Today we're talking about something we all hope to do one day...retire; and along with retirement comes applying for your Canadian Pension Plan (CPP). Whether you're a few years away from retiring, or this is the year you've been waiting for, we want to share with you some advice to get you thinking about your CPP funds. We'll talk about some of the basics around CPP, and why having a retirement plan can help you know when to draw upon CPP.
Canadian Pension Plan Basics
There is a 10 year window that Canadians have to draw upon CPP. You can draw on CPP as early as age 60 (reduced 0.6% for each month before 65) or as late as age 70 (increased 0.7% for each month after 65). Old Age Security can be deferred up to age 70 with a premium of 0.6% per month after 65.
So if we can draw upon our CPP anywhere from age 60 to 70, when is the best time to do so? As with most financial decisions, there is not one answer that fits all. However, there likely is one answer that fits your specific goals and dreams. To find that answer we must first develop a clear snapshot of what your retirement income and expenses will be, or what you would prefer them to be if you are not quite ready to retire. This is all part of what we would consider a broader retirement plan.
For us at Thrive, helping our clients build good financial plans is what gets us up in the morning. Helping you discover your retirement plan is our passion. As you continue reading our hope is that these tips help you begin thinking about your specific situation. We hope it leads you to our front door, where we can invite you in and build your plan.
A retirement plan includes the goals and dreams you have in retirement. What you want to do, where you want to go, how many years you'll have in retirement and more.
"As we build your retirement plan, we can better determine if there is a gap between the money you will need, and the money you will have."
Starting CPP earlier or later
If you don't have a retirement plan don't worry. We've got some advice to help you start thinking about when might be the best time for you to draw upon CPP.
Four reasons to think about starting "earlier"
- Your health is poor
- You need the cash flow
- You have spent lots of time out of the workforce
- Potential to leave more in estate of own saved assets
Three reasons to think about starting "later"
- You have an above-average life expectancy
- You want a reliable income that isn't affected by low interest rates
- You are still receiving earned income
Final Thoughts on cpp
I guess we keep saying it because we believe it so much.
Having a plan for retirement (aka: planning for how you will be making and spending money in the last 25 years of your life) is important.
Our purpose is to not tell clients when, or when not to start drawing on CPP or other retirement savings, but to give you the best advice, the pros and cons, and to let our clients make decisions with confidence based on the information they have received.