Author Topic: CPP - best age to start  (Read 5215 times)

bluebelle

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CPP - best age to start
« on: September 26, 2017, 08:34:42 AM »
Other than needing the money now or a shorter than average life expectancy, is there ever a good reason to start CPP before age 65?  My brother's tax accountant is encouraging him to start drawing CPP at at 60 rather than waiting until 65 or beyond.  My brother has a pretty good government pension and has a better than average life expectancy, based on family history and his own current health. 

I think he should wait until at least age 65, unless he needs the money for cash flow (I don't think he does), his accountant is taking the 'bird in the hand' stance and thinks he should get it while he can.  I'm actually considering waiting to age 70 myself and treating it like a guaranteed annuity for my later years when I don't want to have to manage funds.

I'd love to hear others opinions of 'when to start CPP'?   I have a few retired friends that took it at 60, and I just don't see the benefit.  What am I missing?

Retire-Canada

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Re: CPP - best age to start
« Reply #1 on: September 26, 2017, 08:58:24 AM »
Other than needing the money now or a shorter than average life expectancy, is there ever a good reason to start CPP before age 65?  My brother's tax accountant is encouraging him to start drawing CPP at at 60 rather than waiting until 65 or beyond.  My brother has a pretty good government pension and has a better than average life expectancy, based on family history and his own current health. 

I think he should wait until at least age 65, unless he needs the money for cash flow (I don't think he does), his accountant is taking the 'bird in the hand' stance and thinks he should get it while he can.  I'm actually considering waiting to age 70 myself and treating it like a guaranteed annuity for my later years when I don't want to have to manage funds.

I'd love to hear others opinions of 'when to start CPP'?   I have a few retired friends that took it at 60, and I just don't see the benefit.  What am I missing?

If you retire at say 50 and take CPP at 60 you have 10 years of zero contributions that are calculated into the mix to determine your monthly payment, but the payment is reduced due ~36%. If the same person took CPP at 65 they have 15 years of zero contributions in the calculation of the monthly payment, but there is no reduction in the monthly benefit.

Assuming you don't need the money you'd have to decide if you preferred to have the reduced payment at 60, which you could save and invest [perhaps in your TFSA] or if you'd prefer to wait and get it later.

There are a lot of factors at play [expected rate of return, expected longevity, financial situation, changes to CPP regulations, income tax changes, claw back of OAS, etc...] so I don't think there is a cut and dried generic answer.

I'm leaning towards taking it early because:

1. I'll have fewer non-contributing years in the calculation of my benefit
2. I like managing my own money
3. getting 5yrs of CPP payments I can save and invest is a considerable sum

For some rough calcs:

- assume max CPP at 65 is $1000/month [it's a bit higher]
- at 60 you'd get $640/month [$1K less 36%]
- if you saved and invested that reduced CPP payment from 60-65 and got 6% after inflation you end up with ~$44.6K
- by 80 you'd end up with $296K
- if you took the full $1K at 65 by 80 you'd end up with $291K
- now your actual investment returns with taking CPP early could be much higher or much lower
- this doesn't account for a reduced benefit amount at 65yrs due to 5 less contributing years
- this doesn't factor in income tax

Given your brother's accountant has all his financial details and must be looking at CPP issues daily I'd go with what he suggests unless you have a compelling argument otherwise.
« Last Edit: September 26, 2017, 09:36:34 AM by Retire-Canada »

bluebelle

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Re: CPP - best age to start
« Reply #2 on: September 26, 2017, 10:19:43 AM »
thanks for the detailed reply.

It's doubtful he'd invest the early CPP payments (remember it's me, not him on this forum).

The risk/reward of an extra 5K at age 80 isn't worth it to me, especially since I don't believe a 6% return after inflation is realistic, but that's just me, I see getting more risk adverse as I age.

And we can drop out 7 of the lowest years, CPP looks at the best 40 years out of the possible 47.

Retire-Canada

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Re: CPP - best age to start
« Reply #3 on: September 26, 2017, 10:47:26 AM »
It's doubtful he'd invest the early CPP payments (remember it's me, not him on this forum).

The risk/reward of an extra 5K at age 80 isn't worth it to me, especially since I don't believe a 6% return after inflation is realistic, but that's just me, I see getting more risk adverse as I age.

