Why Plan for Retirement?

The key to a successful retirement is planning. More than ever before, people need to be strategic in their thinking and planning. We need to be aware of national and international trends that might affect our retirement such as low interest rates, reduced health care benefits or changes to government policy. The need to learn as much about issues surrounding retirement has never been more important. Some methods of learning and becoming aware the issues are: attending seminars; reading books; searching on the internet; listening to informed television or radio programs; and talking to people.

Due to changes, and unforeseen circumstances, our planning may shift over time but being flexible allows us to take full advantage of opportunities and to respond to unexpected changes. We have a choice; we can either be the driver or the passenger on our retirement journey. And while it's never too early to plan for retirement, it's also never too late.

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Timing Your Retirement

Now that the Ontario government has abolished mandatory retirement, timing takes on an increased importance. The decision of when to retire is in your control. This is an excellent change, as research shows that people adapt better to retirement when they are in charge of their retirement date.

For those of you who are procrastinators or are having too much fun in your work, you may find yourself drifting along never really thinking about retirement. For others, you may have had a retirement date in mind for a long time and have been working steadily toward it.

Your retirement date may be influenced by a variety of factors - finances, job satisfaction, health issues (yours or others), your attitude, family obligations, employment policies, what else you want to do in your life (that may include part-time work), and if part of a couple, your partner's retirement date.
 
Literature shows that people are using self-employment or short-term part-time employment as a way to bridge or make the transition from work to retirement. Possible reasons are: to earn a needed extra income; to maintain a sense of self or self-worth by continuing in working and contribute; late start to a career; and/or for the social contact.

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Timing For Couples (Who Retires First and Other Relational Thoughts)

One of the great questions around timing of retirement is ""Who retires first?" There seems to be some debate over whether it is better for spouses to retire at the same or different times. Husbands and wives who retire first and are home alone might have expectations of the working partner. Talk to your spouse prior to retirement about expectations, and of course, when issues arise after retirement. Here are a couple of scenarios to think about.

A York retiree who retired before his wife has taken on more of the household responsibilities like cleaning and grocery shopping (his wife is still the better cook so she prepares most of the meals). This means that there is more time for leisure together (they have a standing once-a-week dinner date), and he provides a sounding-board when his wife wants to discuss work-related issues.

In comparison, a woman who started her professional career later in life is experiencing great difficulty because her retired husband expects her to go traveling with him at the proverbial drop-of-the-hat. Also, he wants her evenings to be free so she can spend them with him. He resents the time she spends working on projects well into the wee hours of the morning.

For couples, retirement is a time when you'll be spending 24-7 under one roof. It's a situation you've probably never experienced in your married life, except perhaps if you're faculty and have taken sabbaticals together. When married colleagues were asked what the greatest difficulty was in retirement, the gentleman said working together in the kitchen. Initially, he and his wife kept bumping into each other!

It's not unusual for spouses to view all that togetherness with some fear. A husband or wife, who has the run of the house and responsibility for planning their own time, may feel apprehensive when their spouse finally retires. How will it impact on their existing daily schedule? What will the expectations now be of them as a couple? Know that even the best of marriages will undergo a period of adjustment when both people are home together.

Knowing that, it is wise to ensure you have space of your own. Do your own thing, have your own office, have something new to talk about when you do get together. When couples retire together there is the opportunity for joint leisure activities and decision making, more division of household chores, and you are more apt to be part of a social community.

Timing for Singles (and Other Relational Thoughts)

Most singles, unless independently wealthy, (don’t we wish!) will probably be concerned with finances … after all there is only one income, not two; and with how to manage time. My advice is to plan your retirement date working backwards from what you want to do in retirement and estimating how much that will cost. This will give you a much better idea of how much you need to fund retirement.

One York retiree, who wanted to retire early, said she was a bit worried about her finances but had alternate plans ready to put into action such as: getting another job, starting her own business, renting out a room, selling her condo and renting something less expensive, giving up her car, etc. As it turns out, her lifestyle is simple and she doesn’t have to do any of those things.  

Some singles are more vulnerable to loneliness. See if you can gather a social network of family, friends, neighbours and people you meet in activities. You’ll want to make sure you can count on friends for travelling, to help out in time of need and to share the joys and concerns of life. 

I’ve spoken to several single folk recently. One York retiree lives in a condo where there are lots of single women her own age. She says they’re a tight knit group who go to movies together, have weekly bridge parties and, support each other in a number of ways.

You may have friends who are just waiting for you to join them in retirement. Or you may be the trail blazer! Newly-retired singles sometimes forget that their friends who are still working are not always free, or are too tired, to get together.

 As a single person another retiree said that she had always been involved in a variety of activities – taking courses, seeing friends, enjoying theatre and symphony, pursuing crafts, etc. To her, retirement was great since it involved much more time to do these things. She never feared retirement – on the contrary, she was delighted!

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Timing for Widowed and Divorced

All the advice in the Singles section applies to you too…essentially to establish your support system. Your family, particularly your children and grandchildren, will play a major role in retirement life. You may find that they are more protective of you at this time. They may have expectations of you minding the grandkids more often. And you may have quite different plans – to take courses, go traveling, etc. So it might be helpful to talk with them about your retirement plans and their part too. It’s a new phase of your life and your time to explore.

Once You’ve Set Your Retirement Date

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Retirement Party - Yes or No?

Back to the comment above, many people mark their retirement from York with a party. It can be a small gathering of colleagues at lunch or a larger pan-university event. It’s gratifying for you and your family to hear others speak about how you have provided value to York. Even if you don’t think you have, I bet you have. A retirement party gives you a chance to talk about events that happened during your career at York and to thank special colleagues and mentors.

Some people who say they don’t want a party and are taken at their word may lament their decision later … at the very least, they like to be asked. Most people are glad they had a celebration either before or after retirement. We all like a good party so it won’t really matter to your colleagues when it is. Make it easy on yourself. And have fun.

