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.