And we can drop out 7 of the lowest years, CPP looks at the best 40 years out of the possible 47.

I don't know your brother, but I assume his accountant has a pretty good handle on what his finances and plans are.

Assuming you spend every penny of CPP as soon as you get it:

- Lets' pretend $1K/month is the payment at 65 and $640/month is what you get at 60
- 60-65 = $38.4K you spent and by 80 you will have spent $~154K
- waiting until 65 to start by 80 you will have spent $180K
- ignores income taxes you'd owe on CPP payments
- ignores impact of 5 extra non-contributing years for calculating CPP at 65

Assuming his accountant is any good I would assume he's wargamed the various CPP options and decided early is better for some reason. I can see an unsophisticated retiree jumping to the "bird in hand" conclusion because it's emotionally appealing, but it's hard to imagine a professional accounted thinking in such simplistic terms about a topic they must deal with many many times a year.

Ultimately without access to the information the accountant has it's hard to say he's wrong in his recommendation.

Prairie Stash

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Re: CPP - best age to start
« Reply #4 on: October 02, 2017, 09:07:52 AM »
Is he married and what about the spouses income? You're saying he has a good pension, what about the spouse and what happens if he passes? will the spouse get the double whammy of reduced CPP and pension? On the other hand if he gets it early, puts it aside, it can act as a life insurance policy for the spouse.

There's a good reason right there, looking after your spouse.

bluebelle

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Re: CPP - best age to start
« Reply #5 on: October 02, 2017, 10:05:20 AM »
thanks for the reply....
I find it doubtful that he'd save the CPP between age 60 and 65, which is why I advocate waiting and getting a larger amount.  The idea of getting it and saving it is an interesting point and one I hadn't considered for myself (I'm only 53 now, so I have a few years to decide).  I was actually planning on waiting to age 70 to draw and thinking of it as a life annuity.  I don't want to need to manage investments after age 80. 

He does have a spouse, who is 10 years his junior.  She has always worked, and will be entitled to her own CPP (don't know if it will be the max amount or not, I'm guessing not, but close).  I know she has RRSPs (but I doubt a huge balance).  He's been very open with me about his money, but not hers (I'm hoping he knows)

This brings me to some CPP and survivor benefit questions:
1) if both spouses are receiving max CPP payments, when one spouse dies, am I correct that the surviving spouse does not receive additional monies?
2) if spouse 1 passes (and was receiving the max CPP less the reduction for taking it early), and spouse 2 is receiving CPP less than the maximum - what would spouse 1 now receive?  My understanding is that the reduction impacts what spouse 2 would receive.

This has me thinking about what I should do....both my spouse and I have contributed the maximum to CPP every year, but will be dropping out 10 years early.  By my calculations, that will get us approximately 84% of max CPP.  Based on my family longevity, my plan goes to age 100, but based on hubby's health issues and less than optimal lifestyle choices, I think I'll be lucky to have him to age 80.   CPP discriminates against higher income earners, by capping the survivor benefit they way they do.  Imagine the uproar if my husband's defined benefit pension decided I didn't get the 60% survivor benefit because I had my own pension income!  That is what CPP does.  Remember, CPP is funded by employee/employer contributions, but the government has decided that they get to keep my CPP survivor benefit because I "don't need it".  (steps off soapbox).  I know the government isn't really keeping the money, and it's kept inside the CPP coffers, I'm just annoyed that I won't get something that I think I "deserve".   (and I put "deserve" in quotes because I worry that our society has become a bunch of special little snowflakes, if I hear one more commercial about how someone "deserves" a new car, I may loose it.)

BNgarden

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Re: CPP - best age to start
« Reply #6 on: October 02, 2017, 12:07:07 PM »
I think Doug Runchey has the most complete information for the public about CPP and survivor's benefits. 

http://www.drpensions.ca/

Here is one article:
https://retirehappy.ca/cpp-survivor-benefits/

Prairie Stash

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Re: CPP - best age to start
« Reply #7 on: October 02, 2017, 12:19:01 PM »
Bluebelle, from your scenario, what happens to his 10 years younger wife if he passes at 80 and she's 70? Will she have enough to keep the house and maintain their combined standard of living? As you point out the household income will drop, not all the bills will though. I'm guessing the accountant is thinking in terms of this as well. What would you do in her shoes?