Life After York

In retirement we change from a life where others schedule our time to one where we create our own schedule.  How we make use of the extra 1700 or so hours a year; who we decide will be part of our retirement life; how we keep in touch with our colleagues at York; how we will adjust to a spending mode instead of a saving mode; and where we will live; are important considerations that need to be thought about well in advance of our retirement.  Decisions like these need to be talked about with your partner, family or friends.

In her book, Planning Your Retirement, Blossom Wigdor said, “Change is perhaps the most important aspect of retirement and adapting to change, one of the greatest challenges."  How we have adapted to situations in the past provides a key to how we will adapt in the future.  Don’t be surprised if you find yourself at loose ends for the first few months.  Many retirees find it takes some time to establish a new rhythm or routine.

I really like the way Nancy Accinelli, a 2003 York retiree, describes her experience in Advice From York Retirees (2005)
“Having a focus for you life and time is important. Focus on something, not necessarily a schedule (Bleh, schedules), but some mental focal points to move you and your time forward. It could be language study, a new healthy regime (find a walk-partner), volunteer in an area close to your interest and concerns, a project (read all the books of one author), start a garden or even some part-time work. And allow yourself to enjoy not only that activity, but also the rest of life around it; sometimes we need to give ourselves permission to enjoy IN-activity. I like the possibility of doing these things on impulse. Take pleasure in the openness of time. The days may be full but there is added freedom to our days, added long moments of time when we are not pushing ourselves to accomplish the same task as when working.” 

Finding a Daily Pattern

When our day is structured from the moment we crawl out of bed to the time we crawl back in, it can be a daunting challenge to change our pattern.

Today, in my e-mail, I found a “joke” from a colleague. It outlined a retirees’ day and how they start one thing and it leads to another. We all do it. We decide to water the garden and look at the car and see that it needs washing, and then as we start toward the car we see that there are weeds in the planter and stop to do that, etc., etc. In a recent qualitative study this method is actually identified as a viable retirement pattern, some people call it “puttering” or “putzing” or “tinkering”. It is a perfectly viable way to construct your day – a little of this and a little of that. Many people who do this feel the day goes by fast although they may feel that they, in fact, did little.

Others might make lists of things they want to accomplish and set about with much vigor. The only caution is that you might be setting yourself up for failure by planning too much. Does it really matter if you do one or twenty things in a day?
   
Still others like to have the day unfold with the anticipation of a blank slate fresh with possibilities. There are no real plans and no expectations … just a wait-and-see kind of attitude. 

For many retirees this is how their day might go; read the newspaper (thoroughly), linger over coffee, clear the dishes, have lunch, do some errands, do research, take part in an activity, meet friends, make supper, watch some TV, go for a walk, talk on the phone to friends and go to bed. Luckily, there is no right or wrong answers. Just be aware that it may take some time to get in the swing of things.

Healthy Aging

We all want to be healthy so we can enjoy our life to the fullest. And when you come right down to it - you need your health to hike the Bruce Trail, to take the grandkids to soccer, or to take the subway to a movie. What good is retiring if we don’t have the health to enjoy it!

The World Health Organization describes health as a state of “physical, mental and social well being”. Indeed, successful aging involves staying independent so you can live with little or no help from others; being able to make your own decisions and live the life you want each and every day; being resilient and adaptable to change (its going to happen whether you like it or not); being actively engaged in life; having a high level of mental and physical ability; and maintaining a low risk for disease related disorders.

For the most part, we know how to stay healthy and what the risks are if we don’t.  The Public Health Agency of Canada says that each year in Canada, more than three-quarters of deaths result from four groups of non-communicable diseases: cardiovascular, cancer, diabetes, and respiratory (June 2006 Health Canada web-site). We already know that smoking, lack of physical activity and inadequate diet will put people at greater risk of developing non-contagious diseases (WHO).

When I talk to people about their plans for staying healthy in retirement usually I hear something like this: “When I retire I’m going to exercise more … substitute  … walk, play tennis, join a fitness club, golf, go swimming, cook more healthy foods, join a book club….on and on.

And some do just that but others don’t. Often there is a readiness for making the commitment to being healthy, a turning point if you like, when you finally take charge - whether it’s physical, mental or spiritual health. Your impetus might be a pain in the shoulder, or back, or feet, arthritis in the joints, the illness of a colleague or relative, or perhaps the serendipitous invitation of a friend asking you to join them at YURA’s fitness class. 

Here’s a true story. A doctor recently told a friend’s husband that he absolutely had to lose weight. What happened was that my friend set up a Weight Watchers program at her work, (by the way, York already has Weight Watchers), increased her veggies, lowered her fats and cut out the two glasses of wine at dinner, started using the stationary bicycle, formerly a clothing post, and, so far, has lost 30 pounds. Meanwhile, the husband watched and went on eating. It was funny, he was the one supposed to lose weight and his wife was the one who initially went on the diet. About 6 months later, he noticed how great his wife looked and how much more energy she had and decided to follow her lead. Now both of them are getting healthier and are happy with the results. They look absolutely wonderful. And they are setting an exemplary model for their two kids.
 
My advice is to turn the good intentions into practice, not when you retire but right now. No excuses, no negatives, no “but’s”.

For a start take a walk, (this site will still be here when you return) eat a banana, laugh, call a friend, hum, investigate a lecture or book, dance (yes, by yourself if need be- who cares?!)

Your Home Base

As you approach retirement, you’ll be thinking about whether to move or to stay where you are.   There are a myriad of possibilities – snowbirding (wintering in the sunny south); spending more time or full-time at your cottage; moving to another country (possibly your country of origin or your spouse’s) or province; or downsizing from a house to a condominium, or staying just where you are. 

