Personal Finance

Delaying Defined Benefit Pension

  • Last Updated:
  • Jan 15th, 2019 9:03 am
[OP]
Deal Fanatic
Dec 11, 2008
9024 posts
934 upvotes

Delaying Defined Benefit Pension

This may sound silly but can you defer the retirement and not collect?

Example: you work at the bank and their normal retirement age is 65 without reduction.

You want to work until 55 only. Is there a way to not work from 55 to 65 and then collect the defined benefit pension at 65 unreduced?
9 replies
Member
Jul 8, 2013
370 posts
111 upvotes
Edmonton
Subscribed. Interested in this question as well.
Member
User avatar
Jan 15, 2017
487 posts
209 upvotes
Generally, yes, in fact if the early retirement age is 60 then you'd have no other choice if you leave at 55. I think you can defer to any point between early and normal retirement age.
Deal Addict
User avatar
Dec 14, 2007
2935 posts
1366 upvotes
The question is... why would you want to? You'd be giving up 10 years of income... which can be invested while you're not earning anything ( lowest tax bracket ).

What kind of reduction are we talking?

Remember that when you hit 65, you'll be collecting OAS and perhaps GIS... Anytime before 65 that you're not working, you should be aggressively withdrawing from taxable income stores like the RRSP.
I'd love to write history... in advance.
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Deal Fanatic
Feb 15, 2006
7595 posts
2008 upvotes
Toronto
OP, find out if the company has some type of early retirement and what the conditions are.

Of course you can quit before 65, and wait till 65 to begin getting the pension. But you'll need to calculate what you get and what you have to live on.
atomiton wrote:
Jan 14th, 2019 6:15 pm
Remember that when you hit 65, you'll be collecting OAS and perhaps GIS... Anytime before 65 that you're not working, you should be aggressively withdrawing from taxable income stores like the RRSP.
Can start getting CPP at 60, at reduced rate.

But the downside of aggressively withdrawing from RRSP is the funds withdrawn are not earning taxfree any more. So whether that's good to do really depends on each individual's situation and holdings.
Deal Addict
Mar 11, 2016
1501 posts
421 upvotes
You may have to resign rather than retire. This may impact any other retirement benefits...check with your HR dept.
Deal Addict
User avatar
Dec 14, 2007
2935 posts
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Arrgh wrote:
Jan 14th, 2019 7:37 pm
OP, find out if the company has some type of early retirement and what the conditions are.

Of course you can quit before 65, and wait till 65 to begin getting the pension. But you'll need to calculate what you get and what you have to live on.



Can start getting CPP at 60, at reduced rate.

But the downside of aggressively withdrawing from RRSP is the funds withdrawn are not earning taxfree any more. So whether that's good to do really depends on each individual's situation and holdings.
Yes... it's not earning tax-free that's true... but if you have room in your TFSA... In addition, withdrawing and then putting it into tax-favorable dividend-generators while keeping the RRSP for highly-taxes bonds and whatnot can help with that. Either way, withdrawing early is usually the right choice... even at a reduced rate.

As for CPP take it at 60... allowing it to grow. YOu wouldn't break even otherwise until your mid-70s if you waited.
I'd love to write history... in advance.
AMEX Biz Plat 75K AGAIN! | Plat 60K | Biz Gold 40K | Gold 25K | SPG 20K
Deal Fanatic
Nov 24, 2013
5210 posts
1809 upvotes
Kingston, ON
This is going to entirely depend on the terms of the actual pension plan. I know the federal public service pension has the distinction between a “deferred annuity” vs retiring with an “immediate annuity,” and rules on who can opt for what. There’s also different ages for unreduced pension depending on when you joined the pension plan (& different contribution rates).
[OP]
Deal Fanatic
Dec 11, 2008
9024 posts
934 upvotes
Thanks for the responses.

This is just to see if there are other options in case it works out. Obviously the numbers have to make sense.

In this case for example, my husband's pension would go from say $35k to $55k just by delaying pension for 9 years. But of course that is $35k income at marginal tax lost.

He will have a decent RRSP as well that will be drawn down at some point. Plus, he has no benefits or health/dental.

As for me, I have a much higher pension (unreduced) by 56 at say $90k and with pension splitting etc and get to keep/maintain my health/dental as well, just seeing if the numbers may make sense etc.
Member
Sep 2, 2009
209 posts
88 upvotes
Ottawa
atomiton wrote:
Jan 14th, 2019 6:15 pm
Anytime before 65 that you're not working, you should be aggressively withdrawing from taxable income stores like the RRSP.
I think this is one of the exact reasons why you would reasonably delay taking a pension; You get the chance to drain an RRSP while also reducing the penalty on the pension amount.

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