In your case, making rough assumptions, it might be good for you to wait till 70 and your husband to get it at 60. Its the blend, you get a lifetime annuity and if your husband passes early you get the savings. Although it seems couples tend to take it at the same time, there's no rules against timing it to optimize the household.

CPP, pensions, RRSP's always need to consider the household, not just the individual.

Goldielocks

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Re: CPP - best age to start
« Reply #8 on: October 02, 2017, 02:50:01 PM »
I am skeptical that there are more net dollars to taking CPP early, even if retiring early.   There was a year or two during the rules switchover where someone could choose OAS and maybe early CPP that provided a loop hole, that is now closed.  I calculated this very thing several times for myself, and it was always the same money or better to take it at age 65.  (or a minor difference)

The advantages to early CPP:

1)  If you expect to die earlier than age 80 for some reason.   The cash is calculated to be identical for people living to age 80.
2)  If you expect to receive  more income at age 65 or 67 (OAS, pension, spousal pension, etc).  and you need the extra money to cash flow your expenses NOW not later. 
3)  A variation on the above -- if you receive another source of income after age 65 (e.g., RRIF income?) that would generate a OAS clawback, and you are close to the cut off, so a lower CPP taken earlier, is to your benefit.

4)  I have seen some advisors show that the earlier CPP is invested 100% and grows for 20 years before funding future retirement, because a spouse is still working, (money not needed) and self investing the money for a couple of decades is better returns than the increased CPP...  I thought that was being overly optimistic of human nature to keep it invested, but those are the planners trying to get people to buy more funds from them..

Stasher

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Re: CPP - best age to start
« Reply #9 on: October 02, 2017, 05:40:33 PM »
I simply see it as this....
I could die tomorrow !
I like money now
I could possible preserve my investment capital marginally and enjoy the government piggy bank sooner.

pachnik

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Re: CPP - best age to start
« Reply #10 on: October 03, 2017, 11:14:37 AM »
I simply see it as this....
I could die tomorrow !
I like money now
I could possible preserve my investment capital marginally and enjoy the government piggy bank sooner.

I smiled when I read this one.  I agree with it completely.  My husband turned 60 earlier this year and started collecting his CPP.  He's still working and expects to put the pension money into his retirement savings.   I won't turn 60 for a while but I will collect it right away too.

Stasher

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Re: CPP - best age to start
« Reply #11 on: October 03, 2017, 12:55:51 PM »
@Pachnik .... of course my answer is horribly simplified but so many around me between the ages of 50-70 died suddenly and unexpectedly around me in the last year including my Father and Uncle only weeks apart from each other. My mind has switched over the last year and I am happy to live with less and go for what is right in front of me both financially and experiential.

pachnik

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Re: CPP - best age to start
« Reply #12 on: October 03, 2017, 02:44:15 PM »
@Pachnik .... of course my answer is horribly simplified but so many around me between the ages of 50-70 died suddenly and unexpectedly around me in the last year including my Father and Uncle only weeks apart from each other. My mind has switched over the last year and I am happy to live with less and go for what is right in front of me both financially and experiential.

Stasher, I  get it.  My best friend died in her mid-50's and never got to collect a cent of the pension she'd been paying into.  Another friend has lots of pension $$$ coming in but isn't able to enjoy it since she has been struggling with a terrible mental illness for the last several years. 


meghan88

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Re: CPP - best age to start
« Reply #13 on: October 04, 2017, 06:04:17 PM »
But what about those of us who would defer CPP/OAS in order to draw down from the RRSP in the absence of other income so that there is a smaller RRSP to roll into a RRIF?  Is that a dumb idea for those with no dependents?

Stasher

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Re: CPP - best age to start
« Reply #14 on: October 04, 2017, 06:16:31 PM »
But what about those of us who would defer CPP/OAS in order to draw down from the RRSP in the absence of other income so that there is a smaller RRSP to roll into a RRIF?  Is that a dumb idea for those with no dependents?