Take your time in making your decision. Listen to your friends and kids but ultimately make your own choice. Weigh the pros and cons. Trust your feelings. For most of us after we do all the analysis, the decision comes down to the question “Does this feel right for me at this time?” Only you can know the answer. But remember no decision is cast in stone; you can always change your mind. What you are looking for is a place to call “home”.

If you are thinking about moving, try it out for a while, particularly in the off-season.  If you don’t like unwanted surprises, the most important piece of advice is to play it safe.  Rent in the new community but keep your options open for moving back into your old house if the new place doesn’t live up to your expectations.  The short-term cost of renting out your primary residence, or even leaving it un-rented for six months or a year, might pay off in the end. 

Another tip is to subscribe to the local newspaper. You’d be surprised how much you can learn about the values in that community, the costs of housing and food, diversity of cultural and sports events, concerns and current issues. Also see if there are medical facilities in the area and doctors accepting new patients. Many York retirees still keep their doctors and dentists in the city and tag on visits to colleagues at York or take in a theatre production or Blue Jays game.

If you are moving to another country or even province, check the medical situation. It may not be like ours in Ontario.  And make sure to check out the implications of York’s post-retirement health benefits.

If you are moving, you will have the humongous task of clearing out all the stuff accumulated over the years (even if you’re not moving, one of the first things most retirees do is clean out cupboards, offices, gardens etc. Personally, I think it’s part of clearing away for a new life to begin).  You might consider hiring a personal organizer or asking a friend (someone with limited attachments to “your stuff”) to help.  A York retiree told me that when she and her husband moved from the house where they had raised their five children to a small flat, people said to her, “Weren’t you sad. How did you do it?” She replied with nary a pause, “I still have my memories. I’ve taken them with me.”

PART 2: FINANCIAL PLANNING FOR RETIREMENT

PERSONAL FINANCES

Now that you have an idea of your retirement lifestyle it’s time to look at the amount of money you’ll need to finance it. The following section outlines the basics for determining when you’ll retire, sources of retirement income, issues around taxation, estate planning and investments.

When And Where To Start

 Ideally you should start saving for retirement as soon as you receive your first York pay cheque. That’s not to suggest that if you haven’t started, all is lost. It simply means that the earlier you begin, the better the chances of you reaching your goal. If you haven’t started, starting now is a good time.  

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How Much Money Will You Need?

Start by creating a current budget and come to grips with the simple fact that you need to “live for today” and “save for tomorrow”. It’s never an easy task, but, it needs to be done.

 Most people in retirement want to either continue, or better their standard of living. They want to live in the same house, eat the same meals and be able to afford doing the same things. Your standard of living is defined by how much you earn and what you spend. In other words your budget!        

 If you have not completed a budget recently you may want to do one as a first step in your plan for retirement. There are many sources where you can find itemized budgets and all you have to do is dig up your personal information as to what your costs are.  A good place to start could be your bank, credit union or other financial institution. Your monthly bank statements will give you a good idea of where you spend money and how much net income you earn.  The following website may be helpful to you

http://www.brocku.ca/gradstudies/financial/Personal_Budget_Worksheet.xlsg

Then create a retirement budget. Look at the budget that you have just created that defines your current standard of living. Now consider yourself being retired today. Do the same budget but eliminate those expenses that you will not have, like mortgage payments, RRSP contributions, or children’s educational savings, and add those expenses that you will likely incur in retirement such as travel, hobbies and possibly health related expenses. Work in today’s dollars and consider all expenses as being after tax.

Compare the difference between your current expenses and projected retirement expenses. Will you need more to live on or less in retirement?

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Create A Net Worth Statement

A net worth statement identifies the value of what you own and what you owe at any one time. If completed annually as part of a financial and retirement plan, it provides you with an excellent barometer to gauge your progress in reaching your retirement goal. A net worth statement provides you with the information that you need to make investment decisions, determine your savings, and identify those assets that are intended for retirement like RRSP’s, and separate those that will not be required in retirement like “second” cars.  The Mackenzie Financial Corporation has an online tool that will help you create your net worth. Look for Investment Calculators under the heading Planning Tools: http://www.mackenziefinancial.com.

It is important to differentiate assets that are savings and investment from those that are personal use. Savings and investment assets, if handled properly, are the ones that will provide you with an income in your retirement.

Many people fall short of their retirement objectives – not because they have inadequate income, but because they fail to manage their financial resources along the way to retirement. The net worth statement and the budget are tools that can help you better manage your resources.

One more point in regards to Net Worth Statements, every time that your circumstances change significantly: a child graduating from university and leaving home, a property being sold or bought, the receipt of an inheritance, or a prolonged major illness in the family, it is advised to review your net worth statement and make the appropriate adjustments.

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How Much Do You Need To Save Each Year?

Once you have determined the annual cost for your retirement, the next step is to determine the capital that will be required to fund your retirement, and the amount that you need to save each year in order to reach the capital amount needed. This step is best done with the help of a financial planner. A qualified financial planner will take the information from the net worth statement and your budget, together with your pension statements, your CPP statements, your bank accounts, RRSP accounts. You and your advisor will make certain assumptions about inflation, your tax liability, interest rates, rates of return on investments, the number of years you have to save until retirement, as well as the number of years you intend to be retired. There may be other assumptions that your financial planner may take into consideration.

There are many web-based calculators to help you in your retirement planning. The government of Canada has neat calculator, Canadian Retirement Income Calculator:
https://srv260.hrdc-drhc.gc.ca/English-App/INT_02.asp
It estimates your OAS, CPP at any time between 60 and 65. It allows you to input your York pension and RRSP information. You are then given an estimated annual retirement income statement (before income tax).
    
As well, there are a series of calculators on the following website that may help you with a number of calculations, however, please remember that all these calculators are based on your assumptions. It is best to consult a qualified financial planner to ensure that your retirement plan is the right plan for you. 
http://www.moneychimp.com/calculator/compound_interest_calculator.htm

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Where Will Your Retirement Income Come From?

