As an advisor, this is a question a lot of my clients want answered and of course, each person is unique. Usually, when to take CPP depends on a variety of things:
The age you want to stop working
What your RRSP or Pension looks like
Your health
If you need the money
In this post, we will discuss,
What is the Canada Pension Plan?
How do you qualify for it?
Where do you apply?
When is the best time to take it?
So, first things first, what is CPP:
The Canada Pension Plan is a monthly, taxable benefit that will replace part of your income when you retire.
Who qualifies for CPP?
You must be at least 60 years old and/or have made at least one valid contribution to the CPP.
What is a valid contribution? Valid contributions can be either from work you did in Canada, or as the result of receiving credits from a former spouse or former common-law partner at the end of the relationship.
Where do you apply?
To apply for CPP you will need to visit: https://www.canada.ca/en/services/benefits/publicpensions/cpp/cpp-benefit/apply.html. This will start and finish the process for you.
Other Important Details:
Your CPP is indexed and will increase every January. Once you have applied and your application has been accepted, you will begin getting a monthly benefit for the rest of your life.
Once payments begin, you will see the monthly instalments go directly into your bank account, but be careful. This is a taxable amount of money, one that you as the recipient must decide to have the taxes deducted. If you do not organize that, you will be on the hook for quarterly filings of your taxes.
The Big Question:
When should someone take their CPP to get the maximum amount of money for them? This is a big question because each person is different, however, the biggest factor will be, how long do you plan to live?
Example #1: If you plan on living into your 80’s and you have no need for CPP, the best bet is to wait until age 70. By age 81 you will have collected more money starting at age 70 than any other age to begin drawing your CPP. Not only that, but after 81, the gap between the numbers begins to separate.
If someone was to take their CPP at age 60 and lived to age 90 instead of taking their CPP at age 70, they would see a 32% drop in money made, even with a 10-year head start. This can equate to upwards of $100,000 lost over your retirement.
Example #2: if you currently have a disease such as diabetes or have a hereditary concern that will affect the longevity of your health you will find the break-even point of taking your CPP at age 60 to be around 75 to 76 years old.
Below, we have attached a simple spreadsheet to showcase break-even points when you decided to take your CPP at ages 60, 65 and 70.
If you would like to have a greater in-depth conversation on CPP or have questions about financial planning, please feel free to reach out and we will connect you with one of our many Advisors to help guide you through the appropriate questions.
Yorumlar