I have been planning my retirement for just over 2 years, with the original plan to go in August 2027. I even put a countdown timer on my website that shows 628 days left (a little over 20 months). Back in August of this year, I noted that with two years to go, I did NOT have everything on track for my planning. I’ve been doing more work since then on my original plan of touring across North America, trying to wrap my head around the possibility of a single RV unit or a towable trailer behind a truck. Andrea and I even went to an RV place and checked out some RV options. It still seemed doable.

I also went to a writing conference in New Orleans in September, loved both the city and the conference, and came back jazzed about writing. I don’t have kayaking, astronomy, photography, the fitness side in general, or continued learning locked down yet. But with 20m to go, it seemed doable.

And then work decided to confuse me with potential incentives to retire earlier.

A positive incentive to go earlier

The first announcement was a positive incentive, the Early Retirement Initiative, unveiled in the fall budget.

For those not familiar with the public service pension, you basically can work until 30 years of service AND age 55 or over, and you’ll get what they call an unreduced pension at 60% of the average of your best five years of salary. If you DON’T make it to 30 years, every year under that is reduced by 2% not earned plus 2% penalty. In other words, for me, I’m at 29 years. If I go now, I would have “earned” 58%, but would pay a 2% penalty to drop it to 56%. If you want to see it in action, you would get:

• 30 years –> 60%
• 29 years –> 56%
• 28 years –> 52%
• 27 years –> 48%
• 26 years –> 46%

The ERI waives the penalty and makes it:

• 30 years –> 60%
• 29 years –> 58% (save 2%)
• 28 years –> 56% (save 4%)
• 27 years –> 54% (save 6%)
• 26 years –> 52% (save 8%)

On the face of things, I could go now and save 2% penalty. Or wait until August and have no penalty. But I also have some pension paperwork in the works that would transfer money from my RRSP into the public pension, and thus I don’t need the waiver. I’m nominally above 30 years already. I could work another 4-5 years and get a 70% option, but that isn’t in the cards. My “plan” above aka the original one that is now in doubt was that I would likely finish with about 31.5 years and get 63% for my pension.

On the finance side of the equation, the Reddit forum Canada Public Servant has a really good post by one of the moderators, u/HandcuffsOfGold. You can find it here:

His first example is for a public servant earning $100K and considering the ERI, with 30 years of service. He shows that from the original $100K gross salary, you pay federal income tax, provincial income tax, public pension contributions, CPP/EI, union dues, disability insurance, and supplementary death benefit for a total of $34K in Ontario in the CAPE union leaving $66K in take-home pay. By contrast, the pension would be $60K gross, of which you would pay federal income tax, provincial income tax, health care plan, and dental care plan for a total of $9720, leaving $50,280 of pension. The difference is $16K a year which they could potentially make up through part-time work, gig work or RRSP/TSFA, or income+pension splitting (about $1300/m).

He also did the same calculation with 25 years of service. $66K in take-home pay from working remains the same, but pension would drop to $50K per year (instead of $60K). Total deductions would be $7522 (instead of $9720) leaving $42,478. As a result, they would need about $2K a month to top up.

The whole point of the calculation is not the exact amounts — it is showing that if you are close to 30y, and you have RRSPs, the difference might not be as huge as you think. In example one, while you lose $40K in income, your take-home pay only drops by $16K — because you also lose $24K in deductions. It’s a sobering set of numbers to see.

A negative incentive to go earlier

The new option, though, is normally a negative incentive. The Government announced that they are going with Workforce Adjustment (WFA) in the new year at my department, as well as lots of other departments. We received the formal heads-up email this week that letters will be sent to individuals in January. The WFA is basically a layoff notice, but with some big options to help you manage the possible transition. In effect, the notice says your position is being eliminated, and since you’re in it, you’re being laid off. While you can’t change the first part (the elimination of the position), there are ways to eliminate the layoff effect. Once you’re WFA’ed, you have 120 days to decide what to do. The official options are listed here: https://www.njc-cnm.gc.ca/directive/d12/v239/s669/en#s669-tc-tm_2.

Option A, as it is referred to, is basically that you have a year to find another job within the public service. You keep working, theoretically doing assigned work AND looking for a job. Still, the assigned work varies by group… some people do NOTHING but look for a job, others are given non-urgent work, others are worked hard. The priority is clearly on finding a new job. There are options if you change your mind halfway through the year or don’t find anything, but it mainly revolves around being paid at your current salary for a year to find another job. So basically PAYx1Y.

Option B is the “severance plus TSM” option. Basically, there is a transition support measure that will pay you approximately one year’s pay (52w if you are between 16y and 29y of service, and then 3w less for every year over 52w i.e., 31y = 49w of pay). Plus you get severance, which is about 4w for the first 20y and 1w for every year after 20. If you’re close to 29/30y, that would mean 13w of severance. And they code you as laid off, so you’re eligible for EI. While it isn’t completely linear, and you have options to play with WHEN the pay and severance are given to you (up to 2 payments over 2 years), assume you wipe out 13w of EI, leaving you with .75 of a year of EI remaining. PAYx1.25Y+EIx.75Y.

Option C is the “education” option, and it splits into two sub-options depending on whether you want to return after the educational period. If you do wish to return, you basically get up to $17K in education, go on leave without pay for 2 years, and, at the end of 2 years, go on a priority list to return to the government. A coworker did this back in DRAP, and it worked out PERFECTLY for her. An amazing option for her, and she returned to full-time work after taking two years to go to school.

Or you can just leave immediately, with no plan to come back, and it is basically the same as Option B, with some potential hiccups related to EI but a tuition bonus. (For EI eligibility, you are supposed to be both actively looking for and available for work, which would normally exclude full-time university attendance. However, there are some options for referrals through the province which might allow it to happen). As such, you can potentially get the TSM (PAYx1y + .25x1Y + EIx.75Y + $17K in tuition.

That’s not chickenfeed

If I get a WFA letter, and opt for Option B or Option C, I could potentially get as much as $200K in salary and EI, not including the education allowance. I would be giving up 1.5y of service and thus losing some on my monthly pension, but at the same time, I’m also not working for the next 20 months.

Which is a long way ’round to say that the government is messing with my verb tenses. Original plans, current plans, and future plans are all in a state of flux. And some people might look at it as either a #FirstWorldProblem (to which I agree) or a “wait and see” situation, i.e., wait to see if I get a WFA letter. Except there is a flexible component in there that if I know there are going to be SOME letters handed out in my area, I could volunteer in advance informally to WFA me. It saves someone else from being whammied. Or even if I’m not whammied myself, I could look at potential alternation options (where people who were whammied change jobs with people who weren’t but were hoping to be). And if I do get whammied, I would still have 120d to figure it all out.

I have to say…I have thought of little else for the last week. And don’t get me started on whether Andrea could retire too, and what that would look like for our finances. Likely workable, even if it wasn’t the plan, and I’m happy to have options; it would be great if they were a bit clearer.

#MessedUpHead