charting retirement

Last week, we calculated whether a man aged 60 was better off starting his CPP pension at 60 versus at age 70. To do the calculation, we first determined the break-even age: the age when the total CPP pension received (adjusted for interest) by starting CPP at the later age first exceeds the total CPP pension if you start it earlier.

For men, the probability that starting CPP at 60 was the better strategy was just 19.6 per cent. As we show below, it will be different for women since their mortality rates are different.

Imagine there are 1,000 women, all age 60, who decide to start their CPP pensions immediately. The chart shows how many of them “win” each year by starting their CPP early.

Why women (probably) shouldn’t take CPP early

Number of women out of 1,000 who end up being better off taking

CPP early by age

Winners

(by starting CPP early)

Losers

60

40

20

65

70

75

80

85

90

95

100

THE GLOBE AND MAIL, source: AUTHOR’S CALCULATIONS USING CPM-2014

MORTALITY WITH IMPROVEMENTS TO 2023

Why women (probably) shouldn’t take CPP early

Number of women out of 1,000 who end up being better off taking

CPP early by age

Winners

(by starting CPP early)

Losers

60

40

20

65

70

75

80

85

90

95

100

THE GLOBE AND MAIL, source: AUTHOR’S CALCULATIONS USING CPM-2014

MORTALITY WITH IMPROVEMENTS TO 2023

Why women (probably) shouldn’t take CPP early

Number of women out of 1,000 who end up being better off taking CPP early by age

Winners (by starting CPP early)

Losers

60

40

20

65

70

75

80

85

90

95

100

THE GLOBE AND MAIL, source: AUTHOR’S CALCULATIONS USING CPM-2014

MORTALITY WITH IMPROVEMENTS TO 2023

By adding up all the years, the total number of winners is 152. By contrast, the ultimate number of losers, (those who started CPP early but die after age 80 and 6 months) is 848.

In other words, there is only a 15.2-per-cent chance they will be better off starting CPP at 60 versus 70. In spite of this math, most Canadians start their CPP earlier rather than later.

Frederick Vettese is former chief actuary of Morneau Shepell and author of the PERC retirement calculator (perc-pro.ca)