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Hello again already,
Since posting, I already heard from one other single woman SFU colleague about the helpfulness of raising the beneficiary issue to her decision. However, I also paid attention today to my financial advisor's point this morning because several days ago, I had heard the concern about beneficiaries by a very successful younger colleague who does have a child.
Upon contemplation, I'd like to see see some discussion of this beneficiary issue, not just for me, but for everyone.
I think that if my advisor is right, then the DBPP plan would mean that into the future, a pension holder at death could not leave any percentage of their pension holdings to a non-minor child or even a grandchild, much less a sibling (as in my case), or to a charity. It could only go to a spouse or a minor child who holds that status at the time of death. Otherwise, it would ALL go back to the pension fund. As my advisor said, "GONE".
Due to an earlier than average post-retirement death, do people really want to forfeit what could be even more than what would likely be (given my experience) $500,000 in a DCPP in today's dollars to the DBPP, in the absence of a surviving spouse, instead of to desired beneficiaries (e.g. one's adult children, any of one's grandchildren, to a sibling as in my case, or to a charitable cause)?
I may very well be off track, but it strikes me that this beneficiary issue deserves full discussion before the final vote. I've really turned myself around today because of this issue, so I don't quite know what to think at the moment.
Response? Nancy
Nancy Hedberg Professor of Linguistics and Cognitive Science Chair, Linguistics Department Simon Fraser University Burnaby, British Columbia, Canada V5A1S6 From: Nancy Hedberg <nancy_hedberg@sfu.ca>
Sent: November 14, 2018 5:57 PM To: academic-discussion@sfu.ca Subject: Re: Pensions vs. Mortgages Dear colleagues,
I thought that some of you might appreciate the advice that my financial advisor gave to me this morning.
My situation is unusual in that I am single with no children but do have a younger sister (also single with no children) in Paris who brings in almost no income and who will need quite considerable support from me for the rest of her life. I plan to retire in 2024 at the age of 67. I have worked at SFU since 1990, and have saved a probably unusually large portion of my SFU earnings thanks to having no children and no car. I feel I was underpaid until 2012 when I became a full professor, but I feel satisfied by the recent gender and market-differential salary boosts. I bought my first condo in 2004 and paid it off. My sister and I also recently each received a quite decent inheritance from an uncle.
n actual fact, the Sun Life DCPP and SFU have worked very well for me financially over 28 years, despite the first 22 years of relative hardship.
Last night, I performed my own calculation of my retirement outlook under the two plans: I contemplated buying back 13 years of service to achieve a $52,000 pension from the DBPP compared to keeping the DCPP, in both cases continuing my current investments. I assumed that I would (1) ensure a very comfortable retirement for both me and my sister up to age 95, plus (2) help her buy a (quite small but not the smallest) apartment in central Paris so as to improve her living situation for the rest of her life.
I calculated that I can achieve those goals under both plans. The difference between the plans would lie in the additional legacy that my portfolio could accrue prior to and at the point of death. It depends on when I die. If I die anytime up to 83 years of age, the DCPP benefits my legacy (decreasingly, and zeroing out at about 95), but for as long as I live beyond that, the DBPP benefits my legacy (increasingly).
I finally decided that my physical fitness is such that I doubt I'll outlive the average life Canadian life expectancy of 87, so basically both plans are effectively equal.
However, I think I will vote no
because I am pretty well convinced by the argument that the DBPP is too rigid.
Diverse people can
benefit from the flexibility
to plot their own diverse financial paths. One size does not fit all.
Finally, in case it is helpful to anyone (i.e. the beneficiary issue—bold face provided by me), below is what my financial advisor said this morning (prior to seeing the details of the SFU-specific DBPP). He didn't realize that I had been planning to leave my RRSP intact.
This is what he said:
"..., in regards to the defined benefit pension, this decision, is quite complicated. My biggest objection is that if you move your DCPP and RRSP
to the DBPP, you as a single person are making the pension plan the beneficiary of your estate. In that, if you pass away,
you cannot name a beneficiary of your pension funds unless they are a spouse, or minor child. There are circumstances where you could name a beneficiary like your sister of the “guaranteed” portion of your pension benefit. If you chose a 10 year single
life guarantee pension benefit then if you died in year 6, your sister would get your pension for 4 years. But beyond that any money in your pension plan just goes to the pension fund. GONE. Your estate is sizable and so are your pension savings. You would
be much better served to not move your funds to a DBPP and keep them in the DCPP where you can name your sister as beneficiary or charity etc, and all those funds on your death would go to your named beneficiary. Your net worth and impressive retirement savings
are at a level that you don’t need the “guaranteed” pension income that a DBPP offers. You will be more than comfortable for the rest of your life with the money you have already saved for retirement. And the way it is now, you have full control of how much
you can draw in retirement. Under DBPP, you lose control of the amount of pension income you get per month. If I were in your situation, I would much prefer the control, and independence of the current situation, to the “guaranteed income” proposed by the
DBPP."
I wrote this message just in case it helps someone else in a similarly unusual situation and/or is concerned about the beneficiary question.
Nancy
Nancy Hedberg Professor of Linguistics and Cognitive Science Chair, Linguistics Department Simon Fraser University Burnaby, British Columbia, Canada V5A1S6 From: Michael Sjoerdsma <michael_sjoerdsma_2@sfu.ca>
Sent: November 14, 2018 4:50 PM To: sspector Cc: Nilima Nigam; Krishna Pendakur; Tamon Stephen; Martin Hahn; academic-discussion@sfu.ca; Michael Monagan; Nilima Nigam Subject: Re: Pensions vs. Mortgages Hi Stephen,
Voting members refer to those who vote on the motion. The constitution requires a minimum of twenty percent of members to vote on a referendum for the results to hold.
Mike
Sent from my iPhone
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