For most people, income in retirement will usually come from the following three sources: personal savings and investments; employer’s pension; and government.  It is unlikely that the employer’s pension and the government pensions will be enough to pay for many people’s selected standard of living. Therefore, your own savings and investments will determine the difference in the standard of living that you enjoy in retirement.

Personal Savings and Investments

Once you have determined the amount of annual savings required to meet your goals, its now time to design an investment plan. Your savings can grow as registered savings (RRSPs) or non registered savings, outside RRSPs. It is best to contribute your maximum annual RRSP limit to into your RRSP account first, and the remainder into investments outside the RRSP.

TSFA - What is it?

Starting in 2009, Canadian residents who are 18 years of age or older will be able to earn tax-free investment income within a Tax-Free Savings Account (TFSA) during their lifetime.
Contributions to a TFSA are not deductible for income tax purposes. Also, interest on money borrowed to invest in a TFSA is not tax deductible. However, the income generated in such an account (for example, investment income and capital gains) is tax-free, even when it is withdrawn. The TFSA dollar limit is $5,000 in 2009, and will be indexed to inflation and rounded to the nearest $500 in later years. Unused TFSA contribution room can be carried forward to later years. The total of TFSA withdrawals in a calendar year is added to the TFSA contribution room for the next calendar year.

RRSP – What is it?
     
The Registered Retirement Savings Plan (RRSP) is a savings plan available through financial institutions, and mutual fund companies for retirement savings. It provides for a tax deduction on your contributions and allows for an accumulation of capital on a tax deferred basis. RRSPs are time limited and must be deregistered by the end of the year in which you turn age 69 or by converting them to an annuity, or a Registered Retirement Income Fund (RRIF) - a vehicle for the conversion of RRSPs.

When you withdraw money from an RRSP you will be taxed (except in the case of home ownership programs) on the amount withdrawn at your marginal tax rate.

Want to know more? Most banks have good information on their websites.

RRIF - What is it?
A Registered Retirement Income Fund (RRIF) is a financial product funded only with RRSP deposits and designed to provide an income stream during retirement, while still continuing the deferral of taxes.  A RRIF can be started at any time, but in the calendar year that you turn 69 years of age, you must convert your RRSPs into RRIFs. 
Once you have opened a RRIF, there is a minimum amount that you are required to withdraw each year based on Canada Revenue Agency (CRA) regulations, however, you can elect to take more if you want or need to.  There is no maximum payment amount. Payments maybe received monthly, quarterly, semi-annually or annually, and are taxed.

How do I withdraw money from an RRSP?
Essentially there are three ways to withdraw money from a Registered Retirement Savings Plan (RRSP).

1. Cash. You may withdraw any amount you like from an RRSP at any time until the end of the year in which you turn age 69. Remember any amount that is withdrawn is subject to tax, at your marginal tax rate. A withholding tax will be charged by the financial institution at the time you make the withdrawal. It is best not to liquidate your RRSP all at once because of the very large tax liability you’d face. If you require additional money at retirement to supplement your cash flow needs then you may take out incremental amounts.
2. Annuity. Another option is to convert your RRSP to an annuity. The conversion from an RRSP to an annuity has no tax consequences; however, the income from the annuity is taxed. The income derived from an annuity depends on different factors such as amount of capital in the RRSP, age at time of purchase, gender, prevailing interest rates, survivor option, and guarantee elected. Since there are many different types of annuities it would be best to check with a financial planner as to which one is best for you. By purchasing an annuity you give up control of your capital in exchange for income.
3. RRIF. Registered Retirement Income Fund (RRIF) is a financial product designed to provide income in retirement. It can only be funded with RRSP deposits and is designed to provide a stream of income while still continuing the deferral of taxes.  A RRIF can be started at any time, but you must convert your RRSPs into RRIFs in the calendar year that you turn 69 years. Once you have opened a RRIF, you must withdraw a minimum amount each year based on Canada Revenue Agency (CRA). However you can elect to take more if you want. There is no maximum payment amount. Payments may be received monthly, quarterly, semi-annually or annually and are taxed at the recipient’s marginal tax rate. Unlike an annuity you continue to control the capital in the RRIF and therefore are responsible for the way the money is invested. Most banks and financial institutions’ websites have a RRIF withdrawal chart.

 What’s a LIF? And what’s a LRIF?
 A Life Income Fund (LIF) is a financial product designed to work with RRSPs that are “locked-in” or with Locked in Retirement Accounts (LIRA) to provide income. Locked-in funds often occur when people withdraw company pension funds, either prior to, or at retirement. Generally these plans work in a similar fashion to that of a RRIF with one exception and that is that they have a limit on the maximum withdrawal. In other words each year the owner of a locked- in account (LIF or LRIF) must take out more than the minimum, but cannot withdraw more than the maximum. These minimums and maximums are preset by government regulations. Of course any withdrawals are subject to tax. One exception worth noting is that LIFs must be converted to annuities by age 80.

Investing for Retirement
Whether you save for retirement through an RRSP, or outside an RRSP, or both, you will need to make investment decisions about your savings. The decisions you make will greatly depend on how far you are from retirement, what rate of return you need, how much risk you’re prepared to take, and what other sources of income you can expect.

Your rate of return on your investment will have to exceed inflation and the possible tax consequences that may be applied in the case of non-registered investments. In addition, it will have to reflect a certain growth factor based on your risk tolerance and how much capital you need to accumulate. To develop the proper investment strategy, speak to a professional to who will help you select the right balance between equities, bonds, and cash.

Some people start with their financial institution; however, do not feel limited to dealing solely with them. There are many good financial planners and investment mangers that provide excellent service, but be careful, do your homework and check references!

