Jean-Claude Ménard, Canada's former chief actuary, photographed at his home in Gatineau, says he doesn’t want people to outlive their retirement savings – especially with longevity rates increasing. Photo by Ashley Fraser, Globe and MailAshley Fraser/The Globe and Mail
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This is the latest article in an ongoing series, Planning for the CPP, in which Globe Advisor explores the decisions behind when to take CPP benefits and reviews different aspects of the beloved and often-debated government-sponsored pension plan.
Jean-Claude Ménard was Canada’s chief actuary from 1999 to 2019, responsible for preparing actuarial reports on programs such as the Canada Pension Plan (CPP) and the Old Age Security (OAS) plan, among others. Mr. Ménard spoke recently with Globe Advisor about why he thinks Canadians should wait to take their CPP or Quebec Pension Plan (QPP) benefits, including his decision to start taking his QPP benefits last year at age 67.
Why do you wish more Canadians would wait to take their CPP or QPP benefits?
I don’t want people to outlive their retirement savings. What’s the point of creating the CPP – and making it financially sustainable [with the establishment of CPP Investments in the late 1990s] – if it doesn’t serve the people? That’s the main reason. Also, as time passes, longevity rates are increasing. The mortality rates from the 1960s are quite different than they are today, thanks to astonishing progress in fighting diseases. I don’t think many people realize how much progress has been made and will continue to be made in the future. That will cause longevity to increase even more.
Why do you think so many people decide to take it sooner?
I think there are four main reasons: First, many people underestimate their life expectancy. Recent studies show people underestimate their life expectancy by about five years. The second is a lack of confidence in the future. Some people prefer to get the money sooner, even if it’s less, because the future is unknown. However, uncertainty could also be a reason to wait to take CPP and receive more money later. The third reason is some people believe they will be too old to enjoy life when they reach a certain age, like 80. They prefer to spend money on leisure activities such as travel in the near term rather than on long-term care when they’re older. They believe the government will take care of them until they die and don’t need retirement savings after a certain age. The fourth reason is many people know a relative or friend who died at an early age, like in their 60s, and see that as a reason why they should take the money sooner.
Why did you take CPP at age 67?
My decision was influenced by the ages my parents died. My father died at 78 – he was a heavy smoker until he had triple bypass surgery at 50 – and my mother died at 85. My grandmother lived to 104. I had to decide the best age for me. I never smoked, but genetics are still an important factor to consider. I could live to my mid-80s, maybe 85, 88 or 89. I will be a little bit penalized by taking it at 67 instead of 70 – or 72, which is now possible in Quebec as of this year.
What do you tell your family and friends about timing the CPP?
I’ve tried to convince some of them to postpone taking their CPP/QPP benefits, without much success. After a while, I realized asking someone to wait five or more years is too long. So, instead, I now encourage people to consider waiting an extra year. Then, once that year is up, they should ask themselves, ‘Do I need it now, or can I wait another year?’ I’ve convinced some people to push it forward for at least a few years by thinking about it this way. We don’t know what will happen in the future. Fair point. But most people have a pretty good idea of what will happen in the next 12 months. So, if you’re in good health, wait a year because, as most people know, you receive higher monthly payments the longer you wait. I’m very happy when I can convince someone to wait at least a year, and it benefits them.
This interview has been edited and condensed.
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