If you’re looking to take advantage of a Deferred Salary Plan (such as 4 over 5), we’re in a prime position to help you organize your finances year-by-year, ensuring that by year five, you’re free to travel, work on home renos, expand your education – or do whatever else you have in mind.

How a Deferred Salary Plan works?

By spreading your total earned salary evenly over a set number of years, a Deferred Salary Plan allows you to take one of those years as an “unpaid year off” – yet still get paid. For example, the popular 4-over-5 plan means that for 4 consecutive years, you work full-time in exchange for 80% of your salary. You then take the fifth year off, while still being paid 80% of your full salary.

For many, the rewards of this year off more than compensate for the challenges of living on a reduced budget. However, with careful planning, many educators make a huge success of it. This is where Educators Financial Group can help.

Other common deferred salary plans are the 5-over-6, and the 3-over-4. Note that special arrangements can often be made to allow you to begin your sabbatical partway through your year off.

How does this affect my pension?

While participating in a Deferred Salary Plan, you would still be making regular contributions to your pension as though you were receiving your full salary. As a result, you would have very little, if any, extra RRSP contribution room as it is used by your large OTPP contributions to significantly reduce your taxable income.

Who typically participates in a Deferred Salary Plan?

Any educator who has completed 3 years of continuous service as a permanent employee of a participating school board or district may apply for this leave. That said, it’s often best-suited to educators in the earlier stages of their career – a time when you’re still near the bottom of your pay grid, and your pension contributions are minimal. This way, you can reap the full rewards of your Deferred Salary Plan without negatively affecting your pension or retirement.

How do I plan for a deferred salary leave?

If you’re considering or are already participating in such a plan, our experts can help you in many ways, especially advice on maintaining your lifestyle with confidence and peace of mind while earning just 80% of your usual salary. With many educators finding their jobs increasingly demanding, the thought of an entire year off is all the more appealing – we’ll help make it financially feasible.