If you missed out on contributing to your company’s pension plan while you were on maternity leave or sabbatical, there’s a way to catch up. Most defined benefit pension plans will let you “buy back” the years you missed, so you can get the pension you would have received if you’d never taken the time off. Is it worth the money? In most cases, the answer is yes.
“The issue is whether the cost you have to pay now is going to be worth the extra years of pension,” says retirement expert Malcolm Hamilton. If you only have to make up for your own missed contributions—and your employer will pay its part at no cost to you—it’s a no-brainer. “In many cases, the pension is heavily subsidized,” notes Hamilton, so you’re only paying a portion of the true cost.
Try to do it when you’re younger if you can, as the cost will be less. Buying back three years of service in your mid-30s may just set you back a few thousand dollars, but after age 50 the cost could increase 10-fold.
You can get a rough estimate of the benefit using an online pension buyback calculator, or have an actuary do the calculations for you. But either way, take the time to run the numbers. “Don’t just ignore it,” says Hamilton.