You might be on your last LAPP at work as you approach the finish line of retirement. There are several things you need to know about getting there. If you have two or more years of LAPP membership or service you are vested, which means you are entitled to a lifetime LAPP pension at retirement.
Every vested LAPP member is able to take their unreduced pension on or after their 65th birthday. This is considered the "normal retirement age" in the Plan.
How Early Can I Retire?
The earliest that vested LAPP members can begin their pension is their 55th birthday. Retiring early like this normally means that the amount of pension you receive is reduced. You can retire early with an unreduced pension, though, if you have enough pensionable service to meet something called "the 85 factor".
You may have the option of starting your pension earlier than age 55 if you become disabled and stop contributing to the Plan.
85 Factor ("85 Points")
If your age at retirement and your total years of pensionable service added together equal at least 85 points, then you are entitled to an unreduced LAPP pension as early as your 55th birthday.
Early Retirement Reduction
Once you become vested, you can begin your pension as early as age 55, but the amount of the monthly pension you receive will be reduced (unless you meet the 85 factor).
The amount of the reduction is 3% per year multiplied by the lower number of:
Keep reading to see an example of how the early retirement reduction is calculated for a member deciding to retire early with the following age and pensionable service:
STEP 1: Calculate the number of years it would take her to reach age 65, AND the number of years until she reaches 85 points.
STEP 2: Use the lower number (7 Years) to calculate the total pension reduction rate:
STEP 3: Determine the member's monthly pension with the reduction applied:
For this example, if this member waited to start her pension upon reaching 85 points or age 65 (the "normal retirement age" in the Plan), her unreduced pension would be $1,000 per month ($12,000 annually).
Based on the pension reduction calculated in STEP 2, her pension will be subject to an early retirement reduction of 21%, which results in her pension being $790 per month ($9,480 annually).
How Late Can I Wait Before Starting My Pension?
You must begin your LAPP pension no later than December 31 of the year in which you turn 71. This does not mean you have to stop working for your LAPP employer if want to stay on with them, though!
When Should I Retire?
Only you can answer this! It will be different for everyone and can depend on a lot of different factors:
It's a lot to consider, but thankfully we do have some tools to help you.
Pension estimates (also called Retirement Benefit Statement - Estimates) are documents that tell you how much pension you might expect to get if you keep working at the same pace or Full-Time Equivalent you are now until a certain date. The longer you work, the larger your pension will get.
Think about getting at least two estimates: one for the earliest you would consider retiring, and another for the longest you would wait before starting your pension. This will give you an idea of how much more you could receive by continuing to work for a period of time. Estimates can be a great help in figuring out the best date for you to retire, and you can receive one by contacting us.
You will also want to consider how other forms of income — like Old Age Security, the Canada Pension Plan and any personal investments — will affect your finances once you have retired. There are other resources throughout the Thinking of Retiring section, and you can always contact us if you have any questions about your LAPP pension.