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This is the latest in a continuing series, Planning for the CPP, in which Globe Advisor explores the decisions behind the timing of when to take CPP benefits and reviews different aspects of the beloved and often-debated government-sponsored pension plan.
It’s often said that good things come to those who wait. For Canadians eligible for the Canadian Pension Plan (CPP) or Quebec Pension Plan (QPP), the “good thing” is more money. Canadians who hold off until 70 to collect their CPP benefits receive 42 per cent more than if they took it at 65, which is considered the traditional age to start – even though many more take it sooner.
Globe Advisor spoke with four Canadians about why they waited, or plan to wait, until 70 to collect their CPP benefits:
Stephen Wisking, 71, Ottawa
Mr. Wisking started taking his CPP benefits at 70, five years after he retired, because of the higher payout.
He also had other retirement savings and a small pension from his career in the banking industry, so he didn’t need the CPP to make ends meet.
“The revenue stream from the CPP wasn’t instrumental for me,” he says. “If you need it, you don’t have a choice. I calculated that I didn’t need it, but if the situation had changed, I could’ve always taken it sooner.”
Mr. Wisking also likes that the pension is a guaranteed income stream that’s indexed to inflation.
“It’s reassuring,” he says. “I wasn’t desperate to make sure I got every last cent out of the CPP. I wanted to be more sure that if the day ever came when I really needed it, it would be there, and I would get the maximum amount I could.”
One worry he has is running out of money later in life, especially if he becomes ill and needs to move into a long-term care home.
“I don’t want to end up at a place where the care is mediocre. I’d rather have a little cushion for something higher end,” he says.
Stan Davey, 71, Winnipeg
Mr. Davey was in his mid-60s when he decided to wait to start taking his CPP benefits.
He was researching the topic on the Financial Wisdom Forum website, an online discussion community for Canadian investors, and realized that – if he was careful with his money – he could live off his workplace pension and other investments until it was time to collect his CPP and Old Age Security (OAS) benefits at 70.
“I viewed it mainly as longevity insurance,” says Mr. Davey, who retired in 2018, at 65, from his information technology job at the Winnipeg Regional Health Authority. “It was the security I was going for.”
The self-directed investor, who gave up his investment adviser in 2008, crunched some numbers and believed he would be better off waiting and collecting the higher CPP payments.
His wife, who retired just before him, is also deferring her CPP and OAS benefits until she turns 70 next year.
“I would suggest that, if you can afford to wait, you should,” Mr. Davey says.
Vince Tan, 65, Vancouver
Mr. Tan retired last year, at 64, after spending decades running his own general maintenance contract business. As a self-employed person who paid himself a salary, Mr. Tan had to contribute to the CPP as both an employer and an employee. He also put away money regularly in a registered retirement savings plan (RRSP).
He plans to wait until 70 to start collecting his CPP benefits because of the higher payout.
“If you’re healthy and can wait to 70, you will receive 42 per cent more,” he says. “I view it as a longevity risk.”
Mr. Tan says most of his friends took CPP at 60, viewing it as “free money.” Some worry they won’t live long enough to get the most out of their CPP benefits.
“I don’t worry if I will die at 75. I worry that I won’t have enough money to spend when I get older. Everything is so expensive,” he says.
His strategy is to live off his RRSPs until 70, which lessens how much money he’ll be forced to take out of his RRSP when it’s converted to a registered retired income fund (RRIF). Mr. Tan also plans to delay his OAS benefits until he reaches 70.
“If you’re considered a healthy person and have a large RRSP and other savings, why not delay to 70 and get a higher CPP payment for the rest of your life,” he says. “I exercise every day, so hopefully, I’ll live a long time.”
Alan Whyte, 68, Kingston
Mr. Whyte is a semi-retired lawyer who plans to wait until he’s 70 to take his CPP benefits.
He retired from his legal career in 2021 and now runs a small legal consulting business to keep busy and help cover some of his living expenses. Because he was self-employed during his career, he doesn’t have a workplace pension and plans to live off of the income generated from his corporation and his CPP and OAS benefits, the latter of which he will also start collecting at 70.
“If you don’t have a pension to fall back on, you have to create your own,” Mr. Whyte says. “I don’t have any other inflation-protected retirement savings, and, like many people, I worry about outliving my money, especially if I have the good fortune to live a long time. There is longevity in my family.”
Mr. Whyte knows many people who started taking their CPP benefits sooner – and for good reasons – but says waiting is the right decision for him.
“If I ended up passing away at age 72, it would probably be the wrong decision. But, at that point, I’m not going to care. I’d rather buffer against the possibility that I will live to 95, or maybe longer.”
Next Tuesday, we feature Canadians who wish they had waited longer to take their CPP benefits – and why.
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