Early CPP, or not? - MoneySense

Early CPP, or not?

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



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!