Author Topic: FIRE with Dual-DBs - Canada  (Read 1450 times)

Bytowner

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FIRE with Dual-DBs - Canada
« on: March 04, 2023, 10:01:18 AM »
I've been lazily pursuing FIRE for a couple decades now, but, as I think I'm about a decade out, I want to start crunching the numbers a bit more seriously. Interested in your thoughts on our situation.

Life Situation:
40M ($120k gross) & 40F ($115k gross) - about $160k net last year
Canadian Public sector; MCOL area
$600,000 (conservative) house with $165k mortgage outstanding, 9 year amortization
3 kids under 10
Comfortable lifestyle, full slate of activities for kids, 2 nice vacations a year

Current expenses:
$118k (including mortgage and daycare, excluding savings)
$40k (savings, $30k to RRSP/TFSA)
$77k (excluding mortgage/daycare/savings)

Assets:
$245k TFSA (combined) (tax free)
$150k RRSP (me) (tax deferred)
$60k RRSP (her) (tax deferred)
$25k stocks (non-tax advantaged)
$16k savings
$100k family RESP

Liabilities:
Just the mortgage

Pensions:
If I were to retire at 50, and defer to 65 I would receive $37k/yr; if I took an immediate benefit: $22k/yr dropping to $15k at 65 (bridge benefit).
If she were to retire at 55 (no penalty), would immediately receive $75k/yr. If she retired at 50, $60k/yr deferred, or $33k immediate.

Plan:
I'm thinking of the mortgage payoff in 10ish years as my trigger date. I would retire at 50 with just over $1 million, deferring my pension to 65. She would keep working until 55 for that unreduced pension. To my mind, that gives us plenty to live off for those 10 years before my pension kicks in at 65. Assuming a spend of $80k/yr. This seems like a comfortable, low risk early'ish retirement plan.

Questions:
Interested in your thoughts, and a few questions:
1) Given her early pension, does it make sense to use what little RRSP room she has or should we stick that money somewhere else (e.g. mortgage)?
2) Am I being too conservative? Should she pull chute at 50 too?
3) Anyone know of a FIRE calc that handles couples with pensions particularly well?

Fru-Gal

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Re: FIRE with Dual-DBs - Canada
« Reply #1 on: March 04, 2023, 10:17:44 AM »
This is not mathematical and am in USA but I consider a pension, let alone TWO pensions, a ticket to FIRE. That $#% pays for LIFE. You got it made in the shade. Working till 55 ain’t bad but she can also quit at 50. The mortgage early pay off only makes sense if the interest rate is high (at inflation rate or higher than what investment earnings could be). Tax-deferred savings are always better unless you’re going to be extremely wealthy in retirement, which at $1 million you won’t be.

I’m 52, quit at 51 with the proverbial milly (now down significantly due to market). No pensions for either spouse or me but still consider ourselves good to go with Social Security. He is planning to work till 62 and then take early Social Security; he doesn’t make a big salary but likes his chill job and is proven (through recessionary unemployment in the past) to need the structure.

deborah

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Re: FIRE with Dual-DBs - Canada
« Reply #2 on: March 04, 2023, 11:48:30 AM »
What happens if you both retired at the same age? It puts a bit of a strain on the relationship if one is working and the other isn’t, particularly for as long as five years. If you did retire five years ahead, would you take over all the housework etc. until she retired? Divorce can undo FIRE all too easily.

Bytowner

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Re: FIRE with Dual-DBs - Canada
« Reply #3 on: March 04, 2023, 12:11:47 PM »
What happens if you both retired at the same age? It puts a bit of a strain on the relationship if one is working and the other isn’t, particularly for as long as five years. If you did retire five years ahead, would you take over all the housework etc. until she retired? Divorce can undo FIRE all too easily.

You're absolutely right and that's certainly a major (the major?) consideration. We'll have to see where we are in 10 years. A couple reason I'm considering going first (behind her better pension): she likes her work more than I do mine, and a good chunk of the stress associated with work right now is actually commuting/dinner/kids activities. So I suspect having one at home will significantly improve the work life balance if the other. But yes, I can see pushing for doing both of us at 50, just a question of how much that is worth.

Bytowner

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Re: FIRE with Dual-DBs - Canada
« Reply #4 on: March 04, 2023, 12:16:09 PM »
This is not mathematical and am in USA but I consider a pension, let alone TWO pensions, a ticket to FIRE. That $#% pays for LIFE. You got it made in the shade. Working till 55 ain’t bad but she can also quit at 50. The mortgage early pay off only makes sense if the interest rate is high (at inflation rate or higher than what investment earnings could be). Tax-deferred savings are always better unless you’re going to be extremely wealthy in retirement, which at $1 million you won’t be.

