Should you collect CPP/QPP when you turn 60 or delay to age 65 or 70 to get a higher monthly amount?
There are two ways of thinking when deciding to take your CPP/QPP benefit. Most advisers will tell their clients to defer both CPP/QPP and OAS until they are 70 to get the maximum benefit from the Canadian government.
This, however, could be a calculated risk, since your future is uncertain. Delaying the benefit until you are 70 and continuing to contribute definitely ensures you will receive a larger monthly amount, but that is only good if you live well into your 90s. You see, if you delay your benefit but die in your 70s, you have shortchanged yourself and not taken advantage of a benefit that you have paid into for your entire working career.
The decision to take your CPP/QPP benefit earlier or later should be one that you make when you plan your retirement. Monthly cash flow, overall health and perhaps even simple genetics all play a part in making your decision. Today everyone seems to be living longer and we are continually told that retirement could last 25 to 30 years, but there is no cookie-cutter answer. If you do opt to take your benefit at age 60, you ensure an income for five years before OAS and ultimately reduce the possibilities of an OAS clawback.
You can also apply to assign up to 50 per cent of the benefit to a spouse in a lower tax bracket. This is a great way to maximize tax savings and can be easily changed back if desired at anytime.
Short of knowing when we will die, there is no real way of knowing whether to delay or take the benefit at age 60. Some Canadians feel the entire process is too complicated and time consuming to warrant consideration. But do not forget all the years you have paid into these programs.
Make sure you plan your retirement strategy wisely and definitely take advantage of all the benefits you are entitled to.
— Christine Ibbotson is the author of the bestselling Canadian book How To Retire Debt Free & Wealthy. She also writes the Moneylady column.
