Timing, health and other factors play into the decision
Clients who took short breaks from their careers – such as parental leave or sabbatical – or who neglected to join their company’s defined-benefit pension plan when eligible may opt to “buy back” into their pensions to boost the amount of guaranteed income in retirement.
Usually, the employer presents buyback opportunities over a specific time period. Defined-benefit pension plans will have the employer match the employee’s contributions or, in certain cases, exceed them. Ms. Thompson helped a client on maternity leave with a buyback. The client ultimately decided on a 12-month leave instead of 18 months, so “there was enough of a buffer at the end of maternity leave to be able to fund that buyback,” she says.
The pension’s actuarial stability and how it’s structured also need to be considered before investing more money into a buyback. Ms. Thompson points to her grandfather’s pension plan from Nortel Networks Corp., which was supposed to be a stable company with a coveted pension plan.
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