I don't think there is any dumb idea out there, we each do what is best for us. I won't have anywhere enough total income to worry about so for me I'm taking the cash....

You can withdraw up to $72,000 per individual before there is any OAS clawback and if you are able to take that much out of your RRSP at 60, well I owe you a high five and job well done!

http://www.moneysense.ca/save/retirement/pensions/why-im-taking-old-age-security-right-at-65/

Goldielocks

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Re: CPP - best age to start
« Reply #15 on: October 04, 2017, 11:38:29 PM »
But what about those of us who would defer CPP/OAS in order to draw down from the RRSP in the absence of other income so that there is a smaller RRSP to roll into a RRIF?  Is that a dumb idea for those with no dependents?

That's a pretty good idea, it's just that not that many (%) people are worried about too much money in retirement, and some who have enough that they should be, are clueless bout taxes.

The rest are on this forum..   ;p


For me, I have calculated that any year that I would have individual income less than $60k, is a year to pull from the RRSP's to draw down, even if it goes right back into the taxable investments.  The tax bracket drop versus when I put it in, is worth it.  This is not just about OAS clawback, but overall balacing out the marginal tax rates between high and low years.
« Last Edit: October 04, 2017, 11:46:22 PM by Goldielocks »

meghan88

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Re: CPP - best age to start
« Reply #16 on: October 05, 2017, 09:04:50 AM »
For me, I have calculated that any year that I would have individual income less than $60k, is a year to pull from the RRSP's to draw down, even if it goes right back into the taxable investments.  The tax bracket drop versus when I put it in, is worth it.  This is not just about OAS clawback, but overall balacing out the marginal tax rates between high and low years.

Yeppers - No matter what I draw down from the RRSP, I'll keep contributing the max each year to my TFSA.

You mention drawing down when your individual income is less than 60K.  Wondering why you've chosen that amount?  And, would you also plow the max back into your TFSA after you draw down from the RRSP?

I don't think there is any dumb idea out there, we each do what is best for us. I won't have anywhere enough total income to worry about so for me I'm taking the cash....

You can withdraw up to $72,000 per individual before there is any OAS clawback and if you are able to take that much out of your RRSP at 60, well I owe you a high five and job well done!

http://www.moneysense.ca/save/retirement/pensions/why-im-taking-old-age-security-right-at-65/

Thanks for the link - that story makes good sense to me, and I may well do the same:  Defer CPP to 70 but take OAS at 65.

Step37

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Re: CPP - best age to start
« Reply #17 on: October 24, 2017, 09:06:27 PM »
Posting to follow.

Rightflyer

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Re: CPP - best age to start
« Reply #18 on: January 13, 2018, 05:58:59 AM »
Why would anyone pay about $2,500 per year for 20 years so that if you die before age 65 your estate will get $2,500 as a death benefit... that is taxable? If you live, you get approx $13,000 per year at age 65... but that too is taxable. Makes no sense.

I was just shown a strategy that costs a little more than CPP but my estate gets $400,000 tax free on death and $40,000 per year tax free at retirement. My wife is doing the same so that when we retire we'll make $80,000 a year tax free.

Is this a sales pitch?

Retire-Canada

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Re: CPP - best age to start
« Reply #19 on: January 13, 2018, 08:01:19 AM »
Why would anyone pay about $2,500 per year for 20 years so that if you die before age 65 your estate will get $2,500 as a death benefit... that is taxable? If you live, you get approx $13,000 per year at age 65... but that too is taxable. Makes no sense.

I was just shown a strategy that costs a little more than CPP but my estate gets $400,000 tax free on death and $40,000 per year tax free at retirement. My wife is doing the same so that when we retire we'll make $80,000 a year tax free.

I'm not aware that you can opt out of CPP so there is no choice beyond what start date you pick for your benefits to start.

RichMoose

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Re: CPP - best age to start
« Reply #20 on: January 13, 2018, 10:38:56 AM »
Why would anyone pay about $2,500 per year for 20 years so that if you die before age 65 your estate will get $2,500 as a death benefit... that is taxable? If you live, you get approx $13,000 per year at age 65... but that too is taxable. Makes no sense.

