Some Canadians feel the financial pinch of not waiting to take CPP.Maridav/iStockPhoto / Getty Images
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This is the latest in a continuing 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.
For many Canadians, the decision of when to start taking their Canada Pension Plan (CPP) retirement benefits is a difficult one. Some rely on advice from an advisor who runs the numbers. But even then, the decision often involves more than just math. Others make the decision on their own, based on information from friends and family, or without enough information.
Here, five Canadians talk about why they wish they had started taking their CPP payments later:
Elaine Kurtz-Hardowa, 67, Edmonton
Ms. Kurtz-Hardowa started taking her CPP benefits at 62, once she retired from a 35-year career at the Cross Cancer Institute in Edmonton. The decision was based on her income, which includes a provincial government pension and CPP survivor benefits from her husband, who passed away in 2016 at 69.
However, she didn’t realize the survivor benefit would drop significantly – from about $500 a month to about $190 in her case – when she started taking her own CPP benefits. Those survivor benefits then dropped to one cent a month when she turned 65 – a sum she still needs to record on her income taxes.
Ms. Kurtz-Hardowa tried talking to a Service Canada representative but couldn’t get an explanation she felt made sense. She also consults with a fee-only advisor once a year, but the survivor benefit wasn’t discussed when she started her CPP payments. “That’s one thing I regret not bringing up. Maybe I would have decided to take my CPP benefits later had I known the result,” she says.
“My advice to others is to do your homework and research the positive and negative aspects of when to take your CPP and Old Age Security (OAS) benefits,” she says. “I think seniors get really excited when retirement comes and can hardly wait to get the government payments. ... If I had waited longer, I would be receiving more money today.”
Alan Forde, 69, Mississauga
Mr. Forde started taking his CPP benefits at 65 when the COVID-19 pandemic hit and stock markets crashed. “I blinked. I didn’t need the money,” says the former investment banker, who retired twice, first at 48 and then again at 58.
Mr. Forde decided to take his CPP benefits earlier than planned “because it was there,” and the future seemed so uncertain. “I was worried about what might happen next and about my kids, so I thought, ‘I might as well start taking the money,’” he says.
Now, Mr. Forde wishes he had waited until he turns 70 next year, not because he needs the money, but so he would have more to leave for his beneficiaries.
“Remember that if you don’t need the money, you’re needlessly spending an asset that grows each year it’s deferred,” he says, referring to CPP legislation that shows some people who take it after 65 will see their payments increase by 8.4 per cent a year, up to a maximum increase of 42 per cent if they wait until 70.
He urges Canadians to consider their other sources of income first before tapping into their CPP benefits: “Consider it your rainy day fund, and only go there when that rainy day comes.”
Philis Heffner, 70, Calgary
Ms. Heffner took her CPP benefits at 65, worrying that waiting longer could put her in a higher tax bracket when she retired, and lead to a clawback in her OAS benefits.
In hindsight, she wishes she had waited until 70, after retiring at 69 from her career as a physiotherapist – the first 30 years of which included running her own business and the last 15 years working for Alberta Health Services.
“If I would’ve waited, I would be receiving more money now that I am retired and living on a fixed income,” she says.
“Planning for retirement is very difficult,” adds Ms. Heffner, who made the CPP timing decision based on her own calculations. “It’s very difficult to figure out how much money you’ll need and the right thing to do.”
The rising cost of living is also a concern, especially in the past couple of years. “With this inflation, the money doesn’t go as far,” Ms. Heffner says.
She advises others to wait until 70 to take their CPP benefits if they can. “It’s indexed to inflation, and you get it as long as you live. Do you know how wonderful that is?”
Ms. Heffner is concerned about Alberta’s proposal to leave the CPP and create its own plan. “They want to take the CPP away. Many of us seniors don’t want that; we’ll have to fight it.”
David Foulds, 71, London, Ont.
Mr. Foulds took his CPP at 60, three years before retiring from his career as a government lawyer. It wasn’t until he started working again, running his own, independent legal firm until last year, that he got some financial advice and realized he would’ve been better off waiting.
“I could have saved a few tax dollars by deferring,” he says, adding that he didn’t need the pension sooner. “It didn’t make sense to have the money and pay tax on it.”
Mr. Foulds says there wasn’t as much information available about the pros and cons of deferring CPP benefits a decade ago compared with today.
“I used my instincts, which generally are good, but perhaps not so much in this instance,” he says. “It’s hard to refuse money the government wants to give you. In hindsight, knowing what I know now, I wish I had deferred it.”
Stan Podwin, 78, Toronto
Mr. Podwin started taking his CPP benefits at 60, six years before he sold his business and retired. “If I knew I was going to live so long, I would’ve waited,” jokes Mr. Podwin, who owned and operated a chemistry equipment business for 30 years.
Being self-employed, Mr. Podwin was contributing to both the employer and employee portion of his CPP and was tired of paying both ends. Still, if he could do it over again, he would’ve continued to pay both sides of the CPP until he retired – and then waited until 70 to start collecting his benefits.
“The amount isn’t significant to what I need to live on, but it’s still pretty good,” he says.
Mr. Podwin believes not enough Canadians understand the benefits of waiting longer to take their CPP benefits, especially those who don’t have a defined benefit pension plan to fall back on.
“It’s like an annuity,” he says. “If you don’t need it and it’s not material to your lifestyle, then don’t take it until 70 because the benefits at that point are way better.”
Next Tuesday, we feature Canadians who wish they had taken their CPP benefits sooner.
If you have any CPP questions, story suggestions or feedback on this series, please e-mail us at globecpp@gmail.com. We can’t respond to every e-mail or question, but we’ll do our best. The answers will appear on Tuesdays.
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