Members > Newsletters > Fall 2009

Early retirement

Early Retirement

Everyone has different lifestyle goals, and whatever yours are, your CAAT Plan pension will be an important part of the financial plan you'll need to develop. As diverse as our goals can be, one that most people look on favourably is the notion of early retirement.

Early retirement is a great option for some members. There are many factors to consider when planning retirement at any age. Lifestyle changes, income requirements, and the kind of pensions and savings you have to draw on are the key pieces of the puzzle.

Your CAAT Plan pension will certainly get you off to a good start. You may find that expenses diminish once you have retired, as you don't face costs such as commuting and dressing for work. Costs associated with children and mortgages may also be less. Ultimately, only you will be able to answer the question "can I afford to retire early?"

"Early retirement" in the Plan refers to any retirement before what is known as the "normal retirement" age. This is defined by the Plan as the end of the month in which you turn 65. There is no pension reduction associated with normal retirement.

Early retirement occurs between ages 55 and 64 (those with 20 years of service may be eligible to retire as young as age 50). When you retire during this period, you receive an immediate early retirement pension. Your pension will not be reduced if you qualify for one of the two provisions for unreduced early retirement:

85 factor (your age plus pensionable service total at least 85)
60/20 Rule (you have reached age 60 and have at least 20 years of pensionable service).

For example, if you are 57 years old and have 24 years of pensionable service, your total is 81. This does not qualify you for the 85 Factor. You would need to wait for 2 years, when you are 59 years old with 26 years of pensionable service to qualify. It would take longer - 3 years - for you to qualify under the 60/20 Rule.

If you retire before you qualify for an unreduced pension, your pension will be reduced. Keep in mind that, although the reduction is permanent, this is not a penalty. When you start receiving your pension at a younger age, you will receive it for a longer period of time than if you waited to receive an unreduced pension.

The reduction to your pension is 3% for each year (and part year) you are away from qualifying for an unreduced pension. This qualification is the earliest of the date you:

qualify for the 85 Factor
qualify for the 60/20 Rule
turn 65.

The smallest of these amounts will be multiplied by 3%, and that percentage reduction will be applied to your pension.

Those who retire early also receive the bridge benefit, an extra payment that is made until you reach age 65. If you retire on a reduced pension, the bridge benefit will be reduced in the same manner as the pension. The bridge benefit is designed to account for the fact that full Canada Pension Plan benefits do not start until age 65. (Click here for more on CPP)

It's also important to keep in mind that once you reach the qualification for an unreduced pension, this does not mean you have accumulated the maximum possible benefit. If you continue to work past your earliest unreduced retirement date, you will continue to build your service and your pension benefit will increase.

December 2009