While there’s no denying that waiting until age 70 can lead to higher lifetime payments for the average retiree, there may be reasons to consider taking CPP sooner.
Need for early income — Retirement costs are often not linear in nature and may reflect life stages. Often, more income may be needed earlier in retirement, and CPP can provide that extra income.
Concerns about longevity — Some people may worry about longevity due to family history or illness. Life expectancy is difficult to predict.
Opportunity cost of other income — If the CPP is deferred, other sources of income will be used. This may require the withdrawal of investments, which involves an opportunity cost of potential loss of future growth. The recent study suggesting that you can give up $100,000 by taking CPP sooner may be misleading because it does not take into account this potential loss, which would reduce this gap.(4)
In other cases, individuals may expect to leave certain investments to family members. Research by the Society of Actuaries suggests that if the goal is to maximize a RRIF/RRSP for beneficiaries, then the best option may be to take the CPP at age 65 so that the RRIF can run out more slowly.( 5)
Other factors may affect the decision to start receiving CPP benefits, including the amount of CPP you are entitled to, the continuation of other income-tested benefits, and your current or future tax bracket. All of these considerations can vary greatly from individual to individual. For an in-depth analysis specific to your particular situation, please call.
1. Or 0.7% for each month; 2. Other sources of income allow a deferral of CPP; 3.
your-long-term/; 4. fpcanadaresearchfoundation.ca/media/5fpda5zw/cpp_qpp-
research-document.pdf; 5. cia-ica.ca/docs/default-source/research/2020/rp220114e.p
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Cole Kachur has received national recognition for his work in the field of wealth management.
He has been nominated several times in the past as one of the top 40 finance professionals under 40 in Canada by the Investment Industry Association of Canada and often appears on Market Call, BNN Bloomberg’s flagship program