I was just shown a strategy that costs a little more than CPP but my estate gets $400,000 tax free on death and $40,000 per year tax free at retirement. My wife is doing the same so that when we retire we'll make $80,000 a year tax free.
Most people join MMM forums to freely share their knowledge with a like-minded online community. We have doctors, lawyers, accountants, engineers, software guys, plumbers, you name it.

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Be a part of this community by meaningful contribution and please promote your business elsewhere.

bluebelle

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Re: CPP - best age to start
« Reply #21 on: January 16, 2018, 12:34:29 PM »
I found this a while back.....It lets you download an excel spreadsheet and get a reasonably accurate estimate of your future CPP payments.  I had added a second worksheet based on my own numbers, I didn't start contributing the max until I was 23 (later start due to unniversity)....and I plan to stop when I'm 56.  Based on that, my breakeven point between taking it at 65 vs 60 is if I live past 77.  And I'd have to live past 89 to make delaying it until 70 worthwhile...I have longivity in my genes though, my Mother is 96 and one of my father's cousins is turning 100 in May.  What I didn't do was try and apply a present value to the money.  I'm treating $1 at age 60 the same as $1 at age 65, and that's not quite fair, but it's close enough for me for right now. 


http://www.holypotato.net/?p=1694


The Fake Cheap

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Re: CPP - best age to start
« Reply #22 on: January 20, 2018, 05:20:56 PM »
I found this a while back.....It lets you download an excel spreadsheet and get a reasonably accurate estimate of your future CPP payments.  I had added a second worksheet based on my own numbers, I didn't start contributing the max until I was 23 (later start due to unniversity)....and I plan to stop when I'm 56.  Based on that, my breakeven point between taking it at 65 vs 60 is if I live past 77.  And I'd have to live past 89 to make delaying it until 70 worthwhile...I have longivity in my genes though, my Mother is 96 and one of my father's cousins is turning 100 in May.  What I didn't do was try and apply a present value to the money.  I'm treating $1 at age 60 the same as $1 at age 65, and that's not quite fair, but it's close enough for me for right now. 






23?  Kind of makes me feel bad I didn't hit CPP max until like 34.  No need to provide excuses for "only" hitting it at 23. :)
(Sorry, I know this doesn't really add much to the discussion.)

bluebelle

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Re: CPP - best age to start
« Reply #23 on: January 20, 2018, 05:30:24 PM »
23?  Kind of makes me feel bad I didn't hit CPP max until like 34.  No need to provide excuses for "only" hitting it at 23. :)
(Sorry, I know this doesn't really add much to the discussion.)


oh - don't sell yourself short - in made me snort a little....and made me realize that my comment was tad bit obnoxious with my 23  comment.  I forget that I was fortunate, and landed an IT job right out of unniversity.  And that it was late mid-80s when everybody was hiring 20-30 graduates at a time.

Prairie Stash

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Re: CPP - best age to start
« Reply #24 on: January 22, 2018, 08:33:52 AM »
I found this a while back.....It lets you download an excel spreadsheet and get a reasonably accurate estimate of your future CPP payments.  I had added a second worksheet based on my own numbers, I didn't start contributing the max until I was 23 (later start due to unniversity)....and I plan to stop when I'm 56.  Based on that, my breakeven point between taking it at 65 vs 60 is if I live past 77.  And I'd have to live past 89 to make delaying it until 70 worthwhile...I have longivity in my genes though, my Mother is 96 and one of my father's cousins is turning 100 in May.  What I didn't do was try and apply a present value to the money.  I'm treating $1 at age 60 the same as $1 at age 65, and that's not quite fair, but it's close enough for me for right now. 


http://www.holypotato.net/?p=1694
Thank you for the link. I now realize how small CPP will be for me :)  All information is good though, its easier to for the future.

Stasher

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Re: CPP - best age to start
« Reply #25 on: January 22, 2018, 11:03:30 AM »
You can avoid all spreadsheets and formulas now thanks to the CRA
Log into your CRA online "My Account" income tax portal, from their click on the "My Service" button on the left side I believe. Then click on estimated CPP link and it shows you every year you paid in and what your current projection is.

