If you take CPP and later regret your decision, you are allowed to repay the government as long as your request is in writing and it is done within a 12 month period. So technically the decision to take CPP is reversible.
Absolutely! Jason discusses this in the video around 12:30, if it’s caught within 12 months this is a good option to adjust and reverse any payments during that initial period.
You have to factor in health, not just life span. At 65 you can still travel and enjoy life. At 75 your energy is lower, the money has less value. By foregoing CPP at 65 you maybe foregoing life experiences you will later not be capable of.
It should be noted that CPP is calculated using the YMPE (yearly maximum pensionable earnings). Not only do you get the 8.4% annual increase by deferring it by one year but you also get the increase in the YMPE.
I think its based on the 5 year average of YMPE leading up to your CPP starting. But then again, you need the minimum # of months of paying into CPP. If you're working at a YMPE (or close to it), no worries. If you're not working , but deferring CPP for a while, you may be adding a bunch of 0 income years to the calc.
You bring up a good point. The YMPE is based on wage growth, which has historically grown faster than the consumer price index (CPI). This means that the benefit to deferral can be larger if the YMPE continues to grow faster than CPI. However, the benefit of deferral is reduced slightly if YMPE increases less than the CPI.
The remaining life i have is more unpredictable than the stock market. Investing my cpp money in index fund/stock market, i will get more or worst the same as i waited on later date - i rather enjoy it and/or give it to my love ones.
1.I have noticed many of my colleagues (federal public Servants) taking the CPP benefit at age 60. Have you noticed this as well? Many are being advised to do so because of their federal pensions. 2. Does this impact the graph when the bridging stops at 65? Good video!!
The cpp income crossover points ( 60 vs 65 or 70 ) would not change if you have a bridge or not. Its all just income sourced from CPP. Taxation would be higher during the pension+bridge+CPP years.
There are some cases where it can be reasonable to take CPP at age 60. If someone has a large defined-benefit pension (especially one that is indexed to inflation) then the value of getting more CPP income might not be as attractive. Many pensions include a bridge benefit which lasts until age 65, but the pension bridge is independent of when a person starts CPP. They just both use age 65 as the traditional age of retirement. Thanks for watching!
Generally, you still receive a much higher amount by deferring when early retirement means late fifties or later. Doug Runchey runs a great service that can provide you with a complete picture of potential CPP benefits..
You spend more between 60-70 and less after 70. Why wait until the time when you don't need as much money to get more money?!?! I'll be taking it at 60 and spending it on enjoying life while I'm young. I have $1M+ in RRSP and will let that grow more while I get back what I can from the government as soon as I can.
i would really guide you to an tax professional (i am not one!)... it is usually far better (for most individuals) to utilize your RRSP funds between age 60-70 and defer their OAS and CPP until age 70... Don't forget that when individual dies the GoC will take a BIG portion of the remaining RRSP/RRIF (on a $1M RRSP portfolio, your estate will lose 50%). Withdrawal $100K per year 60-70 for 10years. After 70, live off of TFSA+OAS+CPP (+ any cash saving).
Yes. You are correct about drawing down the RRSP. I plan to do that as well. But I don't trust the government enough to wait 10 more years to get my money or to find they changed the rules.
My seemingly healthy father in law died from a massive heart attack at age 64. He was a healthy weight and had no known health problems. My mother in law died just before her 71st birthday. I don’t know if either of them took CPP early or not but it would have benefited them both.
It is unfortunate and sad from a personal and financial perspective that there are circumstances in which an individual passes away far earlier than anticipated. Indeed, this is one of the most compelling arguments for starting CPP and OAS earlier. However, another way to look at CPP and OAS is as a form of insurance against running out of investment assets in retirement. When an individual chooses to defer these forms of pension income, they will eventually receive a higher, guaranteed income stream, which can be especially valuable to those who live longer than expected or have depleted their other retirement assets.
Personal family medical history should be factored into the decision. Accepting a much lower CPP however may lead to challenges without stable, guaranteed, inflation indexed income later in retirement.
