How Not Having A Company Pension Became A Blessing in Disguise

I worked for the same large, multinational corporation for over 26 years, starting right out of school and remained there until the day I retired.  When I first joined the company back in 1986, I was enrolled in a defined benefit  pension plan, but had no idea what that meant. A few years later, the company changed policies and offered to convert its existing employees to a defined contribution plan. Again, I had no idea what that meant, but listened to the HR representatives as they convinced us how much better and safer it would be for us to switch over.

Back in those days when I still believed that my company had its employees best interest at heart, as opposed to its own bottom line, I voluntarily gave up the chance of a company pension that would pay me money from the day I retired until the day I died.  Instead, I retired with the meager sum that accumulated in my defined contribution, which was basically a locked in RRSP. It was not even close to being enough to live on.  For many years I was very bitter at what I considered to be my naivete in being "tricked out of the security of a pension in my retirement years".  But now that I am actually retired at the early age of 48, it turns out that it was actually a hidden blessing in disguise.

What I have come to realize is that I never would have been able to retire at such a young age if I had a company pension.  First of all, I would have been tied down by the terms of the pension and would have felt obliged to keep working until I had fully vested my retirement benefits.  This would have taken me at least until age 54.  More importantly, knowing right up front that I had to rely mostly on my own savings to fund my retirement years, motivated me to open an RRSP and start saving early. In the beginning of my career, when I had a mortgage and other financial obligations, I would still contribute enough to my RRSP annually to eliminate any income tax obligations. Although the amounts were minor, the effects of compound interest over the years helped the savings grow.  As I became debt free, I would contribute more and more, until I could max out my RRSP contribution room.

These days, due to cost cutting measures, few private corporations still offer a defined benefit plan. Many of those that do, have significantly cut the payout ratios of the plans they support, and most plans are not indexed for inflation.  Had I remained in the defined benefit pension plan offered by my company, I would not have received enough income upon retirement to sustain a comfortable lifestyle without supplementing with my own savings.  But I may not have realized this until it was too late, and would not have been as motivated to take control of my own retirement plans. More likely, I would have been lulled into a false sense of security, thinking that my company pension plus the government pension and CPP would suffice to live on.

When I met my husband, who also did not have a company pension, and realized that he shared my dream of retiring early, we pooled our resources to continue saving for this goal. Eventually, we taught ourselves how to calculate and predict how much we wanted to spend in our retirement years, how much money we needed to save to fund this, and how long that money would last. These are all lessons that we discuss in our book Retired at 48 - One Couple's Journey to a Pensionless Retirement.

I wish that there had been more training in our school days to teach us about budgeting, saving, financial and retirement planning.  Everything we know has been self-taught.  It makes me worry for the youth of today, for most of whom, the company pension will be a thing of the past.  Will they be prepared to support themselves by the time they want to retire?  Will the government pension plans like Old Age Security and Canada Pension Plan still be around to supplement?

Grateful is probably too strong a sentiment, but I am no longer bitter about being "talked out of" staying with my company pension plan. In retrospect, this actually paved the way to my early retirement at age 48, and I am loving every second of it.