Readers offer their own suggestions about when to withdraw from the CPP.berkah jaya/iStockPhoto / Getty Images
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This is the latest in an ongoing series, Planning for the CPP, in which Globe Advisor explores the decisions behind when to take CPP benefits and reviews different aspects of the beloved and often-debated government-sponsored pension plan.
Since launching our weekly Planning for the CPP series in January on the timing of taking the Canada Pension Plan (CPP) benefits, we’ve received dozens of e-mails from readers commenting on our coverage, offering story ideas, providing feedback and sharing their thoughts and decisions regarding when to take CPP retirement benefits.
Here’s a collection of these responses, which have been edited and condensed.
‘A bird in the hand’
I read with interest your article about taking CPP at 60. I took mine at 60 and have zero regrets. My thinking is, ‘I am active and healthy now and might not be later.’ I don’t know how long I’ll live. There’s the wise adage that ‘a bird in the hand is better than two in the bush.’ In other words, money today is better than money tomorrow. – Rachel Corbett
I chose to take my CPP at 60 and believe it was the best choice. You may get less money taking it sooner, but you can enjoy it sooner, too, whether it’s for travel, renovations, food, or just upgrading your vinyl collection. Also, the 60-year-old you is likely to be more active and engaged than the 70- or 75-year-old you. As health and abilities start to deteriorate, more money becomes a moot point. The additional CPP money won’t help you much in assisted living, especially when it’s tied to your income. Your pension series needs a more balanced perspective. Maybe compare the average health and activities of 60-year-olds versus 70-year-olds or how money is spent at various ages. That might be far more useful in pension decisions than a strict dollar comparison. – Konrad Doerrbecker
If you take CPP early, you have more cash to spend now, preserving more of your capital for later (inheritance, etc.). Taking it later means that you might have to dig into your capital for spending today, potentially reducing the size of the inheritance you will leave to your beneficiaries. – Alan Tambosso
Take it early and invest it
My financial planner says I should wait until 70 to take my CPP and Old Age Security (OAS) benefits. Working the numbers, I’m not sure this is the right way to go. I’ve been earning 8 per cent in my registered retirement savings plan (RRSP) portfolio. Taking CPP earlier would allow me to leave my money growing in my RRSP. The math seems to justify doing this. Also, income splitting is a huge part of my plan with my wife. When one spouse dies, the income goes to the survivor, and their taxes go up. There’s also the risk of OAS being clawed back. The survivor benefit for CPP is also something to consider, but the government information is confusing. If I could find my death date somewhere, it would make it so much simpler. – Michael Maguire
People assume that money received earlier was wasted. If invested, would it have grown more than you could achieve by waiting? Can you invest more successfully than the CPP’s guaranteed return? Maybe. That would be a pretty good story. – Paul Christie
I’m widowed and took my CPP at 60. I continue to work and now collect my CPP benefits, and my survivor benefits from my late wife. I took it early to invest it and add it to my estate. If I wasn’t collecting CPP and I died, my estate would only receive a death benefit of $2,500. It makes more sense to invest the money and have it grow. – Ray Eckert
I’m a retired chartered professional accountant (CPA) who took my CPP benefits early and invested them in my RRSP and tax-free savings account (TFSA). The overall income was not only higher, but the money was then also available to leave to my family in the event of my death. Paying off debt sooner is another similar option. Less debt tomorrow and less interest paid today is the same as more income later – except it’s tax-free. It’s just another suggestion for those with the self-discipline to do that. – Marnee Faragher
Other points of view
Many of my friends and family took their CPP benefits as soon as possible, based on advice from their financial advisors. If these advisors are paid based on the percentage of wealth they manage, they have an incentive to recommend people take their CPP benefits early instead of drawing down their investment portfolios. Just something to think about. – Chuck Jacobs
The people you interviewed are not average Canadians. Many people don’t have an indexed pension or own a successful company. Many people also have no RRSP or TFSA savings and don’t own their own homes. For these folks, having a larger CPP benefit means receiving less in Guaranteed Income Supplement benefits. – Robert Stevens
Here’s a scenario I have yet to read about: A couple, eligible to receive the maximum CPP benefits, waits until 70 to start collecting the money. Until then, they’re using their retirement savings for income. One of them dies at 70 or soon after. The surviving partner is now seeing their (anticipated) pension income reduced by half because one person can only receive the maximum amount – and their retirement savings have been depleted. It sounds like a valid reason not to wait to collect the CPP. – Bob Giguere
I retired at 61 and started my CPP a bit later. I didn’t need the money; I needed the cash flow. Starting my CPP when I did meant I had some guaranteed monthly income, which made budgeting much easier and reduced my stress. Another major benefit was that, because of the CPP payments, I didn’t have to sell any investments to pay my living costs – and I could reinvest some of the cash flow. With the investments, my cash flow increased. If I had waited and sold some of my investments, my portfolio would be smaller, and I would have less cash flow. Would the higher CPP payments I would’ve received by waiting have increased my cash flow above what it is now? I haven’t played with the numbers and can’t change what has been done, but I’m happy with the results. – Robert Findlay
Plan to start at 70, then revisit
My wife and I (both 66) decided early on not to take our CPP and OAS benefits until 70. We come from long-lived families and based our plan on living to 90. We’ve set our monthly RRSP withdrawals to last until then. We supplement our current income with monthly payments from non-registered savings (which will last until 70) and modest dividends from my part-time consulting business. Meanwhile, we are recycling money from the RRSP withdrawals into our TFSAs, which are our financial backstop. Our plan includes splitting our income to stay in a lower tax bracket. We have the comfort of knowing if our circumstances change, we can always take our OAS and CPP earlier. – Kyle Peterson
As a CPA and long-time financial planner, I advise Canadians to change the order of the CPP timing decision: Plan on taking your CPP benefits at age 70 and then evaluate reasons to go sooner. There are many reasons to go earlier but they require study. It will lead to better decisions for this very complicated question. – Gordon Stockman
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