Retire-Canada

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Re: CPP - best age to start
« Reply #26 on: January 22, 2018, 11:05:31 AM »
You can avoid all spreadsheets and formulas now thanks to the CRA
Log into your CRA online "My Account" income tax portal, from their click on the "My Service" button on the left side I believe. Then click on estimated CPP link and it shows you every year you paid in and what your current projection is.

Does that projection assume you keep working until you take CPP? If so that doesn't work for folks that retire early.

Stasher

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Re: CPP - best age to start
« Reply #27 on: January 22, 2018, 11:09:46 AM »
I believe it is making that assumption @RC
But for those that want to do their own calculations it shows your contributions for every single year that you worked. Then you can do the math easily to figure out the amount at 60 you will receive due to your non-working years.

Retire-Canada

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Re: CPP - best age to start
« Reply #28 on: January 22, 2018, 11:14:26 AM »
I believe it is making that assumption @RC

Okay. I thought so. I just don't want folks to overlook that as it can make it seem like they'll get way more CPP $$$ than they will actually get if they stop work early.

Prairie Stash

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Re: CPP - best age to start
« Reply #29 on: January 22, 2018, 11:28:19 AM »
You can avoid all spreadsheets and formulas now thanks to the CRA
Log into your CRA online "My Account" income tax portal, from their click on the "My Service" button on the left side I believe. Then click on estimated CPP link and it shows you every year you paid in and what your current projection is.
The CRA estimate seems to assume I'll work until I apply. It doesn't have the option to retire at 40-45 and forecast my CPP. I much prefer the CRA estimate, but its not an accurate estimation for anyone doing FIRE. The spreadsheet estimates I might get $5000/year, the CRA estimates $12,000. The $5000 makes sense for someone only working half as much as a regular Canadian.

It does a great job at having the information for the spreadsheet.

chickinyow

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Re: CPP - best age to start
« Reply #30 on: February 15, 2018, 09:36:01 AM »
I will definitely take it early. The breakeven point is around age 80 or so. Hubby is currently 48 and retired from the military with a 28 year pension and working for the federal government (double dipper). When we went to the retirement seminar before he left the military it seemed to me taking it early was our best bet. He will have 5 years of collecting the bridge benefit as well as the reduced CPP, then at 65 the bridge benefit stops, but OAS starts. I feel I am good enough with money/investments that there is no reason to wait to collect CPP for either of us (I'm planning to stop working at about age 55 - so in 8 years or so).

RichMoose

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Re: CPP - best age to start
« Reply #31 on: February 15, 2018, 10:06:22 AM »

daverobev

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Re: CPP - best age to start
« Reply #32 on: February 15, 2018, 10:51:17 AM »
Oh, man, so taking CPP early reduces the number of "zero years" for someone FIRE?

Wow. I should quite possibly take mine early then - I have only paid in for a few years (immigrant), and I'll get the drop outs as well as some child rearing I think.

If anyone's really au fait with this stuff... let me know? I think I'll have ~5 years of reasonably high contributions and another couple with much lower. But that'll be all, unless I decide to go back to work after the children are older.

I think it makes sense for me to delay taking OAS because, again, I'm an immigrant and OAS is based on years of residency. So not only will I get the bump for delaying taking it, but also more eligible years too (caps at 40 years, but I only came when I was 30 or 31).

Depending on what happens with the TFSA I may even be eligible for GIS. Not sure I feel happy taking it, even if I am eligible. We'll see, I suppose - still a long time for me before I get there.

Goldielocks

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Re: CPP - best age to start
« Reply #33 on: October 11, 2018, 12:58:11 PM »
Oh, man, so taking CPP early reduces the number of "zero years" for someone FIRE?

Wow. I should quite possibly take mine early then - I have only paid in for a few years (immigrant), and I'll get the drop outs as well as some child rearing I think.

If anyone's really au fait with this stuff... let me know? I think I'll have ~5 years of reasonably high contributions and another couple with much lower. But that'll be all, unless I decide to go back to work after the children are older.
I ran my numbers and FIRE with 25 years of CPP credits --> taking CPP at age 60 did not result in greater net claim than at age 65.  The 0.7%/mo deferral rate is still the strongest factor in the calculation, zeros in years of service are mathematically less significant.

