FP Answers: What is a pension bridge and should I take it?

Make a decision with lifetime lifestyle and insurance in mind

Read More

Article content

By Julie Cazin and Alan Norman

advertising 2

Article content

Q.: I will retire year that is next age 59, but We have a definite benefit (DB) pension plan using my employer, therefore I have a number of choices in order to make before I start. What’s the pension bridge benefit from the DB plan? Should this option is chosen by me? You must also determine the percentage of pension survivor benefits that will be paid to your spouse Richard upon death. You have several options. Richard doesn’t have a pension from his employer, but he has about $250,000 in a Retirement that is registered savings (RRSP), in which he will reach 65 in four years, later than i actually do. About $400,000 per year. The other options ought I look closely at? Really don’t need to make an error. — Rinalda

An issue occurred while signing up.please try again

Article content

This ad has not loaded yet, however your article continues below.

Article contentFP Answer:

Dear Rinalda, i realize your confusion and concerns about the pension bridging and benefit that is survivor. These decisions will have a impact that is lasting your along with your husband’s lifestyle, taxes, and potential government benefits. A look that is quick the basics will help you decide which option is best for you.

All DB pension plans have a lifetime annuity that may or may not be indexed to inflation. Some plans also offer a bridge benefit, which is pension that is additional after retirement until age 65.

Other plans like yours allow bridging positive points to be blended into a life annuity. The total pension you receive by age 65 will be less, and after age 65 you will receive slightly more.

Advertising as a result 4

This ad hasn’t loaded yet, but your article continues below.

Article content

The Bridge Benefit is intended as an alternative to the Canada Pension Plan (CPP) until it is obtained upon normal retirement at age 65. However, this doesn’t mean if it makes sense to start CPP earlier. in your situation.

When deciding whether it should be built into a life annuity, think about your desired lifestyle and financial requirements after retirement whether you should receive a large bridging benefit before turning 65 or. Can you make use of your income that is steady or you more likely to spend it when you are young, healthy and capable?

Advertising 5

This ad hasn’t loaded yet, but your article continues below.

Article content(I be able to achieve the lifestyle I want from now until age 65 without making a large investment or starting my CPP early*)If I am thinking of incorporating a bridge benefit into my lifetime annuity, will? consider a more substantial bridge good thing about 65.

Insurance for bereaved family benefits. He need if you lose your husband, what kind of income will? Part will be transferred to your husband, but he shall struggle to divide the pension income and his awesome expenses may not be reduced.

Advertising 6

This ad hasn’t loaded yet, but your article continues below.

Article content

If you choose survivor benefits, your life annuity will be reduced. The higher the family that is surviving, the higher the pension reduction.

Your husband can sign off and agree not to ever receive survivor benefits. For most of us, it is best to keep survivor benefits. Cause of considering giving them up include if her husband’s life span is getting shorter, if they have enough money.