Your House as a Retirement Savings Strategy

Some people regard their home as a type of retirement savings. Their intention is to pay off the mortgage, sell the house, and release tied-up capital, tax free to subsidize their retirement income. Many people have, in fact, done this. Remember, however, that real estate markets fluctuate and their conditions when you retire may not produce the expected result.

Another product on the market that you’d really want to do your homework on before considering is called a Reverse Mortgage. It converts a retiree’s equity in their home into an income stream. Most financial institutions now offer Reverse Mortgages, but please remember that a Reverse Mortgage is not for everyone. The following site may help you to assess this type of product http://www.chip.ca/index.cfm?id=101.

Tax Planning for Retirement

In order for you to pay less tax in retirement you’ll need to plan well in advance. The general idea is that less income results in paying fewer taxes. However it does not mean that your standard of living will decrease, it simply means that your income can be restructured by sharing your income with a spouse, or receiving income in other forms.    “Income splitting” is a term used to signify that rather than having a certain amount of income taxed in one individual’s tax rate it is in fact split between two spouses, each one being taxed at a lower rate.

A simple example of income splitting is as follows: Say you are in the top tax bracket. You'll pay almost 50% on any additional income that you earn. By contrast, suppose your spouse is in the lowest bracket of around 25%. If you can redirect just $10,000 of income from you to your spouse, your household comes out $2,500 ahead, assuming that your spouse stays in the same tax bracket.

Income splitting is achieved through spousal RRSP contributions and splitting of CPP benefits. As of October 31, 2006 Canadians are now allowed income splitting between spouses of up to one half of income derived  pensions, lifetime annuities, registered retirement savings, deferred profit sharing savings, and RRIF savings.

Other ways to save on taxes and structure your income in retirement are to receive income as dividends from qualified Canadian corporations and as capital gains. Both dividends and capital gains are taxed at a substantially lower rate than income from salary or pensions.

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YORK UNIVERSITY PENSION PLAN

For most of us, the York University Pension Plan will form a major component of our retirement income. Therefore, it’s important to understand how it works, what impacts on it, how much pension you can anticipate, and what happens to it upon death.
Below are some commonly asked questions about our York pension and post-retirement benefit plans. To learn more, come to one of the Retirement Planning Centre’s pension seminars. Review the yearly statement which is mailed to your campus address by the Pension and Benefits office around the end of June. Alternatively, check out the e-learning pension and post-retirement benefits seminars posted on our website or check out the Pension and Benefits site for text on the York University Pension Plan and post-retirement benefits.

How Does The York Pension Plan Work?

Contributions to the pension plan are deducted from your pay. York University matches your contribution and even sets aside an additional 3% that goes to a special fund called the Non-Reduction Reserve.  The NRR is set aside when you elect a monthly pension to help pay for the cost to maintain the level of pension in your hands in years when the moving four-year average fund return is less than six percent.  At retirement, your pension is determined by looking at your age, your marital status, and your spouse’s age, if applicable.
We’re lucky! At York, we have what’s called a “hybrid” pension plan. York calculates the pension two ways: money purchase – based on pension contributions and the rate of return of the fund, and defined benefit or minimum guarantee- based on your earnings and the highest five years of earnings while in the pension plan. We all get the amount of money in our money purchase account but if the calculation shows that the minimum guarantee calculation is greater York will top up our money purchase to the minimum guarantee figure. It sounds complicated but in effect when you look at your pension statement we get whatever figure is the higher of the two calculations. And York gives us the promise that whatever pension we start to receive will never be lowered in your hands. You can count on it. We are doubly lucky!

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Do I Have To Apply For My York Pension?

Yes, you have to apply for the York pension. If you want a seamless transition from receiving your pay cheque one month to getting a pension cheque the next month, you’ll want to give the Pension and Benefits Office a minimum of three months notice to prepare a retirement package and send it to you.  Academic employees must provide written notice to their Dean, Principal or the University Librarian as appropriate and the Vice-President Academic, a minimum of nine months prior to which they plan to retire.  Non-academic must provide written notice to their manager a minimum of six months prior to which they plan to retire.  
For example, if you are retiring on July 1, in April, the Pension and Benefits Office will send you a retirement package. It will include a calculation of your estimated pension,  plus the necessary pension and tax forms to complete and return. Usually in May, the RPCentre holds a seminar where a representative from the pension office reviews the package and talks about decisions you’ll have to make and the timing of them.

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Do I Need To Write A Formal Retirement Letter?

Yes you need to write one in which you announce your intention to retire on a particular date and state how unused vacation days, if applicable, are to be treated. Your retirement letter also gives you a chance to say something personal and positive about your experience working at York. For sure, we have all met some amazing people, forged strong friendships and made a difference at York.

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When Will I Receive My York Pension Cheque?

Your York pension payment is made the first of the month. However in the first month of retirement the payment will likely be made around the third week of the month.  This is due to the Pension and Benefits Office having to wait until your final pay has been calculated to process your pension election.  Your pension payment can be directly deposited into your bank account. Your pension may be adjusted the following year when the rate of return is known as the initial pension is calculated using no rate of return in the year of retirement.

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Can I Add Additional Money To My Pension?

Yes, you can. It’s called a “voluntary contribution” and is based on your RRSP eligibility room. The Pension and Benefits Office can help you determine what contribution room you have. Funds in this account are invested in the same way as your York pension funds. You can also transfer funds from your RRSP account to York’s plan. One of the restrictions is that you cannot access any of the voluntary contributions prior to retirement or termination.  Upon retirement or termination, you’ll be asked if you want to combine the money in this account with your pension or if you want to manage these funds separate and outside of York. You’ll want to understand each option thoroughly in order to make an informed decision.  The University does not match voluntary contributions or transferred in funds.

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When Can I Retire?

You can retire anytime after your 55th birthday with a reduced pension. You will be eligible to receive a full pension, the first of the month following your 65th birthday. If you work beyond age 65 your pension will be higher if the fund performance remains positive.  Your normal retirement date remains the July 1, coincident with or following attainment of age 65.