Quote
I think it makes sense for me to delay taking OAS because, again, I'm an immigrant and OAS is based on years of residency. So not only will I get the bump for delaying taking it, but also more eligible years too (caps at 40 years, but I only came when I was 30 or 31).

Depending on what happens with the TFSA I may even be eligible for GIS. Not sure I feel happy taking it, even if I am eligible. We'll see, I suppose - still a long time for me before I get there.
Daverobev

I just ran numbers for a client in a similar situation.  She will be resident in Canada for 19 years at the time of her retirement.  Because each year of deferral of OAS adds to her 1/40 increase due to additional residency, plus the 0.6% deferral/month, the total value of the deferral is actually 1.1% per month she defers.

Then I ran the numbers to see if she should defer the OAS in light of GIS.   She is planning on a retirement income of about $24k per year, and can structure how she takes it to get GIS before age 70.

Because OAS $ value is still quite low when you only have 20 years of residency, adding 60% more to OAS by deferring is vastly overshadowed by the available GIS that she would no longer receive.   So, if you can claim at least $200/mo GIS because you are justifiably low income, then take OAS as soon as you retire, despite any deferral bonuses.    (GIS maxes out around $17k/yr for singles)


Her solution is to work until 67, (to create more retirement savings, she is mid 50's and has little now), apply for OAS and GIS, use TFSA to top up the difference to get $2k/mo income.  Then, at age 70 start CPP, losing the GIS, and sell her home, investing conservatively, to make up to about $25k/yr income plus rent on a small place.

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Re: CPP - best age to start
« Reply #34 on: October 11, 2018, 02:01:33 PM »
I took a different approach in figuring out if I should take CPP and my work pension early or not - I looked at how it affected my Cfiresim success percentage. Taking the pensions as early as possible, even with the reductions, always increases my success numbers. 

I was an expat for years so expect to only get about 1/3 of max CPP, and a modest pension from my current job (I will have about 8 years accrual when I leave) so your mileage may vary.  I suspect the prediction will be far better for those with near maximum CPP if they also consider Cfiresim predictions.

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Re: CPP - best age to start
« Reply #35 on: October 11, 2018, 02:50:54 PM »
Oh, man, so taking CPP early reduces the number of "zero years" for someone FIRE?

Wow. I should quite possibly take mine early then - I have only paid in for a few years (immigrant), and I'll get the drop outs as well as some child rearing I think.

If anyone's really au fait with this stuff... let me know? I think I'll have ~5 years of reasonably high contributions and another couple with much lower. But that'll be all, unless I decide to go back to work after the children are older.
I ran my numbers and FIRE with 25 years of CPP credits --> taking CPP at age 60 did not result in greater net claim than at age 65.  The 0.7%/mo deferral rate is still the strongest factor in the calculation, zeros in years of service are mathematically less significant.

Quote
I think it makes sense for me to delay taking OAS because, again, I'm an immigrant and OAS is based on years of residency. So not only will I get the bump for delaying taking it, but also more eligible years too (caps at 40 years, but I only came when I was 30 or 31).

Depending on what happens with the TFSA I may even be eligible for GIS. Not sure I feel happy taking it, even if I am eligible. We'll see, I suppose - still a long time for me before I get there.
Daverobev

I just ran numbers for a client in a similar situation.  She will be resident in Canada for 19 years at the time of her retirement.  Because each year of deferral of OAS adds to her 1/40 increase due to additional residency, plus the 0.6% deferral/month, the total value of the deferral is actually 1.1% per month she defers.

Then I ran the numbers to see if she should defer the OAS in light of GIS.   She is planning on a retirement income of about $24k per year, and can structure how she takes it to get GIS before age 70.

Because OAS $ value is still quite low when you only have 20 years of residency, adding 60% more to OAS by deferring is vastly overshadowed by the available GIS that she would no longer receive.   So, if you can claim at least $200/mo GIS because you are justifiably low income, then take OAS as soon as you retire, despite any deferral bonuses.    (GIS maxes out around $17k/yr for singles)


Her solution is to work until 67, (to create more retirement savings, she is mid 50's and has little now), apply for OAS and GIS, use TFSA to top up the difference to get $2k/mo income.  Then, at age 70 start CPP, losing the GIS, and sell her home, investing conservatively, to make up to about $25k/yr income plus rent on a small place.

