Commuting your Pension: An option worth exploring.

Time for a final commute before retiring?

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Pension PiggybankI think back to my university sociology classes where we studied demographic graphs until my eyes crossed, and how much more meaning those charts have 30 years later! “If I knew then what I know now”… I suppose that’s a common sentiment that many of us share.


The clients that were but a few years my senior when I first started my financial advisory practice are now facing in reality what we then discussed in concept: they are approaching retirement at Mach 3 and are staring down the barrel at the day when their income will no longer come from their “human capital”, but rather their “financial capital”. This is financial geek-speak for the fact that they will start living off of their savings instead of their employability.


Earlier this week, I published an article in that drilled down into a key decision that employees who are nearing eligibility for a Defined Benefit Pension may not even know they can make. The article goes a bit deeper into Defined Benefit Pensions, how they work and the implications of choosing the fixed retirement benefit over taking the commuted value of that same pension and investing it yourself.


Although it may seem counter-intuitive, the commuting option is most compelling in a low interest-rate environment, because the cheque that you’ll take with you into retirement will be significantly larger than otherwise would be the case. Your decision rests on the level of confidence you have in your ability – hopefully with the assistance of a qualified advisor – to manage that wealth effectively. Done well may give you the freedom to shape your retirement income to your lifestyle and activity level in a way that your company pension does not permit.


To learn more on this planning tactic, you can read my article entitled, “Approaching Retirement? Consider Commuting…”. Again, the counsel and insight offered by a qualified financial advisor can be invaluable toward helping you navigate your way to the right decision for your circumstances.


Perhaps you’ve got some personal experience with this retirement decision. I know other readers would love to hear from you!