Getting CPP and working: would you do this?

[Arjon]

This was a huge topic at my work too, to take it early or not?
Read this analogy to see what the break even point is. ( this article was updated in 2015 )

What is the mathematical break-even point?



Under the old rules, the decision to collect CPP early was really based on a mathematical calculation of the break-even point. Before 2012, this break-even point was age 77. With the new rules, every Canadian needs to understand the math. Here’s the example of twins that I used before, with the break-even point updated to 2015 values.

“Janet and Beth are twins. Let’s assume they both qualify for the same CPP of $502 per month at age 65. Let’s further assume, Beth decides to take CPP now at age 60 at a reduced amount while Janet decides she wants to wait till 65 because she will get more income by deferring the income for 5 years.
Under Canada Pension Plan benefits, Beth can take income at age 60 based on a reduction factor of 0.58% for each month prior to her 65th birthday. Thus Beth’s benefit will be reduced by 34.8% (0.58% x 60 months) for a monthly income of $327.30 starting on her 60th birthday.
Let’s fast forward 5 years. Now, Beth and Janet are both 65. Over the last 5 years, Beth has collected $327.30 per month totaling $19,638. In other words, Beth has made $19,638 before Janet has collected a single CPP cheque. That being said, Janet is now going to get $502 per month for CPP or $174.70 per month more than Beth’s $327.30. The question is how many months does Janet need to collect more pension than Beth to make up the $19,638 Beth is ahead? It will take Janet 113 months to make up the $19,638 at $174.70 per month. In other words, before age 74.4, Beth is ahead of Janet and after age 74.4, Janet is ahead of Beth.”

https://retirehappy.ca/four-reasons-...st-2011-rules/

I suppose it depends on your health and your " luck " . If you are darn tootin sure you will live a long life then wait to collect it at 65, if your health is questionable and you believe in Murphy's Law then draw it at 60.

Does this break-even calculation take into account the time value of money?

[Arjon]

People has different factors, longevity, pension plans, disability, inheritances, etc... and for tax reasons and financial planning CPP is one of the items that needs to be considered in the big picture.

Another factor that influenced the decisions of a few people I know IRL was their perceived "need". I put this in quotes because they all used this word although from my perspective, they wanted the money rather than actually needing it.

[Shwa Girl]

This was a huge topic at my work too, to take it early or not?
Read this analogy to see what the break even point is. ( this article was updated in 2015 )

What is the mathematical break-even point?



Under the old rules, the decision to collect CPP early was really based on a mathematical calculation of the break-even point. Before 2012, this break-even point was age 77. With the new rules, every Canadian needs to understand the math. Here’s the example of twins that I used before, with the break-even point updated to 2015 values.

“Janet and Beth are twins. Let’s assume they both qualify for the same CPP of $502 per month at age 65. Let’s further assume, Beth decides to take CPP now at age 60 at a reduced amount while Janet decides she wants to wait till 65 because she will get more income by deferring the income for 5 years.
Under Canada Pension Plan benefits, Beth can take income at age 60 based on a reduction factor of 0.58% for each month prior to her 65th birthday. Thus Beth’s benefit will be reduced by 34.8% (0.58% x 60 months) for a monthly income of $327.30 starting on her 60th birthday.
Let’s fast forward 5 years. Now, Beth and Janet are both 65. Over the last 5 years, Beth has collected $327.30 per month totaling $19,638. In other words, Beth has made $19,638 before Janet has collected a single CPP cheque. That being said, Janet is now going to get $502 per month for CPP or $174.70 per month more than Beth’s $327.30. The question is how many months does Janet need to collect more pension than Beth to make up the $19,638 Beth is ahead? It will take Janet 113 months to make up the $19,638 at $174.70 per month. In other words, before age 74.4, Beth is ahead of Janet and after age 74.4, Janet is ahead of Beth.”

https://retirehappy.ca/four-reasons-...st-2011-rules/

I suppose it depends on your health and your " luck " . If you are darn tootin sure you will live a long life then wait to collect it at 65, if your health is questionable and you believe in Murphy's Law then draw it at 60.

Thanks for the article and link. I looked at the comments and my coworker's plan came to mind. My coworker looked at how long parents and grandparents lived before deciding on taking the money early. Like one of the commenters (Russ), my coworker invests the money so that there is little or no tax paid on any again.