Heh. Well, no longer that relevant to me - I'm outta here come next year :)

I *think* I can bring... well, I'm not sure actually, if it is OAS or CPP over to the UK as 'qualifying years' for the UK state pension. I won't get any OAS because I haven't been here long enough, but to be able to take it back with me would be nice. Woohoo, UK state pension, yeah!

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Re: CPP - best age to start
« Reply #36 on: October 11, 2018, 04:50:33 PM »
I took a different approach in figuring out if I should take CPP and my work pension early or not - I looked at how it affected my Cfiresim success percentage. Taking the pensions as early as possible, even with the reductions, always increases my success numbers. 

I was an expat for years so expect to only get about 1/3 of max CPP, and a modest pension from my current job (I will have about 8 years accrual when I leave) so your mileage may vary.  I suspect the prediction will be far better for those with near maximum CPP if they also consider Cfiresim predictions.

Yes,  I just read this article that someone else linked  (thanks to you!) and the conclusion is that if you can save (put into RRSP?) your CPP early, take it.  That is pretty much what cFiresim with early CPP is doing, isn't it?  Allowing you to be fully invested in returned exceeding 4%, for longer.

My plan does not have me touching my RRSP funds at age 60... but living on lower expenses as long as I can.

https://edrempel.com/delay-cpp-oas-age-70-complete-answer-real-life-examples/

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Re: CPP - best age to start
« Reply #37 on: October 11, 2018, 04:56:49 PM »
Heh. Well, no longer that relevant to me - I'm outta here come next year :)

I *think* I can bring... well, I'm not sure actually, if it is OAS or CPP over to the UK as 'qualifying years' for the UK state pension. I won't get any OAS because I haven't been here long enough, but to be able to take it back with me would be nice. Woohoo, UK state pension, yeah!

It should work for OAS -- NZ and AUS that I looked into both for my uncle do this for OAS; USA also does this.  The residency years in Canada apply to the AUS / NZ superannuation residency (somehow, I was looking into it from the opposite direction - how to get OAS paid to and expat canadian now living overseas).

CPP - you can be paid your canadian CPP anywhere in the world once you are 60, on the same basis as if you are in Canada.  CPP is supposedly a user / employer paid up system, not a social benefit.  Collecting it really only requires that you paid into it, even if a small amount, you get the small amount in return.   

I am not sure what the withholding tax for it would be, if you are in the UK.  Most tax treaty countries with Canada only have 15% withheld, but all I found was the Canada / UK treaty about no double taxation.  Do you know if it is withheld at the standard 25% or 15% tax rate when paid out to you if you live in the UK?

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Re: CPP - best age to start
« Reply #38 on: October 12, 2018, 07:34:59 AM »
Heh. Well, no longer that relevant to me - I'm outta here come next year :)

I *think* I can bring... well, I'm not sure actually, if it is OAS or CPP over to the UK as 'qualifying years' for the UK state pension. I won't get any OAS because I haven't been here long enough, but to be able to take it back with me would be nice. Woohoo, UK state pension, yeah!

It should work for OAS -- NZ and AUS that I looked into both for my uncle do this for OAS; USA also does this.  The residency years in Canada apply to the AUS / NZ superannuation residency (somehow, I was looking into it from the opposite direction - how to get OAS paid to and expat canadian now living overseas).

CPP - you can be paid your canadian CPP anywhere in the world once you are 60, on the same basis as if you are in Canada.  CPP is supposedly a user / employer paid up system, not a social benefit.  Collecting it really only requires that you paid into it, even if a small amount, you get the small amount in return.   

I am not sure what the withholding tax for it would be, if you are in the UK.  Most tax treaty countries with Canada only have 15% withheld, but all I found was the Canada / UK treaty about no double taxation.  Do you know if it is withheld at the standard 25% or 15% tax rate when paid out to you if you live in the UK?

My CPP will be tiny, but I don't know - I know 'periodic pension payments' are taxed at 0% by Canada, though, so maybe it will fall into that (same as periodic RRIF payments - though you have to pay tax to the UK on stuff inside the RRSP/RRIF as the UK doesn't see it as a retirement vehicle...)