How would you know how much taking early pension at age 60, would have benefitted them? Many people at age 60 have accepted their lifestyle and their spending habits. In fact many people just bank their pensions. I am 69 and not yet taking pension as income and expenses are balanced. At age 70, our current income changes, but we still will bank our pensions. Perhaps we don't live an expensive lifestyle? We don't need trips, toys and a garage full of new vehicles. In fact I will get minimum pension because I never made a large income and never had a career job. My best paying job was as a janitor working 35 hour weeks. My most important job, was MANAGING my finances.
It strikes me that this question is more complicated than your analysis suggests. Does the cost (and loss of subsequent returns) of self funding retirement for the years one defers CPP need to be considered? The source of those funds (savings vs RRSP)? What about one's overall tax rate given that only a portion of retirement needs come from CPP? Does that significantly affect this calculation?
There are many other factors that could be considered, including investment returns and taxes. The impact of those factors are typically smaller than the benefit of the deferral however. For investment returns, the higher potential return from taking CPP early and investing is uncertain and could be negative if there is a market correction early in retirement. A big part of the CPP start decision is setting a foundation of secure lifetime income and taking some investment risk off the table.
Who can afford to defer until they are 70 years old... to get even more CPP... not the people who need that support the most? I wonder if it's an advantage for the government to offer this incentive... as some people who defer won't live too many years past 70. Why do they have to make it so stressful?
The average Canadians is working after the age of 65, (some by choice and some by necessity) and given the average life expectancy in Canada is now 80+, there are a fair of people that can AND should consider defer (for maybe a year or two!). A GUARANTEED 8.4%+inflation adjusted yearly rate of return with no risk is a solid return.. I do recognize that there are also some Canadian's the NEED to take CPP early. - there is no advantage for the government (remember that the CPP isn't government money!!, it is in a big pool of employee/employer contributions!.
www.longevityillustrator.org/ is a site that allows you to input information about you (and your partner, if applicable) that will help provide some longevity estimate based on your current age and other relevant criteria.
Good Video on opening Service Canada Account. Did not know. I wish investment world would look at 60 for people continuing to work taking pension with no taxes and putting it into RRSP and buying monthly high yield ETFs that generate 10-15% then spreadsheet the snowball at 65 add money income and what you will have. Do the math!?! Think about it if you monthly invest in ENCL BANK BKCL etc etc at 65 look at the math and to income added to taking early and equity you have and protects against those healthy ones that die at 64 waiting until 70.
Wasn't there a rule change for early/delayed CPP sometime in 2012 or so? The increased percentage of people who are deferring taking their CPP statistic since 2012 (@10:09) doesn't seem to take this into account.
You're right that there was a change in the CPP calculation. At that time, the reduction in monthly benefits for starting before 65 and the boost for deferring both became larger.
If you are above age 65, you can apply to not make future contributions if you wish. If you do decide to continue to contribute, the ultimate retirement benefits will be enhanced as those years will count towards your work years.
@@SteadyhandInvestments Periods of low or no earnings You might have years of low or no earnings. When we calculate the base component of your CPP retirement pension, we will “drop out” or not include up to 8 years of your lowest earnings from your earnings history. This will increase the amount of your pension.
Not sure how the title of this video has anything to do about the discussion. The discussion is related to when to take CPP. Nothing new here, well known fact that if you live past your early 80’s it’s best to wait till 70. Hundreds of videos on TH-cam on when to start CPP.
If you take CPP and later regret your decision, you are allowed to repay the government as long as your request is in writing and it is done within a 12 month period. So technically the decision to take CPP is reversible.
Absolutely! Jason discusses this in the video around 12:30, if it’s caught within 12 months this is a good option to adjust and reverse any payments during that initial period.
@@SteadyhandInvestments I made my comment before I finished seeing the video. Naughty boy.
