Why Your CPP Calculation Could Be Wrong (Top CPP Mistakes)

[@laed3520]

I have a DB Government Pension, so my RRSP contribution Room was very limited. I still maxed it out each year. So I used a RRSP Melt Down when I retired at age 60 along with the DB Pension Bridge Payments to finance my travel in my Go Go years and collected my CPP starting at age 70. I had my cake and ate it as well. At age 70 I used my first 6 CPP benefit payments to pay my daughter to stay home on maternity leave for her full 18 months to give my Grandaughter the best chance to get a leg up in her development. Best money I ever spent. Great planning pays off thanks to free financial education KZbin videos like yours David. Thank You.

[@canpin]

The remaining life i have is more unpredictable than the stock market. Investing my cpp money in index fund/stock market, i will get more or worst the same as i waited on later date - i rather enjoy it and/or give it to my love ones.

[@mkyhou1160]

You have to factor in health, not just life span. At 65 you can still travel and enjoy life. At 75 your energy is lower, the money has less value. By foregoing CPP at 65 you maybe foregoing life experiences you will later not be capable of.

[@enatp6448]

100%

[@GreatIaker]

That's a factor that is often misunderstood in this type of analysis. Deferring CPP to 70 does not mean deferring spending to 70+. The total planned spending is the same, but deferring means spending more of the retiree's own savings earlier to get more guaranteed, indexed, lifetime government benefits later. For people that don't have big DB pensions and want more certainty in their retirement income it's often a good choice.

[@TheSerenityV]

Your assessment @mkyhou1160 is right on.

[@bl9531]

@@GreatIakerwell said: in other words - if delaying CPP means you are forced to spend less than you would like to and forego life experiences then of course the decision is easy - you should take CPP ASAP.

[@Imsosmrt1999]

@@GreatIaker This is the typical rebuttal (I watch way too many YT videos on this subject): “You’ll miss out on life by deferring CPP”. But for most people, personal savings are grim and don’t factor into their plans. It’s more like “I can’t afford not to take CPP” than “I want to take three cruises a year”.

[@cherylvl1036]

My seemingly healthy father in law died from a massive heart attack at age 64. He was a healthy weight and had no known health problems. My mother in law died just before her 71st birthday. I don’t know if either of them took CPP early or not but it would have benefited them both.

[@SteadyhandInvestments]

It is unfortunate and sad from a personal and financial perspective that there are circumstances in which an individual passes away far earlier than anticipated. Indeed, this is one of the most compelling arguments for starting CPP and OAS earlier. However, another way to look at CPP and OAS is as a form of insurance against running out of investment assets in retirement. When an individual chooses to defer these forms of pension income, they will eventually receive a higher, guaranteed income stream, which can be especially valuable to those who live longer than expected or have depleted their other retirement assets.

[@James_48]

Personal family medical history should be factored into the decision. Accepting a much lower CPP however may lead to challenges without stable, guaranteed, inflation indexed income later in retirement.

[@ThisOldMan-ya472]

How would you know how much taking early pension at age 60, would have benefitted them? Many people at age 60 have accepted their lifestyle and their spending habits. In fact many people just bank their pensions. I am 69 and not yet taking pension as income and expenses are balanced. At age 70, our current income changes, but we still will bank our pensions. Perhaps we don't live an expensive lifestyle? We don't need trips, toys and a garage full of new vehicles. In fact I will get minimum pension because I never made a large income and never had a career job. My best paying job was as a janitor working 35 hour weeks. My most important job, was MANAGING my finances.

[@wrongwayconway]

I’ll be retiring next month at 63. I started taking my CPP at 61 3/4 and investing it into aTFSA. I used the CPP estimator on MyService Canada website to play with different ages to start collecting. I work in an ICU, I’ve seen way too many people die before 60, let alone 65. I used the Sunlife life expectancy calculator, according to that I’m expected to make it to 87. I’m in favour of collecting less over a longer period of time and enjoying life while I am healthy and able to travel.

[@ThisOldMan-ya472]

@@cherylvl1036 Assessing decisions in hindsight is easy. Making decisions in anticipation of a future is impossible, necessary and irrevocable. NO ONE should make financial decisions based on perceived pensions, inheritances or windfalls.

[@robertross8565]

If you take CPP and later regret your decision, you are allowed to repay the government as long as your request is in writing and it is done within a 12 month period. So technically the decision to take CPP is reversible.

[@SteadyhandInvestments]

Absolutely! Jason discusses this in the video around 12:30, if it’s caught within 12 months this is a good option to adjust and reverse any payments during that initial period.

[@robertross8565]

@@SteadyhandInvestments I made my comment before I finished seeing the video. Naughty boy.

[@karenb64]

In the video you mention a life expectancy calculator. Where is that link? Thanks.

[@สายใจปริงเกิล]

I don't understand the pension insurance payment.

[@YvonBolduc_Tip007]

It should be noted that CPP is calculated using the YMPE (yearly maximum pensionable earnings). Not only do you get the 8.4% annual increase by deferring it by one year but you also get the increase in the YMPE.

