By Barbara Knoblach, PhD, CFP®
The calendar has flipped, and we have a new year ahead. Bring on 2020.
The kids are back at school; homework, lessons and sports practice have begun to fill the family calendar again. Summer holidays and backyard BBQs are on the horizon but may not feel that way given the dark days, rain (and snow) across most parts of Canada.
It’s a time to look toward to new challenges at work, plans for the New Year, and yes, summer vacations. Because, really, what is all our hard work for, if not, at least in part, to afford time with friends and family?
In fact, as you ease into a busier winter schedule, it’s a great opportunity to pause and remember why you work hard, and to recommit to your life goals—including your important retirement goals. Who doesn’t dream of the day when all four seasons are theirs to shape and enjoy?
But retirement looks very different to everyone, and one of the most important things to consider when planning yours, is the optimal time to apply for Canada Pension Plan (CPP) benefits. All it takes is a bit of calculated foresight, to make the decision that will best suit your circumstances.
Here’s a look at some basics:
Canada Pension Plan benefits can be drawn 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).
The average life expectancy for Canadians is age 80 for men and 84 for women. Statistics Canada predicts a continued rise in life expectancy of roughly two years over the next 15 years.
Things to consider:
Life expectancy
Contemplating your mortality may feel uncomfortable, but it should not be ignored. Your health and whether longevity is a family trait, are things to consider when making your decision regarding CPP.
If you take your CPP starting at age 60, your breakeven point with someone who waits until age 65 is when you both turn 74. Confused? Let me put it another way – I will use an example to illustrate my point.
If Mary takes her CPP at 60 and Brenda takes hers at 65, Mary’s monthly CPP payment will be 36% lower than Brenda’s, but she will collect five years longer. They will be 74 when Brenda pulls ahead of Mary for overall amount collected.
Over the years I’ve transitioned many clients through retirement and while each story is unique, there are some commonalities in their experiences. One story that sticks with me is the reaction that my client Margaret (name has been changed) had when we went through the retirement projections which gave her the green light for retirement. Instead of jumping for joy, she burst into tears!
Money—such a loaded word. We spend an amazing amount of time, energy and emotion on money; loving it, hating it, worrying about it, or being frustrated by it. The one thing we don’t often do is talk about it. Sure, we’ll collectively moan over coffee or cocktails that we don’t have enough, that everything is so expensive; but the silence or moaning reinforces the illusion that money is complicated.
How We Age is Changing
