Author Topic: Pension Handcuffs  (Read 2692 times)


  • Handlebar Stache
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Pension Handcuffs
« on: January 07, 2018, 06:46:09 AM »
I heard about "pension handcuffs" my whole career but never saw calculations to back up the notion.  I even had a friend who retired from a megacorp in his late 40s to avoid the pension handcuffs. He has been very busy consulting ever since so I'm not sure what he accomplished except freedom to choose his clients and projects. He has worked all over the world.

My situation is I have a company pension and also a government pension in the country I'm working in right now. Both are payable as lump sum after I retire.  They are accruing value equal to about 85% of my base salary annually and increasing.  Having "dialed in" this benefit, it is hard to walk away from it.

Those of you who have retired, how did you deal with breaking the pension handcuffs?


  • Handlebar Stache
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Re: Pension Handcuffs
« Reply #1 on: January 07, 2018, 12:41:01 PM »
Not retired yet, but I don't plan to retire before the pension. 

I'm 34 and can retire from teaching with full pension at 48...same with my wife, but she's 33, so one more year after I retire.  My wife and will likely be about 43 when we hit FI assuming 7% growth of the stache. 

So, we can either quit and be FI, or teach an extra 5 years and be FI 3 times over.  We get summers off already, so there'd still be lots of time to travel around for those last 5 years.  And by that point there won't be much point in maintaining a really high savings rate, so we'll probably open up our spending a bit travel, maybe get a boat?  We'll see. 


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Re: Pension Handcuffs
« Reply #2 on: January 07, 2018, 08:20:22 PM »
Sure.  My DH, who is noticeably older than me, had a pension with his former employer that he could collect full benefits on once he'd clocked in 30 years.  When he was between 20 & 30 years with that employer, I was looking for work and wanting to move elsewhere.  Other, similar employers where he could find work would offer 401Ks but not pensions; the difference in what he'd have needed to stash in a 401K (given his age/time to retirement/unpredictability of markets) versus the value of the pension at that point was really striking, moreso because the retirement benefits his employer provided also include health insurance.

Long story short, he stayed in that job and claimed the pension, with 100% survivorship benefits for me.  As a part of our retirement savings, it's pretty nice, though hardly lavish and certainly not enough for everything.  So, yes.  And yes, this did put serious constraints on my job search, though I in fact ended up with a good job, though not in my "dream" field, in our local area.

Lews Therin

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Re: Pension Handcuffs
« Reply #3 on: January 08, 2018, 06:39:16 AM »
I could have a pension worth 50% of my salary if I stayed in for 25 years 2% a year, but only if you hit 25 years); I'm breaking them since A) I don't use 50k a year now. and B) By the time I'd hit 25 years, I'd have more than 50% of my salary in investments payouts, so the income would just be excessive to my needs. I'm choosing working less over making more.


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Re: Pension Handcuffs
« Reply #4 on: January 08, 2018, 07:06:49 AM »
Great question and one that I'm currently assessing.

As a federal (CDN) gov't worker, the maximum pension I can achieve is 70% of my 5 highest paid consecutive years (usually last 5).  As Canadian Ben stated, you accrue 2% per year - thus 35 years of service is required for a full pension.  Thus, nobody will realistically FIRE with a full pension.  To simplify, there are basically 3 options:

- take a transfer value of the pension (must elect his option prior to 50).
- take retirement any time and defer pension to 60 or,
- after 50 take immediate pension but with a 2% penalty per year prior to 60.

I intend on taking the second option and have always treated the pension at 60 as the bond portion of our overall retirement portfolio.  Taking this option also means we lose out on Dental coverage and Health insurance coverage beyond our universal health care.  One can, at 60 when pension kicks in, get back on the extended health coverage.  Since we plan on retiring this year at 46 - we'll be 14 years without these coverages.  Time to start making lots of appointments!!