You have to factor in health, not just life span. At 65 you can still travel and enjoy life. At 75 your energy is lower, the money has less value. By foregoing CPP at 65 you maybe foregoing life experiences you will later not be capable of.
It should be noted that CPP is calculated using the YMPE (yearly maximum pensionable earnings). Not only do you get the 8.4% annual increase by deferring it by one year but you also get the increase in the YMPE.
I think its based on the 5 year average of YMPE leading up to your CPP starting. But then again, you need the minimum # of months of paying into CPP. If you're working at a YMPE (or close to it), no worries. If you're not working , but deferring CPP for a while, you may be adding a bunch of 0 income years to the calc.
You bring up a good point. The YMPE is based on wage growth, which has historically grown faster than the consumer price index (CPI). This means that the benefit to deferral can be larger if the YMPE continues to grow faster than CPI. However, the benefit of deferral is reduced slightly if YMPE increases less than the CPI.
The remaining life i have is more unpredictable than the stock market. Investing my cpp money in index fund/stock market, i will get more or worst the same as i waited on later date - i rather enjoy it and/or give it to my love ones.
1.I have noticed many of my colleagues (federal public Servants) taking the CPP benefit at age 60. Have you noticed this as well? Many are being advised to do so because of their federal pensions.
2. Does this impact the graph when the bridging stops at 65?
Good video!!
The cpp income crossover points ( 60 vs 65 or 70 ) would not change if you have a bridge or not. Its all just income sourced from CPP.
Taxation would be higher during the pension+bridge+CPP years.
@@davecarpenter4917wouldn’t that depend on the taxable income and bracket vs sources of retirement income ?
That is what I thought. Thank you!
There are some cases where it can be reasonable to take CPP at age 60. If someone has a large defined-benefit pension (especially one that is indexed to inflation) then the value of getting more CPP income might not be as attractive. Many pensions include a bridge benefit which lasts until age 65, but the pension bridge is independent of when a person starts CPP. They just both use age 65 as the traditional age of retirement. Thanks for watching!
Thanks. I'm also interested in hearing examples of the impact of early retirement (ie. end contributions to CPP) on CPP payout.
Generally, you still receive a much higher amount by deferring when early retirement means late fifties or later. Doug Runchey runs a great service that can provide you with a complete picture of potential CPP benefits..
You spend more between 60-70 and less after 70. Why wait until the time when you don't need as much money to get more money?!?! I'll be taking it at 60 and spending it on enjoying life while I'm young. I have $1M+ in RRSP and will let that grow more while I get back what I can from the government as soon as I can.
i would really guide you to an tax professional (i am not one!)... it is usually far better (for most individuals) to utilize your RRSP funds between age 60-70 and defer their OAS and CPP until age 70... Don't forget that when individual dies the GoC will take a BIG portion of the remaining RRSP/RRIF (on a $1M RRSP portfolio, your estate will lose 50%). Withdrawal $100K per year 60-70 for 10years. After 70, live off of TFSA+OAS+CPP (+ any cash saving).
Yes. You are correct about drawing down the RRSP. I plan to do that as well. But I don't trust the government enough to wait 10 more years to get my money or to find they changed the rules.
My seemingly healthy father in law died from a massive heart attack at age 64. He was a healthy weight and had no known health problems. My mother in law died just before her 71st birthday. I don’t know if either of them took CPP early or not but it would have benefited them both.
It is unfortunate and sad from a personal and financial perspective that there are circumstances in which an individual passes away far earlier than anticipated. Indeed, this is one of the most compelling arguments for starting CPP and OAS earlier. However, another way to look at CPP and OAS is as a form of insurance against running out of investment assets in retirement. When an individual chooses to defer these forms of pension income, they will eventually receive a higher, guaranteed income stream, which can be especially valuable to those who live longer than expected or have depleted their other retirement assets.
Personal family medical history should be factored into the decision. Accepting a much lower CPP however may lead to challenges without stable, guaranteed, inflation indexed income later in retirement.