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What If I Want To Work Past 65?

If you decide to work past 65 you may continue to contribute to the Pension Plan and York will match your contributions until age 69. At that point, under the Income Tax Act, you are required to receive your monthly pension not later than December 1 in the year you turn 69.  That means you can get your York pension and a salary at the same time. If this is the case, you’ll want to get information about tax implications.

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How Can I Estimate How Much My Pension Will Be At Retirement?

There are two ways: 1) go on the Pension and Benefits website and log onto the York University’s Retirement Planner (YURP) http://www.yorku.ca/hr/compensation/pensionbenefits/retirementplanner.html. This program is quite powerful and allows you to estimate your pension at various ages; 2) look at the Pension Statement you receive each year. It shows a projection of what your pension will be at your normal retirement date. Check the statement to make sure all of the information is correct, especially information about spouses.

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Is My Pension Increased With Cost Of Living Increases?

IIn simple terms, if the Pension does well, we do well. Your retirement pension may be adjusted at the beginning of each calendar year if the moving four-year average fund return is in excess of six percent at that time.  In the event the moving four-year average fund return is below six percent, no reduction will be made to your pension; however, this deficit will be tracked and future adjustments (positive or negative) will be applied to the reduced amount.  You will not receive any further increment until the deficit is paid up.

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What Decisions Will I Have To Make About My Pension? . Retirement Options

The Pension and Benefits Office will send you a list of various pension payout options in your retirement package. You’ll need to make a choice on your option before you retire. Outside of your retirement date, this is one of the most important decisions to make regarding your retirement from York. It’s essential to understand how the options work and their implications, especially upon your death. Remember, once you have retired, you cannot change your option.
Although there are 20-something options, basically there are four options with variations on a theme.
Option 1: you can take all of your money out of York (including York’s portion) and transfer it to a locked-in retirement account. Here’s one caution for non-academics - if you do this you lose your entitlement to post-retirement benefits. Other considerations you might want to think about. Do you have the time and expertise to be monitoring your pension fund by yourself or keeping tabs on your financial advisor to do this? Can you really do better investing outside York? What is the driving force behind the decision?  How long can you count on your investment advisor to be there to manage your funds?
Option 2: Life-only: this option provides a pension for your lifetime only (provided you don’t have a spouse). Your pension ends with your death unless you have combined this pension with a guaranteed period that is still in effect.
Option 3: Joint-and-Survivor: this form of pension provides you with a lifetime pension. Upon your death, a percentage of your pension (such as 60%, 75%, or 100%) will be paid to your spouse until his or her death. You may also combine this form of pension with a guaranteed period. Pension payments end with the death of the last survivor (you or your spouse) unless you have combined this pension with a guaranteed period that is still in effect.
Option 4: Guaranteed 5, 10 or 15 Years: You may add a guarantee to your pension of 5, 10 or 15 years. This is something like an insurance plan. York guarantees that if you, or you and your spouse die within the guaranteed period, someone (your spouse or a beneficiary) will receive what you should have received for the remaining years of the guaranteed period.
Sound complicated? Here’s an example to help simplify things. Say you are married and you chose a 15 year guarantee and you die after 5 years of retirement. There would be 10 years left on your guarantee. York would continue to pay your spouse 100% of the full monthly amount of your pension for the remaining 10 years of the guarantee. At the end of the 10 year guaranteed period, the pension amount would be reduced to whatever percentage you assigned, like 60% or 75%, etc. to the end of your spouse’s life. At that time, the pension stops. Should both of you die before the guaranteed period is up, a calculation is made to determine how much you should have received and this amount goes to a beneficiary. 

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What Happens If I Marry Or Divorce After I Retire?

If you are planning on making changes to your marital status, such as separation, divorce or remarriage, it is wise to look at the pension implications before retirement. Whoever is designated as your spouse, at retirement, will be entitled to your pension, unless they have signed a special waver upon retirement. If you remarry after retirement, the new spouse is not entitled to any of your pension.

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Will I Pay Income Tax On My York Pension?

Yes. It’s part of your annual income. There’s no way to escape taxes!

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Can I Receive My York Pension If I Move Out of Canada?

York will forward your pension to an address outside of Canada. You’ll want to consult a financial advisor about possible withholding taxes that might apply to the country to which you are moving.

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Where Can I Learn More.?

Watch our e-Seminar at www.yorku.ca/retire, click on e-seminars and go to the seminars titled, “York's Pension Plan 101”.  You can also direct inquiries to the Pension and Benefits staff. Using the first letter of your last name contact your Pension and Benefits Counsellor
A - E   Margaret Crowe 20377 crowem@yorku.ca
F - L   Andreea Madaras 20702 amadaras@yorku.ca
M - R  Yvonne Rego 33912 yrego@yorku.ca
S - Z  Justin Gunraj 20617 jgunraj@yorku.ca

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York's Post-Retirement Health Benefits

Post-retirement health benefits differ according to the union or association to which you belong. To check out the most current listing of all union/association pre- and post-retirement benefits or to print claim forms visit the following site: http://www.yorku.ca/hr/compensation/pensionbenefits/index.html.
Also look at the RPCentre’s e-learning seminars: http://www.yorku.ca/retire/seminars/eseminars.htm .There’s one on post-retirement benefits - “Understanding York's Pension Options & Post-Retirement Health Benefits”, and another on “Topping Up York's Post-Retirement Health Benefits”. Remember that your benefits as a retiree are less than those as an employee, so make sure you have your dental and vision care needs attended to before retiring. Before you retire, ask your dentist if he/she is watching any potential areas of concern (you might be able to save yourself an expensive dental bill in retirement). 

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What If I Work Past Age 65?

If you continue to work past 65, your benefits continue but there are some provisions that apply specifically to you. Once again, check out the details with the Pension and Benefits office.

