A solid investment
February 16, 2017
Did your leave end in 2016?
Sign in to your Ontario Teachers’ online account, visit the Buyback Centre and let us know by April 30 if you plan to pay for your leave.
It’s a popular time of year for financial planning. Paying for your leave is an investment worth considering. Here are four reasons why:
1) It’s as close to a guaranteed investment as you can get.
If you make $78,000 a year and pay around $10,000 towards a leave, then you’ll stand to collect about $1,880 on average more each year during your retirement. If you’re like most members, you’ll likely collect your pension for more than 30 years, so that $10,000 you invest today could ultimately pay out an additional $56,000 in monthly pension benefits over your lifetime.
2) The credit you’ll add to your pension will increase in value as your salary increases.
We use your best five years’ salary and the time you spent teaching (your credit) to calculate your pension. The cost of your leave is based on your current earnings, but the credit you’ll add to your pension is based on the average of your best five years’ salary. So, your pension benefit's value reflects the higher salary you'll likely earn in your last years of teaching.
3) It’s cheaper than working an extra year to make up for the time you took off earlier in your career.
Contributions to your pension are a percentage of your salary. Since you’ll likely be earning a higher salary at the end of your career, it’s cheaper to pay for a leave now based on your current earnings than to work the extra year and pay contributions on higher earnings. Of course there may be other reasons why you may choose to work an extra year and receive another year's salary.
4) You’ll likely reap the benefits of that extra credit for much longer than it takes to recoup the cost.
If you’re like most members, the cost of a $10,000 leave is recouped within the first seven years of your retirement. If you collect a pension for more than 30 years (as most of our members do), you’ll likely benefit from a higher pension for many more years than it took for you to recoup the cost of the leave.