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Discussion Starter #1
Retiring early, a different spin.

Working for the Ontario government has a rare few perks.

1. Good Pension (so I really don't have to worry)
2. Self funded leave

I am 13 years from retirement with a full pension (70% of best 5 years indexed with inflation). 2 kids, one in university and one going in 2 years. Wife is a occasional teacher, very occasional so very flexible. No mortgage, No debt. I have maximized RRSP and RESP in the past, but stopped about 5 years ago to start living for now. I am tired of planning/preparing for retirement.

So I am signing up for a very unused option public servants have, a self funded leave. I will reduce my pay to 75% for three years, then will be paid at 75% while taking the fourth year off. AND IT WILL NOT EFFECT PENSION!!

I can technically do this 3 times and and work one final year before retirement. Which will give me 12 years to become accustom to 75% of my salary. Then retirement at 70% will not be to big a stretch. A full year off is like testing retirement out every four years.

My question or point is, if I can learn to live at 75%. And know that I will receive 70% during retirement. Do I really need to keep saving for retirement?
 

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If you're confident in your pension provider (which makes sense for public servants), you shouldn't need to put a dime into an RRSP unless you're going to have a very high standard of living in retirement.

Keep in mind that when you retire, that 70% pension will probably equate to 90% of your current take-home pay, since you won't have deductions for CPP, EI, pension, union dues, and so on.
 

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Retiring early, a different spin.

Working for the Ontario government has a rare few perks.

1. Good Pension (so I really don't have to worry)
2. Self funded leave

I am 13 years from retirement with a full pension (70% of best 5 years indexed with inflation). 2 kids, one in university and one going in 2 years. Wife is a occasional teacher, very occasional so very flexible. No mortgage, No debt. I have maximized RRSP and RESP in the past, but stopped about 5 years ago to start living for now. I am tired of planning/preparing for retirement.

So I am signing up for a very unused option public servants have, a self funded leave. I will reduce my pay to 75% for three years, then will be paid at 75% while taking the fourth year off. AND IT WILL NOT EFFECT PENSION!!

I can technically do this 3 times and and work one final year before retirement. Which will give me 12 years to become accustom to 75% of my salary. Then retirement at 70% will not be to big a stretch. A full year off is like testing retirement out every four years.

My question or point is, if I can learn to live at 75%. And know that I will receive 70% during retirement. Do I really need to keep saving for retirement?

On the surface this deal looks great. But, before deciding it may be beneficial to verify that your information is correct. Here are some questions to ask/think about:

1. Will you have the required number of service years to receive the 70% pension? (In Manitoba it takes 40 years of service before a Provincial government employee is eligible for 70%.)

2. Does the 70% include integration with CPP, OAS or bath? If so, then your pension amount will decrease once you are elegible for these Federal benefits.

3. If the 70% includes integration, will this be a sufficient amount to live on without a significant amount of income from other income sources?

4. Is your pension fully indexed and is the indexing guaranteed? Often Provincial Pensions are only partially indexed and indexing is dependent on the fund's ability to pay. (Manitoba government pension is indexed UP TO 2/3 of the CPI but this amount is not guaranteed as it is dependent on the amount in the cost of living fund.)

Just a few things to consider before making a decision.

Maltese
 

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Also, what about your career development? Even if you work for the gov't, it's never good to show an employer that they can function without you. It will cause them to question why they even need to keep you around. As well, you may get passed up for promotions and won't be around to sort of "defend your turf" if that makes any sense in a career context.

Not really what you are asking about, but I feel you should at least give these things some thought. Good luck and please keep us posted and let us know what you decide.
 

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Discussion Starter #6
additional info

1. Will you have the required number of service years to receive the 70% pension? (In Manitoba it takes 40 years of service before a Provincial government employee is eligible for 70%.)

Ontario is approx. 2% per year of service, i will retire with 34.5 years, so just under 70%.

2. Does the 70% include integration with CPP, OAS or bath? If so, then your pension amount will decrease once you are elegible for these Federal benefits.

Integrated at 65, so my pension will drop at 65 the amount i will get from govt.

3. If the 70% includes integration, will this be a sufficient amount to live on without a significant amount of income from other income sources?

yes, but some of my co-workers that have retired have taken early cpp reduced at age 60 and then their income will be greater from 60-65, but less 65 plus

4. Is your pension fully indexed and is the indexing guaranteed? Often Provincial Pensions are only partially indexed and indexing is dependent on the fund's ability to pay. (Manitoba government pension is indexed UP TO 2/3 of the CPI but this amount is not guaranteed as it is dependent on the amount in the cost of living fund.)

Indexed on inflation, not sure who makes the rules, but most Ontario govt retiree's will brag their yearly raise is better in retirement than anything they ever received while working. I went through 12 years without a raise and the now infamous bob ray days!!



This idea has my whole way of thinking turned on its head.
 

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Discussion Starter #7
responce

1. what about your career development? Even if you work for the gov't, it's never good to show an employer that they can function without you. It will cause them to question why they even need to keep you around. As well, you may get passed up for promotions and won't be around to sort of "defend your turf" if that makes any sense in a career context.

