Once upon a time, my body built a human being. While I was busy teaching, writing reports, and sitting through meetings, I was also forming tiny eyelashes, fingernails, and generating cells to give my baby a heart, lungs and other important body parts. I know, I’m awesome.
Then, one fateful day during Christmas Break, my sweet baby arrived. Like many parents, I spent my glorious maternity leave gazing into her beautiful face, stressing over how little she slept, and feeling my heart bursting with pride the first time she fed herself a Cheerio. You know what I didn’t spend much time doing? Thinking about my retirement.
I recall one worrisome day when my teacher maternity leave buyback options were explained to me. I don’t remember many details of the conversation, but I vividly picture my face aghast as a ridiculously large number was quoted to me. Where did this financial forethought fit in with my world of baby music class and strolls in the park?
Being the wise, grown-up mom I was, I simply pushed buying back my maternity leave out of my head. Enter baby number two - just as squishy and beautiful and also needing a mom who can provide for her in the future.
I’m an older mom and retirement isn’t really far away - actually, it may come around the time my girls head off to university. Sounds like it may be a time when there is major strain on the old finances. I better get planning!
So here’s the thing...if you suddenly realize you’ve got some catching up to do with your pension, don’t panic. Feel free to continue exerting most of your energy on raising that wonderful, new cuddly person in your life. There are many tools to help you manage your buyback. Here are a few things you need to know:
This means that for all the time you are off, money doesn’t go into your pension savings account. And when you are ready to retire and start collecting that pension, there will be less money to take out.
Your year off (or however long you take off) will affect how much pension you receive. It can be significant - buying back your leave can mean a couple thousand dollars difference in your annual pay out during retirement. A couple thousand! Whether you will be a doting grandmother at that time, or like me, have kids in university (and hopefully, not YET a grandmother), a few thousand dollars a year can have a big impact.
This is important, especially if you're like me and chose to ignore your buyback for a while, or if you have other financial needs to tend to first. You can budget and decide when it is best to put that money back into your pension. The OTPP website, will walk you through all the options surrounding your leave. All the info is outlined in understandable language (for less financially-savvy people, such as myself). You can also call and speak with a pension expert.
That big scary number I mentioned before? It's not so frightening when broken into manageable chunks. Just as we break down complex concepts into teachable units for our students, portion out that buyback so you can manage it. We can totally do this.
Need more reasons to buy back? Consider this: contributions to your pension, including any buyback, are matched by your employer. That means, every dollar you put in equals two dollars you get back. It's just smart, secure investing in your family’s future.
RRSP savings can be used to pay for all or some of your buyback. Any money transferred from your RRSP won’t be taxed as income because you’re just moving money from one tax-sheltered savings account to another. I love phrases like “all or some” because it means you have choices and you don't have to commit to a big payment outside of your budget. I’m also a fan of the phrase “won’t be taxed,” because who doesn’t want to save a little on taxes while planning for the future? Give them a call and they’ll explain it all to you in fine detail.
There is also the excellent BabySteps app to help. This free app, available through the Apple Store, is an awesome resource for those early (sleepless) parenting years, and it is geared towards YOU - parents on leave, or those who have recently have taken a leave from teaching. There is also a blog built into the app which offers helpful pension advice and great parenting tips.
There are also videos where parents like you share their buyback stories.
My favourite part of the BabySteps app? It tracks your buyback for you! There is a tracking tool that tells you how much time you have left to buy back each leave, how much money you have paid and how much is remaining (sadly, those two numbers are very far apart for me, but with all this help, I’m closing the gap). It also tells you the exact dollar amount your annual pension will increase if you decide to buy back - a great motivation!
Buying back your leave doesn’t have to be a daunting cloud hanging over your leave. There are apps, tools and people to help. Now go snuggle that little one and spend just a few seconds thinking about your family’s future!