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What If I Have A Question About My Coverage?

If you have extended health, dental or vision inquiries you can call Great West Life at 1-800-263-5742. Have your employee and policy number available. York’ policy number is 55055 for all affiliations.

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What Else Does Sun Life Offer?

Your reimbursement cheque from Sun Life can be direct deposited into your bank account. You can register on-line at:

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GOVERNMENT PROGRAMS

Government Sources of Retirement Income
Human Resources and Social Development Canada (HRSDC) has a wonderful site which outlines, in straightforward terms, the three sources of retirement income provided by the Government of Canada - Canada Pension Plan (CPP), Old Age Security (OAS) and Guaranteed Income Supplement (GIS). I recommend that you refer to this site often, http://www.sdc.gc.ca (search the A-Z index for any of the programs).
 Below, I’ve listed some of the most common questions asked.

Canada Pension Plan

Who is eligible for CPP?

The Canada Pension Plan (or Quebec Pension Plan) pays a monthly retirement pension to people who have worked and contributed to the CPP, so all York employees are eligible. York deducts contributions from your pay and makes an equal contribution. If you are self-employed, you act as both employee and employer and pay both portions.

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What does CPP provide?

Besides a monthly pension, CPP provides disability and survivor benefits, a monthly income to you and your dependent children if you become severely disabled during your working years, a monthly income to your surviving spouse or common-law partner and dependent children if you die. As well, a lump-sum death benefit is available to your estate upon your death.

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Is there a statement from CPP?

Each year, you should receive a personal "Statement of Contributions". If you are 30 or over, your statement estimates the retirement pension you can expect from the CPP. It also estimates the benefits you and your dependants could receive if you became disabled or died. If you did not receive a statement or have questions, call the CPP toll free number at 1 877 454-4051.

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How much money can I expect?

In general, your retirement pension replaces about 25 percent of the earnings that you paid into the CPP. The exact amount depends on how much and for how long you have contributed. The age at which you decide to take your pension also affects the amount you receive each month. At the time of this writing December 14, 2009, the maximum monthly benefit (2010) CPP retirement pension is $934.17 per month (if taken at the age of 65) and $516.57 (if taken at age 60).

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When can I start to collect CPP?

The normal age that you start receiving a CPP retirement pension is 65. However, you can start receiving your pension as early as age 60 or as late as 70. If you start your pension before 65, you must stop working and earn less than the limit set by CPP as the maximum amount of salaried income.

If you start your pension early, it is permanently reduced by 0.5 percent for each month that you are under age 65. If you start your pension later, it is increased by 0.5 percent for each month that you are over 65, up to the age of 70.

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Is CPP taxable?

Your CPP retirement pension is taxable and must be declared on your income tax return each year, and is taxable at your marginal tax rate

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What If I Stayed Home To Raise A Family Or Had A Lower Salary?

Over the course of your career and if you raise a family, there may be years when you have low or even no earnings. To make up for this, CPP excludes 15 percent of your lowest earning years when calculating your retirement pension. Time spent away from work while you raise children under the age of seven can also be 'dropped out' of the calculation. A special form, Child Rearing Drop-out Form, is completed and sent in with your CCP application. These forms are available in the RPCentre office. For more details see the CPP web-site http://www.sdc.gc.ca (search the A-Z index).

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Is the CPP retirement pension protected from inflation?

CPP monthly retirement pension is adjusted for inflation every January to keep up with increases in the cost of living.

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Can I split my pension with my spouse or common-law partner?

You and your spouse or common-law partner can share your CPP retirement pensions  if both of you are at least 60 years old and each one has applied for the CPP Pension. You may want to check this out since it may result in income tax savings.

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What if I plan on retiring outside Canada?

You can receive your CPP retirement pension regardless of where you live.

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What if I lived or worked outside Canada?

Canada has agreements with many countries that can help you obtain social security benefits from other countries. Even if you didn’t live or work long enough in one country to qualify for their benefits, the time you spent in that country may still be considered when determining your eligibility to collect benefits from either country. Check the CPP web-site http://www.sdc.gc.ca (search the A-Z index) or call them to find out if a country you lived in has an agreement with Canada. Their toll-free number is 1 877 454-4051.

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Can I count on CPP?

The government assures us that we can count on CPP (and OAS) for the long term. In 1998, it took actions to ensure that CPP contributions will be enough to fund the larger numbers of people who will be reaching retirement age in the near future.

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When and how do I apply?

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What happens to my CPP pension when I die?

Survivor benefits are paid to your estate, surviving spouse or common-law partner and dependent children. You must apply. There are three types of benefits.

There are minimum contribution periods to qualify so you might want to check it out.

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How much is the death benefit?

The amount of the death benefit depends on how much, and for how long, you paid into the Canada Pension Plan.
Canada Pension Plan first calculates the amount that your Canada Pension Plan retirement pension is, or would have been if you had been age 65 when death occurred. The death benefit is equal to six months' worth of this "calculated" retirement pension, up to a maximum of $2,500.

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Old Age Security

What is the Old Age Security pension?

The Old Age Security (OAS) pension is a monthly payment available to most Canadians age 65 or older. You must apply and meet the eligibility requirements. It’s not based on your employment years and you do not need to be retired.

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Who can receive the Old Age Security pension?

Two things determine if you can receive the Old Age Security pension: your age (you must be 65 or older), and your years of residency in Canada. You have to be a Canadian citizen or a legal resident of Canada and living in Canada at the time your application is approved. If you are no longer living in Canada you must have been a Canadian citizen or a legal resident on the day preceding the day you stopped living in Canada, and you must have lived in Canada for a minimum of ten years after age 18. If you lived out of the country or lived in one of the countries that Canada has a social security agreement you might also be eligible for OAS. Check the OAS site for details.

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When should I apply?