I am in IT\computers, I am at the top of where I want to be. My absence will give one of the guys in my group a chance to be the lead while I am gone. The only advancement would be management and I am adverse to loosing or seeing my hair graying before its time.;) My goal is to work less and enjoy life more.
 

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You mentioned that you had maximized your RRSP in the past but stopped five years ago. Byt you didn't tell us for how long you had maximized it; in other words, do you have a substantial amount of money in your RRSP? If so, that could make quite a difference to your plans.

I retired four years ago with what seems to be a very adequate income to support me comfortably for as long as I live, but it's reassuring to know that I have about $360,000 in an RRSP which I won't have to touch until the law requires me to convert it to a RIF. So that should cover any unexpectedly large increases in inflation, or other surprise crises. So I'm wondering whether your RRSP will be enough to provide you with some "comfort" money should things not go according to plan.
 

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you have to work for another 15 yrs just to get the pension? that sucks.

taking time off will hurt your income increases, just like any mother who takes time off and deserves less for doing so...
 

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Discussion Starter #10
You mentioned that you had maximized your RRSP in the past but stopped five years ago. Byt you didn't tell us for how long you had maximized it; in other words, do you have a substantial amount of money in your RRSP? If so, that could make quite a difference to your plans.

I retired four years ago with what seems to be a very adequate income to support me comfortably for as long as I live, but it's reassuring to know that I have about $360,000 in an RRSP which I won't have to touch until the law requires me to convert it to a RIF. So that should cover any unexpectedly large increases in inflation, or other surprise crises. So I'm wondering whether your RRSP will be enough to provide you with some "comfort" money should things not go according to plan.
worked just over 21 years, just over 70k in rrsp, just over 50k in resp, just about 50k in non rrsp invest, just over 50k in borrowed non rrsp invest matched by investment loan.

not much in rrsp, pension does not leave much room to invest.

My real question is if a pension is a guaranteed 70% and you can live well on 75%, does investing really make sense to build a large nest egg and take away living for now?
 

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Discussion Starter #11
you have to work for another 15 yrs just to get the pension? that sucks.

taking time off will hurt your income increases, just like any mother who takes time off and deserves less for doing so...
13 years left, trust me I am counting, but if I commit to this plan, I really will only work another 10 out of the 13 years

time off will not hurt any pay increases, self funded leaves have no effect on benefits, pay increases or pension.

The last comment I will pass commenting on
 
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Do you still need to plan for retirement? Well no, neither do I, the pension takes care of that ... or does it ... will you also be supporting your wife, or ex-wife and future wife, or ex-wife and girlfriend, or ex-wife and her new boyfriend ??? ... a separation and divorce can take a big chunk out of that pension ... so you might think contingency ... where was I ... sure, I have my pension ... the extra cash I'm saving is for the toys :)
 

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... sure, I have my pension ... the extra cash I'm saving is for the toys :)
I'm with you. I believe that it's important to have a cushion in addition to the pension. Toys, travel and home repairs/renovations aren't cheap and not likely to be covered solely by a pension unless the pension is significant. Toys and travel can be excluded if necessary but the cost of home repairs will add up over the years.

Maltese
 

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No offense to the poster or anyone else, but this is "benefit" for real?
So you guys are saying an Ontario Govt. public sector worker gets to take a 75% paid 1 year sabbatical every 10 years?
During the full duration of employment years, such a person can get 4 years off with 75% pay!
Hmm...I wonder why we have a deficit budget and our taxes are so high.
 

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No offense to the poster or anyone else, but this is "benefit" for real?
So you guys are saying an Ontario Govt. public sector worker gets to take a 75% paid 1 year sabbatical every 10 years?
During the full duration of employment years, such a person can get 4 years off with 75% pay!
Hmm...I wonder why we have a deficit budget and our taxes are so high.
I've heard of similar plans.

If you check the first post however, you'll note that they have to give up 25% of their pay for the 3 working years. So essentially they will get 3 years of regular pay spread out over 4 years.

The fact that this doesn't affect the pension is the real bonus.
 

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No offense to the poster or anyone else, but this is "benefit" for real?
So you guys are saying an Ontario Govt. public sector worker gets to take a 75% paid 1 year sabbatical every 10 years?
During the full duration of employment years, such a person can get 4 years off with 75% pay!
Hmm...I wonder why we have a deficit budget and our taxes are so high.
Lol true that man, it is kinda stupid (taxpayer wise) but I guess its great if you work for the government lol!
 

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I've heard of similar plans.

If you check the first post however, you'll note that they have to give up 25% of their pay for the 3 working years. So essentially they will get 3 years of regular pay spread out over 4 years.
So essentially, our provincial govt. is overstaffed by 25%.
 

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So essentially, our provincial govt. is overstaffed by 25%.
That would be true if everyone took it but they don't. My friend with the BC government took it once so that he and his spouse could travel around the world for ten months. Giving up 25% for 3 years is a major sacrifice because that top 25% funds many essentials.

Sure you have to be "dispensible" but in his case it was during a career transition. I suppose if it was only available once that would make it more tolerable. In his case, it prepared him for retirement like no amount of conselling could do.
 
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