Author Topic: Canadian Teachers Retiring Early  (Read 1096 times)

whitethunder

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Canadian Teachers Retiring Early
« on: January 08, 2018, 04:54:49 PM »
Hello! Are there any Canadian teachers out there who have made plans to retire early?

What are your thoughts on "missing out" on pension benefits if you leave the profession before the eligible age? Is there a way to contribute less to your province's pension plan and simply put more into your RRSP?


RichMoose

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Re: Canadian Teachers Retiring Early
« Reply #1 on: January 09, 2018, 11:05:03 AM »
My wife is a teacher in Alberta and I also work a government job. We are anticipating retirement by age 40. Maybe earlier so we won't be getting a pension or any retirement benefits.

Unfortunately you can't opt out of your pension plan, not even partially. However, you can treat it like the bond portion of your portfolio. When you retire early with a DB pension, you have the option of deferring your benefit at an estimated reduced monthly payment starting at age 60 (most common age), or taking the money out.

If you take the money out, you will need to put part of it into a LIRA or Locked-in RRSP which can't be touched in most circumstances before age 55 or 60 depending on your provincial rules. The remainder of the commuted value of your pension is a taxable payment, but it can be used to fill your RRSPs to reduce tax. For this reason it's a good idea not to fill your RRSPs while you are working if you anticipate early retirement with a big pension payout.

I'm really not worried at all about missing out on benefits or a secure pension for a few reasons. First, we are not lazy people by nature so I believe we will be working in some form for the rest of our lives with some financial benefit (part-time, sub teaching, short-term contracts, etc.)
Second, we will have a relatively large portfolio. I'm aiming for at least 25x current annual spending. Between portfolio withdrawals and random income, we should be financially capable of handling the costs that retired teacher pension and benefits would normally cover.
Third, we are both fit and healthy. I don't anticipate chronic, expensive health problems like diabetes, mobility issues, weight related issues, or other things that require expensive medications/treatments taken daily forever. Acute health problems are normally covered until provincial healthcare benefits. Once we are seniors, we can get further assistance as well under those applicable plans. Tax planning should result in a low income for each partner on paper.
Fourth, we are very open to travel. If we get hit by a bad stock market crash or something else that shocks our finances, we can take advantage of geographic arbitrage. Living costs can be cut up to half living in Mexico, Ecuador, Peru, Thailand, eastern Europe, Portugal, etc. Many of these places also offer cheap, high quality health/dental services. I have European citizenship so that helps broaden options.
Lastly, retired teacher benefits are good at reducing high impact costs, but they are not free in most provinces. Premiums for their health plans are not cheap as the employer doesn't pay a share. A health/dental plan for a couple with travel benefits can easily run hundreds of dollars a month with a 20-25% co-pay.