension. 85 is the magic number. At 55, that would be 30yrs of full paid service, which means starting at 25. That's about right when you consider it takes a few years out of university to finally get that full time contract.
The military may also be similar since many can start with them right out of high school.


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## Retiredguy (Jul 24, 2013)

nobleea said:


> Most teachers can retire at 55 with full pension. 85 is the magic number. At 55, that would be 30yrs of full paid service, which means starting at 25. That's about right when you consider it takes a few years out of university to finally get that full time contract.
> The military may also be similar since many can start with them right out of high school.


Of course various DB pensions have different rules. Some gov't pensions are age 60 unless you have 35 years and a penalty if you retire before 60 without 35. The poster didn't indicate the plan, private or public etc. I was actually questioning a 26k pension with a 600K CV, as my own 869K CV - DB pension gave me a pension more than double the 26K/600K he referenced. Maybe he'll enlighten us both with more info!

The following is an excerpt from the BC Teachers Pension Plan.

"55 but under 60 Deferred pension Or Immediate pension (your pension is reduced if your age and contributory service total less than 90)"


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## RBull (Jan 20, 2013)

nobleea said:


> Most teachers can retire at 55 with full pension. 85 is the magic number. At 55, that would be 30yrs of full paid service, which means starting at 25. That's about right when you consider it takes a few years out of university to finally get that full time contract.
> The military may also be similar since many can start with them right out of high school.


This will vary by Province. Here in NS:
85 is the magic number to received an "unreduced" pension- not full pension. (Age+years worked =85; unreduced = no penalty for less than 85 factor)
A full pension = 35 years working F/T and minimum age 55 =70% of last 5 yrs avg. salary. Since teachers normally require at least an undergrad this usually means about age 57 for FULL PENSION (ie. start teaching @ age 22 + 35 yrs employed =age 57)


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## Retiredguy (Jul 24, 2013)

RBull said:


> This will vary by Province. Here in NS:
> 85 is the magic number to received an "unreduced" pension- not full pension. (Age+years worked =85; unreduced = no penalty for less than 85 factor)
> A full pension = 35 years working F/T and minimum age 55 =70% of last 5 yrs avg. salary. Since teachers normally require at least an undergrad this usually means about age 57 for FULL PENSION (ie. start teaching @ age 22 + 35 yrs employed =age 57)


As another aside.... I''m not a teacher, but in researching the B. C. Teachers Pension I see that they have recently changed, and new teacher pensions are no longer integrated with CPP. Their pensions now accrue at 1.85% per yr. For existing teachers their pension will be a blend of the new and old rules.


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## RBull (Jan 20, 2013)

Retiredguy said:


> As another aside.... I''m not a teacher, but in researching the B. C. Teachers Pension I see that they have recently changed, and new teacher pensions are no longer integrated with CPP. Their pensions now accrue at 1.85% per yr. For existing teachers their pension will be a blend of the new and old rules.


That's interesting. Here it's still integrated (bridged) - 1.3% + .7% = 2%/yr
I'm not a teacher either. My wife was.


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## ian (Jun 18, 2016)

My sister was a teacher in Coquitlam. A few years ago, prior to retirement, she showed me her pay stub. Her pension deductions totaled just about 11.5 percent (CPP and DB) Don't know what her final pension formula was.


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## olivaw (Nov 21, 2010)

darrenb said:


> My wife has a 600,000 Pension which will soon pay 26,000 a year. It is inflation protected. In 10 years it drops to 20000 due to a bridge between 55 and 65. I think I can do better What do you think?


While it very much depends on your situation, my initial reaction is keep the pension. I rely on my stocks and bonds to fund my retirement. TBH, I am a little envious of my friends with a lifetime guaranteed income and dental, travel and prescription drug coverage. 

_Pensionize Your Next Egg_ talks about the importance of a guaranteed pension or annuity as a portion of your asset mix. One of the authors used to post on this forum as _Moneygal_. 

Just my opinion. I am no expert and I don't really know your full situation.


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