Globe Advisor's CPP series tackled key considerations around the beloved and much-debated government-sponsored pension plan.AscentXmedia/iStockPhoto / Getty Images
It’s human nature for Canadians to take their Canada Pension Plan benefits as soon as possible, according to behavioural economists. That’s because people tend to focus more on the present when making decisions, a human trait known as present bias.
Still, there are other nuances behind the decision of when to take the CPP. In the Planning for the CPP series, Globe Advisor reporter Brenda Bouw tackled several key considerations around the beloved and much-debated government-sponsored pension plan.
Here are 10 articles from the series that readers engaged with most:
What triggers Canadians to take their CPP benefits when they do?
When the CPP was introduced in 1966, it was in response to concerns that too many Canadians were retiring poor. Almost 60 years later, the CPP – and the Quebec Pension Plan (QPP) for those in Quebec – remains a cornerstone of most Canadians’ retirement plans. A tough decision for many is when to start taking their CPP benefits to optimize the money they contributed during their working years.
The human trait that causes Canadians to take their CPP benefits early
The standard age for Canadians to take their CPP or QPP retirement benefits is 65. Yet, about one-third of Canadians start taking their CPP benefits when they turn 60, the earliest age possible. Lisa Kramer, a finance professor at the University of Toronto who specializes in behavioural economics, shares her thoughts with The Globe about what compels Canadians to take their CPP benefits early.
These Canadians took their CPP benefits at 60, the earliest age possible. Here’s why
A voluntary reduction in income of up to 36 per cent may not sound like a good idea, but it’s a conscious choice many Canadians make when they take their CPP or QPP benefits at 60. For example, some need the money sooner, others may have a lower life expectancy owing to health issues, or some take the benefits and invest them. Globe Advisor spoke with three Canadians about why they took their CPP benefits at 60.
These Canadians wish they had waited to take their CPP benefits. Here’s why
For many Canadians, the decision of when to start taking their CPP retirement benefits is a difficult one. Some rely on advice from an advisor who runs the numbers. But even then, the decision often involves more than just math. Here, five Canadians talk about why they wish they had started taking their CPP payments later than they did.
Why these Canadians waited until 70 to collect their CPP benefits
It’s often said that good things come to those who wait. For Canadians eligible for the CPP or QPP, the “good thing” is more money. Canadians who hold off until 70 to collect their CPP benefits receive 42 per cent more than if they took it at 65, which is considered the traditional age to start – even though many more take it sooner. Globe Advisor spoke with four Canadians about why they waited, or plan to wait, until 70 to collect their CPP benefits.
Why many Canadians have a ‘gambler’s mentality’ when taking their CPP benefits
Advisors should stop oversimplifying the decision about when Canadians should take their CPP or QPP benefits and avoid using “problematic narratives” that may lead people to take the benefits too soon, a new report argues. While some Canadians need to take CPP benefits earlier, the report states about 90 per cent choose to take their CPP/QPP benefits by the age of 65, which “reduces the lifetime income security they say they want and will most likely need.”
Why Canada’s former chief actuary says you should wait to take your CPP benefits
Jean-Claude Ménard was Canada’s chief actuary from 1999 to 2019, responsible for preparing actuarial reports on programs such as the CPP and the Old Age Security (OAS) plan, among others. Mr. Ménard spoke with Globe Advisor about why he thinks Canadians should wait to take their CPP or QPP benefits, including his decision to start taking his QPP benefits last year at the age of 67.
Why the ‘break-even age’ analysis can be misleading when determining your CPP start date
Many Canadians cite their “break-even age” while deciding when to start taking CPP. This is the age at which the cumulative amount from taking the CPP benefits later – and receiving a higher monthly payment – catches up with the lower monthly payments received when starting CPP earlier. Canadians then need to guesstimate if they’ll live beyond that age. Yet, some retirement planning experts say it shouldn’t be the only factor when determining the right time to start taking the CPP benefits.
Your CPP questions answered: Strategies to combine your CPP and OAS benefits
As part of the Planning for the CPP series, The Globe invited readers to ask questions about their CPP retirement benefits and we found experts to answer them. Rona Birenbaum, a certified financial planner and founder of Toronto-based Caring for Clients, answers questions about combining CPP and OAS benefits.
How ‘drop-out’ years affect Canadians’ CPP retirement benefits
The amount Canadians receive from the CPP depends largely on their lifetime CPP contributions and when they decide to start taking the pension. Then, it gets a little more nuanced. CPP calculations also remove or “drop out” Canadians’ no- or low-income years, such as the start of their careers when salaries tend to be lower, time away from the workforce to raise kids, or time off due to a disability. CPP benefits are usually higher once these drop-out years are removed. Understanding how drop-out years impact CPP benefits is critical for advisors when developing financial plans for clients.