It’s common knowledge that many Manitobans work for employers with a defined benefit pension. Teachers, nurses, government employees and MB Hydro workers make up a significant portion of our workforce! While having an employer-funded pension is a great start to your retirement plans, you likely shouldn’t stop there.
Defined benefit pensions can provide a consistent income in retirement, similar to the paycheque you’re receiving today. When combined with other income streams, like CPP and OAS, you can likely replicate a significant percentage of today’s income while living in retirement. Sounds great, right?
The biggest problem most pensioners face in their retirement years relates to the timing of cash flows. Especially when large purchases or emergencies come in to play.
Do your retirement plans include warm vacations? A new car perhaps? Replacing a furnace, roof, or windows in your home?
For most people, it’s not a matter of if a lump sum of money is needed in retirement, but when. So if your retirement assets are exclusively monthly incomes (like pension payments), you may find yourself in scrimping and saving mode or cycling through debt to cover the shortfalls. Cutting back on living your dream retirement, to afford the payments on an engine repair, sounds more like a nightmare to me.
To avoid this dilemma, consider building a stockpile of retirement savings, over-and-above your pension. Set money aside specifically for the lump sum expenses of the future. For this type of goal, Tax Free Savings Accounts make an excellent investment vehicle since they alleviate tax headaches when making withdrawals.
Counting on your pension for 100% of your retirement needs could wind up a costly and stressful mistake. If the idea of saving money for future expenses seems daunting now, it will likely only be harder when you’re living on those fixed incomes in retirement. Starting soon, even just starting small, can make all the difference in leaving money stress behind for good!
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