Some people wish they had taken their CPP benefits earlier and invested the money.kutaytanir/iStockPhoto / Getty Images
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This is the latest in an ongoing series, Planning for the CPP, in which Globe Advisor explores the decisions behind the timing of when to take CPP benefits and reviews different aspects of the beloved and often-debated government-sponsored pension plan.
Canadians are often encouraged to delay taking their Canada Pension Plan (CPP) benefits for a few years to receive a higher payout. However, many don’t for reasons ranging from lower life expectancy to needing the money to pay the bills. In some cases, people take the pension money and invest it.
Some even wish they had started receiving their CPP benefits sooner, given growing market returns over the years and the various tax-saving strategies available through programs such as the registered retirement savings plan (RRSP) and the tax-free savings account (TFSA).
The Globe spoke with four Canadians who wish they had started taking their CPP payments sooner – and why:
Lyle Worobec, 68, Saskatoon
Mr. Worobec started taking his CPP benefits at 62 – while he was still working – and invested them in his RRSP and TFSA. Any tax refunds he gets from the RRSP contributions are also invested in his TFSA. In hindsight, he wishes he had started taking his CPP benefits at 60, giving him two additional years of payments to invest. He also elected to stop making CPP contributions at 65, an option for employees based on certain conditions.
He didn’t want to wait to take his CPP benefits – even though he knew the payouts would be higher. His concern was that, after contributing to the CPP for decades, he might end up with no payback if he died prematurely.
Mr. Worobec feels he’s much further ahead financially today than if he had waited to start taking his CPP benefits when he retired last year. He argues that his strategy helps his CPP dollars go further and protects against future losses if he should die sooner rather than later.
“The CPP has no capital value. Once you pass away, it’s gone for the most part,” he says, not including a survivor’s benefit.
Still, he cautions that decisions on when to take the CPP are best made after consulting a financial professional.
Earl Manners, 69, Toronto
Mr. Manners started taking his CPP benefits at 62, a couple of months before he retired from a career in school administration. He took the money to help pay for his two daughters’ post-secondary education.
“In retrospect, I should have taken it at 60,” Mr. Manners says. “I would have had more money to put into their [registered education savings plans] and other savings for their education.”
He considered waiting until 65 to take his CPP benefits to get higher payments, but he and his wife crunched some numbers and discovered they wouldn’t need the money as much in their 70s and 80s when their living expenses would be lower.
“My wife and I felt it was better to have the income from CPP earlier and put it toward a good cause,” he says, noting the rising cost of post-secondary education.
Mr. Manners didn’t use a financial advisor when making his CPP timing decision but talked to others in his profession who had used their pension similarly. “My advice to others is to look at the options carefully in the context your needs be and the kind of lifestyle you want to live,” he says.
Howie Shaw, 74, Peterborough, Ont.
Mr. Shaw discovered at 62 that he could’ve started taking his CPP benefits at 60. He immediately contacted a financial advisor at his local bank to confirm, then double and triple-checked the information in two separate phone calls with employees at Service Canada.
“I told the second person on the phone at the CPP office that I didn’t plan to spend a dime of it – that I planned to invest it in RRSPs – and she said, ‘What are you waiting for? Take it,’” Mr. Shaw recalled from that conversation 12 years ago.
He immediately started taking his CPP benefits and has been investing the payments ever since.
Mr. Shaw, who retired at 69, wishes he had started taking his CPP benefits at 60 and invested that money, too. He believes others should consider doing the same: “It’s your money,” he says.
Asha Sharma, 76, Chilliwack, B.C.
Ms. Sharma took her CPP at 62, a couple of years after retiring from a 23-year teaching career in different cities across Canada. She wishes she had started taking it at 60 and received an additional two years of payments.
“Yes, I’d be getting a little less, but I’d be getting it for longer,” she says.
Ms. Sharma understands the monthly payments would be higher if she waited until 65 or 70 to collect her CPP benefits. However, she believes having the money when she’s younger and healthier is better.
“I wanted to have this money in my early retirement years when I’m more active and to feel the financial comfort of not having to keep working,” she says, adding that she aimed to be debt-free in retirement, which made it easier for her to live with less money.
She also wanted to avoid having her Old Age Security benefits clawed back, especially when she had to start taking mandatory withdrawals from her registered retirement income fund at 72.
“I suggest taking early retirement, travelling, and doing something different without financial worry. It’s the quality of life that matters,” she says. “Plus, life is too short.”
Next Tuesday, we interview Canada’s former chief actuary, Jean-Claude Ménard, on when he took his retirement pension benefits and a strategy he uses to try to convince others to wait a bit longer.
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