OAS is not automatic. You must apply about six months before you turn 65. OAS forms are available in the RPCentre or on the government website or you can order an application kit from them at 1 800 277-9914.

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What if I apply late?

If you apply late for the Old Age Security pension or for the Guaranteed Income Supplement, or the Allowance you may receive retroactive payments.  Payments may be made for up to 11 months plus the month in which the Government receives the application, provided all conditions of eligibility are met.

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How is my Old Age Security benefit calculated?

Full Pension

You’ll qualify for a “full pension” if you lived in Canada for periods that total at least 40 years after turning 18 or if you meet the following three conditions: 1) you were born on or before July 1, 1952, 2) between the time you turned 18 and July 1, 1977 you lived in Canada for some period of time and 3) you lived in Canada for the 10 years immediately before your application was approved. You might still qualify for a full pension even if you move away from Canada before age 65. See the OAS website for details http://www.sdc.gc.ca (search the A-Z index for any of the programs).

Partial Pension

If you don't qualify for the full pension, you may qualify for a partial pension. Eligibility is determined by years of residency in Canada. OAS is divided into 40 pieces, so a partial pension is earned at the rate of 1/40th of the full monthly pension for each full year lived in Canada after your 18th birthday. Here’s an example from the OAS website: if you lived in Canada for 10 years after age 18, you would qualify to receive 10 portions which is equal to one-quarter of the full pension.

It’s interesting to note that once a partial pension has been approved, it can’t be increased as a result of added years of residence in Canada.

Usually your Old Age Security pension will begin either on the month after you have met the residence requirements, or on the month after your 65th birthday, whichever comes later.

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When do payments arrive?

Payments usually arrive in the last three banking days of each month. You can consult the exact payment dates on the government’s website. You might want to contact the government if your payment is more than a week late, or if you lose your cheque. Payments can be deposited directly into your bank account, either in Canada or the United States. If you move, make sure the government knows your new address so they can send you your yearly income tax slip and information updates.  
Pension payments can usually be sent outside Canada  for as long as you want under certain conditions i.e. you lived in Canada for at least 20 years after reaching age 18; or you lived or worked in a country that has a social security agreement with Canada and are considered to meet the 20-year residence requirement.
If you don’t fall into either of these categories, they can send your payments outside Canada for the month that you leave, and for six months after that. For example, if you left Canada in January, the government would send payments until the end of July. After July, the payments would stop. If you plan to be absent from Canada for more than six months, call them well before you leave. If you return to live in Canada, contact them and they will start your payments again from the month of your return.

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Will I get cost-of-living increases?

Your pension payments will increase to reflect any increases in the cost of living as measured by the Consumer Price Index in January, April, July, and October.
The Old Age Security pension will not go down if the cost of living falls.

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Is my Old Age Security pension taxable?

Like most other retirement income, your basic Old Age Security pension is taxable income. We’ve all heard of the “clawback” of the OAS. Here’s how it works: retirees who earn individual net income of $62,144 or more as of 2006 (including the Old Age Security pension) have to repay part of their pension benefits. These payments are normally deducted each month from your pension payment. If you are a high-wage earner, it’s best to consult your income tax advisor to determine if it is to your advantage to apply for OAS, and if you live outside of Canada, are you subject to a non-resident tax.
Income tax can be paid in three different ways. It can be deducted from your monthly pension, or you may be required by law to pay your income tax in quarterly installments, or you may pay it when you file your annual tax return. .

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The Guaranteed Income Supplement (GIS)

What is the Guaranteed Income Supplement?

This is an additional payment that is given to low-income seniors living in Canada. It is based is based on your annual income, or the combined annual income of you and your spouse or common-law partner. To be eligible for the GIS benefit, you must be receiving the Old Age Security pension and meet the income requirements. Eligibility also depends on whether your income and that of your spouse or common-law partner (if you have one) exceeds a specific amount.

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How do I apply?

Application forms are available online or by calling the government at 1 800 277-9914. Reapplication (because it is based on income which could change from year to year) can be done when you file your yearly income tax return or through an application form.

Each July, you will receive a letter that tells you the new amount of your monthly payment. If you do not reapply for the GIS benefit in the spring, or if your income becomes too high to qualify for it, you will only get the basic Old Age Security pension starting in July of that year.

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Conditions affecting GIS

These conditions may affect your benefits: if you marry or separate, if your spouse or common-law partner dies, or if one of you has to live in a hospital or nursing home. Contact the Government for details.

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How is GIS calculated?

According to the Human Resources and Social Development Canada website http://www.sdc.gc.ca (search the A-Z index), there are two basic rates of payment. The first applies to single pensioners - including widowed, divorced or separated persons; and to married pensioners whose spouses or common-law partners do not receive either the basic Old Age Security pension or the Allowance. The second applies both to legally married couples and couples living in common-law relationships, where spouses or common-law partners are pensioners. The GIS single rate is higher than the married rate. However, each spouse or common-law partner in a couple is entitled to a benefit, so the combined benefits for a couple are higher than those for a single person.  Consult the website for current payment rates.

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Is GIS taxed?

The Guaranteed Income Supplement is not subject to income tax

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Can I receive GIS if I move out of Canada?

The Guaranteed Income Supplement is not payable outside Canada beyond a period of six months, regardless of how long the person has lived in Canada.

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Allowance And Allowance For The Survivor

The Allowance, which also includes an allowance for persons whose spouse or common-law partner has died, is paid monthly. It is a payment designed to recognize the difficult circumstances faced by many surviving persons and by couples living on the pension of only one spouse or common-law partner.
Recipients must re-apply annually. These benefits are not considered as income for income tax purposes. The Allowance is not payable outside Canada beyond a period of six months, regardless of how long the person lived in Canada.
To find out more about any of the programs including disability pensions, see the Government’s website http://www.sdc.gc.ca (search the A-Z index).

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