[dagney]

Another very important consideration in the CPP evaluation is that you are only allowed the maximum payment. Therefore if a couple are both maximizing their CPP and one partner dies - that CPP is sucked up by the government. No increase payment to the surviving spouse in this case because they are already receiving the max payment. Break even point for taking pension at 60 vs 65 is that you need to live to 73 years old. Only 6% of retirees receive the max payment at 65 yrs old. My father received 2 CPP cheques before dying and my mother had a survivor benefit only 2 yrs before she passed away. Government sucked up the rest from my dad’s 40 yrs of employment.

I have seen no comparison is you take your CPP at 60 and pay down debt or put into a TFSA and invest it. This would no doubt shift the break even point of 73 years to even an older age point.

I turn 60 at the end of this year. I intend to take my CPP and continue to work part time - this will continue to grow my CPP payout. My CPP will be used to pay down debt and pay for holidays.

Average CPP payment is $650

[dyalect]

wait until 65. don't take it early. especially if you are still working. tax man cometh!

[Shwa Girl]

wait until 65. don't take it early. especially if you are still working. tax man cometh!

interesting that you say 65
another coworker retired at 59
died this weekend at 65, suddenly
so didn't have a lot of time time to enjoy CPP etc

[barbis9]

Another very important consideration in the CPP evaluation is that you are only allowed the maximum payment.

I turn 60 at the end of this year. I intend to take my CPP and continue to work part time - this will continue to grow my CPP payout. My CPP will be used to pay down debt and pay for holidays.

Average CPP payment is $650

Once you start withdrawing from CPP you can no longer contribute to it. If your employer deducts CPP off your part time wages, you will get it back when you file for income tax. Your CPP payout will not grow anymore once you start receiving it even if you continue to work.

[barbis9]

interesting that you say 65
another coworker retired at 59
died this weekend at 65, suddenly
so didn't have a lot of time time to enjoy CPP etc

Very sad.

[dagney]

Once you start withdrawing from CPP you can no longer contribute to it. If your employer deducts CPP off your part time wages, you will get it back when you file for income tax. Your CPP payout will not grow anymore once you start receiving it even if you continue to work.

From my understanding, that rule has changed. If you collect CPP and continue to work it is mandatory to keep paying into CPP. The government will then adjust your CPP higher. But yes the taxman always wins. While one must always consider health problems, there are always unexpected vehicle accidents too. I recall a few years ago in Saskatoon a newly retired married couple who were both teachers - killed in a car accident. All their CPP gone in a flash, plus a majority of their teachers pensions.

[lizzie bargain]

If you continue working past 65, it is the employees decision to continue paying into CPP or not. You must fill in a form to cease deductions at 65 if you so choose. Otherwise if you opt to continue, you will be paying into and receiving a post retirement benefit( all this as per CPP website).

[frugal50]

best to collect CPP at 65 and if you're female at 70
the pay out is bigger and since women liver longer

[Mudit]

Auditor General of Canada on CPP Disability approvals showed that out of 70,000 annual CPP Disability Applicants, only about 40% were approved after the first application.
Since then, Service Canada has simplified the forms and application process to make it easier for applicants. But CPP Disability denial rates are still considerably high compared to other countries. Most of the time the reasons for the denial are not immediately clear, leaving applicants confused as to what they need to do in order to actually be approved.
Some of the reasons CPP Disability applicants get denied may include:

1. The impairment not being recognized as eligible by the CPP Disability requirements
2. A lack of information in the application to prove eligibility
3. A lack of knowledge about certain provisions that if applied to the application, may have given it eligibility.

I myself got denied for these benefits

[dagney]

Once you start withdrawing from CPP you can no longer contribute to it. If your employer deducts CPP off your part time wages, you will get it back when you file for income tax. Your CPP payout will not grow anymore once you start receiving it even if you continue to work.

This is incorrect - check the government website.
You can continue to work from 60-65 and contribute to CPP. Once you are
finally done work your CPP will be re-calculated.
Bonus once one spouse is collecting a pension, that couple can income
split the pension so possibility of less income tax to pay out.

[dagney]

best to collect CPP at 65 and if you're female at 70
the pay out is bigger and since women liver longer

Yes, that would be what the government would like you to think!
Cause they will scoop all those payments from people who pass away between 65-70 years old.
Use those payments between 60-65 to pay off debt, top up a TFSA, income split with your spouse too.

[Mudit]

interesting that you say 65
another coworker retired at 59
died this weekend at 65, suddenly
so didn't have a lot of time time to enjoy CPP etc

Sad!!