I’m 52, quit at 51 with the proverbial milly (now down significantly due to market). No pensions for either spouse or me but still consider ourselves good to go with Social Security. He is planning to work till 62 and then take early Social Security; he doesn’t make a big salary but likes his chill job and is proven (through recessionary unemployment in the past) to need the structure.

Thanks! Yeah, her ability to get an unreduced benefit at 55 is pretty incredible. Certainly helps with peace of mind as well.

c-kat

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Re: FIRE with Dual-DBs - Canada
« Reply #5 on: March 05, 2023, 01:20:38 PM »
I work for the public service too and will have a DB pension at 55.  There are a few things your wife could do to go a bit earlier or reduce hours and still get the full pension.

1. You can both take up to 5 years LWOP during your career and still buy back the pensionable years. If your wife hasn't used any of this leave yet, she could go at 50 take 5 years LWOP, buy it back, and then get the full pension at 55.  Or you could do this 2 or 3 years before retirement and you could cover the gap with investments.

2. She could take retirement transition lave at 53 which means she can work 3 days a week from 53 to 55 but still contribute to her full time pension and get the full pension. This can be used only if you are eligible to retire in 2 years and you must retire at the end of the 2 years.

You could also both take the leave as mini sabbaticals throughout your career and build more pensionable time.

Are you with pension group 2? is that why you can't get your pension earlier than 65 without penalty? If you are in group 1 you can take it at 60. Don't forget that if you do defer it will go up with inflation every year until you do draw the pension.
« Last Edit: March 05, 2023, 02:17:08 PM by c-kat »

Bytowner

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Re: FIRE with Dual-DBs - Canada
« Reply #6 on: March 13, 2023, 03:08:48 PM »
I work for the public service too and will have a DB pension at 55.  There are a few things your wife could do to go a bit earlier or reduce hours and still get the full pension.

1. You can both take up to 5 years LWOP during your career and still buy back the pensionable years. If your wife hasn't used any of this leave yet, she could go at 50 take 5 years LWOP, buy it back, and then get the full pension at 55.  Or you could do this 2 or 3 years before retirement and you could cover the gap with investments.

2. She could take retirement transition lave at 53 which means she can work 3 days a week from 53 to 55 but still contribute to her full time pension and get the full pension. This can be used only if you are eligible to retire in 2 years and you must retire at the end of the 2 years.

You could also both take the leave as mini sabbaticals throughout your career and build more pensionable time.

Are you with pension group 2? is that why you can't get your pension earlier than 65 without penalty? If you are in group 1 you can take it at 60. Don't forget that if you do defer it will go up with inflation every year until you do draw the pension.

Sorry, delayed response, this is great advice. I was vaguely familiar with those various opportunities but hasn't really zodiac how they might apply to our situation. That's right, I'm group 2, she's group 1.

c-kat

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Re: FIRE with Dual-DBs - Canada
« Reply #7 on: March 13, 2023, 03:49:18 PM »
I work for the public service too and will have a DB pension at 55.  There are a few things your wife could do to go a bit earlier or reduce hours and still get the full pension.

1. You can both take up to 5 years LWOP during your career and still buy back the pensionable years. If your wife hasn't used any of this leave yet, she could go at 50 take 5 years LWOP, buy it back, and then get the full pension at 55.  Or you could do this 2 or 3 years before retirement and you could cover the gap with investments.

2. She could take retirement transition lave at 53 which means she can work 3 days a week from 53 to 55 but still contribute to her full time pension and get the full pension. This can be used only if you are eligible to retire in 2 years and you must retire at the end of the 2 years.

You could also both take the leave as mini sabbaticals throughout your career and build more pensionable time.

Are you with pension group 2? is that why you can't get your pension earlier than 65 without penalty? If you are in group 1 you can take it at 60. Don't forget that if you do defer it will go up with inflation every year until you do draw the pension.

Sorry, delayed response, this is great advice. I was vaguely familiar with those various opportunities but hasn't really zodiac how they might apply to our situation. That's right, I'm group 2, she's group 1.

If you take the LWOP for one year or less at a time your job is held for you. If you go for more than a year at a time, a job is held for you but not your current position which can be backfilled. You basically go on the priority list. Of course if you take it at the end of your career and retire right after it isn't an issue.

Also, the first 3 months of each leave you only have to pay your potion of the pension to buy it back. Anything in excess of the 3 months you pay both the employer and employee portion.