By Ermos Erotocritou, CFP, CPCA
Special to the Financial Independence Hub
You’ve undoubtedly thought a lot about the shape of your retirement but whether your plans include traveling, volunteering, starting a new career, or a myriad of other retirement dreams, the most important thing is having sufficient finances to ensure all of them become reality. If you are a member of an employer-provided pension plan, now is the time to make some important decisions that will have a strong impact on the amount and length of your pension.
Decide when your pension payments will begin
If you have a defined benefit pension (DB) plan, your annual benefit may be reduced if you retire before reaching a certain age or before completing a minimum service requirement. However, your plan may have a bridging benefit to offset an early retirement pension reduction that is paid from the date of early retirement up to age 65 when it will stop.
Decide whether or not your pension benefit transfers to your spouse when you die
You can usually: Elect to receive a life-only pension that ends when you die. It will deliver a higher monthly benefit to you than a joint and last survivorship pension but will not provide a continuing benefit for your spouse after you die. The plan member’s spouse will need to sign a waiver to take this option.
Select the joint and last survivorship option. While your monthly benefit will be lower, the “joint and last survivor” option is usually better unless your spouse has his or her own pension, Registered Retirement Savings Plan, non-registered assets and/or adequate insurance coverage. Factor in the expected life expectancy for you and your spouse.
Choosing the survivor benefit
Not all plans allow you to do this: check the details of your plan. In most jurisdictions, the “standard” survivor benefit is 60% of the pension that was being paid to you prior to death; however, some plans will include other options such as 66 2/3%, 75% and 100% survivor benefits. If your goal is to leave an estate to your beneficiaries, commuting your pension could make sense.
Do you have the option of receiving your pension benefit for a guaranteed minimum number of payments? Continue Reading…








