Last month I wrote and article arguing why it makes sense to take CPP later. This month we will review the argument for taking it early.
As I mentioned last time, everyone seems to have an opinion on the matter but few people realize that this isn’t a “one size fits all” problem. If you didn’t get a chance to read my arguments for taking CPP later, see An Argument for Taking CPP Later.
When to take it vs. when to wait
To review, your CPP is reduced by 0.6% for each month it is received before 65 and increased by 0.7% for each month you delay after 65. Taking CPP early at 60 reduces your monthly benefit by 36%, while waiting until 70 increases your monthly benefits by 42%. The first argument for taking CPP early is: who knows how long you’ll live? No sense in waiting until age 70 for CPP if you pass away at age 68.
What if you’re healthy? Should you wait then? Well not necessarily – would you rather have additional income at age 60 or would you rather have more money at age 70? Many would argue they would rather have more money earlier on in life vs. later in life. Why not have more money so you can travel more, help pay for a second home, or participate in activities and sports that carry a hefty price (aka golf)?
What if you don’t need the money?
What if you’re healthy and don’t need the money, then you should wait, correct? Perhaps not. If the government is willing to give you money, it’s probably a good idea to take them up on their offer. Who knows what the rules will be in the future? Besides, you could always take this extra income and direct it into a TFSA. By investing this extra income in a nice balanced portfolio, you’ll be ahead of the people who waited until 70 to start withdrawing CPP, not to mention have something to pass on to your beneficiaries in the event that you pass away. Financial advisor, author, and politician Garth Turner summed it up best, “If you really need the money in retirement, take it at 60 and spend it. If you don’t need the money at 60, take it and invest it.”
Colin Sabourin is a Winnipeg based Financial Advisor whose specialty is working with farmers. His focus is on farmers who are planning to sell or transition their farms in the next 5 to 10 years. Colin ensures the process is as smooth and tax-efficient as possible, while also creating plans to enable them to start the next chapter of their lives with confidence and security.
Disclaimer: The information contained herein was obtained from sources believed to be reliable. However, we cannot represent that it is accurate or complete. This report is provided as a general source of information and should not be considered personal investment advice or solicitation to buy or sell any securities. The views expressed are those of Colin Sabourin, Certified Financial Planner, and Investment Advisor and not necessarily those of Harbourfront Wealth Management Inc., member of the Canadian Investor Protection Fund.
