Early CPP, or not?

A bird in the hand is worth two in the bush, unless it’ll be taxed back!



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I guess I was in my late 20s or early 30s when the Freedom 55 chatter started. But now that I’m rounding the corner, the idea of hanging up my spurs at 55 has far less appeal. I like what I do for a living. And as long as they keep letting me whack people up the side of their heads with their financial reality, I’ll keep doin’ it.

Quite a few people feel as warm and fuzzy about their day-jobs as I do. According to one survey of folks aged 45 to 65, 52% plan to keep working because retirement will keep ‘em young.

There are, of course, plenty of people who would love to kiss their bosses goodbye. But early retirement hasn’t panned out the way we thought. With increasing debt loads, kids in university, and higher costs of living, working a little longer seems to be in the future for most folks.

Even the Canada Pension Plan has jumped on the trend to longer work lives. New rules that came into effect at the beginning of this year encourage Canadians to hold off on pulling their government pensions.

If you take your CPP at age 60, you’ll get 7.2% per year less (up from the previous 6%) payout than if you waited to 65; delay until 70 and you’ll get 8.4 % a year more (again, up from the previous 6%). So if you wait until 70 to draw your CPP, your payments will increase by 42%.

Drawing CPP early and working part-time isn’t the gravy-train it used to be. The new rules also require that you to pay into the CPP at 9.9% up to the Yearly Maximum Pensionable Earnings (9.9% X $46,300.00 = $4583.00), if you work between 60 and 65 and are receiving the CPP.

The very clear message is don’t take your CPP too soon. The longer you wait, the more you’ll be rewarded. Which is fine for folks like me who plan to croak with their boots on!

6 comments on “Early CPP, or not?

  1. Agreed. Wait until it is worth it. Government wants you to wait until you are at least 70 and you will get more $……..however, what is the age that the average male or female lives too? Think about it. I was one of the "lucky" ones. I took CPP at 63, only because I was making too much $ at 60. But at the time that I retired at age 56 the intent was to take CPP at age 60. The simple equation was that
    If I got it at 60 even with the reduction, by age 65 I would have been paid just over $35,000 and I did not need it to live on, so investment was the only choice. My friend who retired at 65 and took his CPP was paid more per month, but by the time we would both be 75 yrs old he was only $100 ahead. However, with the average lifespan of the average Caucasian male being 82, he did not make it that far


  2. A good chapter regarding 'when to draw CPP' is contained in David Trahairs short and easy to read book, 'No Bull…………………'. He talks about the 'when' issue in NPV terms, living and enjoying the money ideas, and, best of all, how not to pay into CPP if one decides to work while collecting. All legal.


  3. There is one situation that is almost as bad as running out of money in retirement. It is having a pile of money but not having the health to enjoy it. This happened to my father-in-law. He was very careful with his money in his 50's and 60's, living frugally, not taking the trips, etc. Now he is worth almost $1 million but he doesn't have the health to enjoy it.

    We can practically guarantee that our health at 70 will not be as good as at 60. So waiting to retire is risky… you might not have the health to enjoy it.

    I believe we should retire as early as possible, those years after 50 are precious. Live simple but do the things you've always wanted to do; with a smaller income you get creative. Retirement can also add years to your life–low stress, time to eat well, time for exercise, hobbies, volunteering, going south in the winter, time for family and friends.

    In retirement your life will change from 'getting' (stockpiling money, etc) to one of 'giving' because your financial needs are taken care of.

    Studies have shown that more money does not make people happier. Happiness is mostly a decision. Being happy with less can be learned–I experienced that in my own life.


  4. All really good advice. One thing to keep in mind also is the amount of CPP one thinks they will get. Not everyone, infact very few, get the maximum CPP. Regardless whether you paid into it for 42 years or not. You may not have paid maximum amounts per year. Only some years, based on your earnings.I have worked for 42 years, paid into it for 42 years but did not pay the maximum, and according to CPP I don't get the maximum amount on payout time.


  5. So do the new rules for the Canada pension plan only encourage? Or does it pretty much say "hold off on your retirement"? This is kind of a big deal; the two are rather different. Personally, I love working and I don't know what I'll do with myself when I can't any longer. I imagine I'd be rather bored. But some people don't have that mindset.


  6. Well it is in the interest of everyone to delay the retirement plan until you become 70. We are on the decline as a nation when it comes to the age structure as we are becoming older with less young people. Just take a look what is happening in countries where this is the case, e.g. Greece.


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