How would you know how much taking early pension at age 60, would have benefitted them? Many people at age 60 have accepted their lifestyle and their spending habits. In fact many people just bank their pensions. I am 69 and not yet taking pension as income and expenses are balanced. At age 70, our current income changes, but we still will bank our pensions. Perhaps we don't live an expensive lifestyle? We don't need trips, toys and a garage full of new vehicles. In fact I will get minimum pension because I never made a large income and never had a career job. My best paying job was as a janitor working 35 hour weeks. My most important job, was MANAGING my finances.
It strikes me that this question is more complicated than your analysis suggests. Does the cost (and loss of subsequent returns) of self funding retirement for the years one defers CPP need to be considered? The source of those funds (savings vs RRSP)? What about one's overall tax rate given that only a portion of retirement needs come from CPP? Does that significantly affect this calculation?
There are many other factors that could be considered, including investment returns and taxes. The impact of those factors are typically smaller than the benefit of the deferral however.
For investment returns, the higher potential return from taking CPP early and investing is uncertain and could be negative if there is a market correction early in retirement. A big part of the CPP start decision is setting a foundation of secure lifetime income and taking some investment risk off the table.
Who can afford to defer until they are 70 years old... to get even more CPP... not the people who need that support the most? I wonder if it's an advantage for the government to offer this incentive... as some people who defer won't live too many years past 70. Why do they have to make it so stressful?
The average Canadians is working after the age of 65, (some by choice and some by necessity) and given the average life expectancy in Canada is now 80+, there are a fair of people that can AND should consider defer (for maybe a year or two!). A GUARANTEED 8.4%+inflation adjusted yearly rate of return with no risk is a solid return.. I do recognize that there are also some Canadian's the NEED to take CPP early. - there is no advantage for the government (remember that the CPP isn't government money!!, it is in a big pool of employee/employer contributions!.
Can you provide a link to life expectancy at current age vs. Birth??
@@brentgraham1735 SunLife has a good life expectancy calculator. Just Google “SunLife Life Expectancy Calculator”.
www.longevityillustrator.org/ is a site that allows you to input information about you (and your partner, if applicable) that will help provide some longevity estimate based on your current age and other relevant criteria.
Good Video on opening Service Canada Account. Did not know. I wish investment world would look at 60 for people continuing to work taking pension with no taxes and putting it into RRSP and buying monthly high yield ETFs that generate 10-15% then spreadsheet the snowball at 65 add money income and what you will have. Do the math!?! Think about it if you monthly invest in ENCL BANK BKCL etc etc at 65 look at the math and to income added to taking early and equity you have and protects against those healthy ones that die at 64 waiting until 70.
Wasn't there a rule change for early/delayed CPP sometime in 2012 or so? The increased percentage of people who are deferring taking their CPP statistic since 2012 (@10:09) doesn't seem to take this into account.
You're right that there was a change in the CPP calculation. At that time, the reduction in monthly benefits for starting before 65 and the boost for deferring both became larger.
Do you pay CPP if you work after you are 65? If you do do those years count toward your work years in calculating CPP
If you are above age 65, you can apply to not make future contributions if you wish. If you do decide to continue to contribute, the ultimate retirement benefits will be enhanced as those years will count towards your work years.
www.canada.ca/en/services/benefits/publicpensions/cpp/cpp-post-retirement/eligibility.html
Didn't talk about the number of working years in the formula, waiting also will keep working until later
Waiting for CPP doesn't mean you must continue working. This strategy does require some savings to draw on in the meantime, however.
@@SteadyhandInvestments Periods of low or no earnings
You might have years of low or no earnings. When we calculate the base component of your CPP retirement pension, we will “drop out” or not include up to 8 years of your lowest earnings from your earnings history. This will increase the amount of your pension.
Not sure how the title of this video has anything to do about the discussion. The discussion is related to when to take CPP. Nothing new here, well known fact that if you live past your early 80’s it’s best to wait till 70. Hundreds of videos on TH-cam on when to start CPP.