[@davecarpenter4917]

I think its based on the 5 year average of YMPE leading up to your CPP starting. But then again, you need the minimum # of months of paying into CPP. If you're working at a YMPE (or close to it), no worries. If you're not working , but deferring CPP for a while, you may be adding a bunch of 0 income years to the calc.

[@SteadyhandInvestments]

You bring up a good point. The YMPE is based on wage growth, which has historically grown faster than the consumer price index (CPI). This means that the benefit to deferral can be larger if the YMPE continues to grow faster than CPI. However, the benefit of deferral is reduced slightly if YMPE increases less than the CPI.

[@ClaudeDemers-d6s]

1.I have noticed many of my colleagues (federal public Servants) taking the CPP benefit at age 60. Have you noticed this as well? Many are being advised to do so because of their federal pensions. 2. Does this impact the graph when the bridging stops at 65? Good video!!

[@davecarpenter4917]

The cpp income crossover points ( 60 vs 65 or 70 ) would not change if you have a bridge or not. Its all just income sourced from CPP. Taxation would be higher during the pension+bridge+CPP years.

[@marinerbc1]

@@davecarpenter4917wouldn’t that depend on the taxable income and bracket vs sources of retirement income ?

[@ClaudeDemers-d6s]

That is what I thought. Thank you!

[@SteadyhandInvestments]

There are some cases where it can be reasonable to take CPP at age 60. If someone has a large defined-benefit pension (especially one that is indexed to inflation) then the value of getting more CPP income might not be as attractive. Many pensions include a bridge benefit which lasts until age 65, but the pension bridge is independent of when a person starts CPP. They just both use age 65 as the traditional age of retirement. Thanks for watching!

[@davidbarlow372]

take it at 60

[@andylowell7405]

My issue is if I draw down on RRSP then I lose the return in dividends and stock growth. If I did that and waited till 70 to take CPP and my spouse passes, I get no OAS from him and no increase in CPP because Im receiving max benefits. Meanwhile I have lowered my savings and dividend income significantly. I get the RRSP meltdown tax strategy but I feel like i will lose more if I or my spouse passes in their early 70s. Can someone explain how using savings is better than taking CPP earlier?

[@pedestrianfare8175]

Thanks. I'm also interested in hearing examples of the impact of early retirement (ie. end contributions to CPP) on CPP payout.

[@James_48]

Generally, you still receive a much higher amount by deferring when early retirement means late fifties or later. Doug Runchey runs a great service that can provide you with a complete picture of potential CPP benefits..

[@odourboy]

It strikes me that this question is more complicated than your analysis suggests. Does the cost (and loss of subsequent returns) of self funding retirement for the years one defers CPP need to be considered? The source of those funds (savings vs RRSP)? What about one's overall tax rate given that only a portion of retirement needs come from CPP? Does that significantly affect this calculation?

[@SteadyhandInvestments]

There are many other factors that could be considered, including investment returns and taxes. The impact of those factors are typically smaller than the benefit of the deferral however. For investment returns, the higher potential return from taking CPP early and investing is uncertain and could be negative if there is a market correction early in retirement. A big part of the CPP start decision is setting a foundation of secure lifetime income and taking some investment risk off the table.

[@RobSnow-ui4sz]

good video- I do have a question. is what you see in the CPP what you will get? or is what you see can still be reduced?

[@deanlee8150]

Wasn't there a rule change for early/delayed CPP sometime in 2012 or so? The increased percentage of people who are deferring taking their CPP statistic since 2012 (@10:09) doesn't seem to take this into account.

[@SteadyhandInvestments]

You're right that there was a change in the CPP calculation. At that time, the reduction in monthly benefits for starting before 65 and the boost for deferring both became larger.

[@davepeak25]

What happens if you dont work. Zero income and delay?? Does it still go up?

[@stephensoles3773]

You are taxed on the money that goes INTO cpp, then taxed again when you take it out? What kind of a deal is that?

[@marionsutcliffe1119]

CPP contributions are not taxed: "You’ll receive a tax deduction for the “employer half” of the contribution when completing your tax return. You’ll receive a 15% federal tax credit for the “employee half” of the contribution when completing your tax return."

[@brentgraham1735]

Can you provide a link to life expectancy at current age vs. Birth??

[@robertross8565]

@@brentgraham1735 SunLife has a good life expectancy calculator. Just Google “SunLife Life Expectancy Calculator”.

[@SteadyhandInvestments]

www.longevityillustrator.org/ is a site that allows you to input information about you (and your partner, if applicable) that will help provide some longevity estimate based on your current age and other relevant criteria.

[@laed3520]

Co-Pilot AI on my Edge browser gave this answer. For a non-smoking, non-drinking male in British Columbia who is currently 70 years old, the life expectancy is generally around 15-20 more years, meaning they could live to be 85-90 years old. This estimate can vary based on individual health factors, lifestyle, and family history.

[@niceguy8305]

Life no guarantee

[@Pmjay00]

I think it's a very indivdual choose based on you finances, and your personal priorities. I'm more interested in survivor benefits and adding up the guaranteed indexed income the survivor will have if one of us passes early. We have a large RRSP to bridge between 65-70 and beyond. My partner has a DB pension but my survivor benefit is %66.6 . I will delay CPP until 70 so that will boost up my personal guaranteed income making it more equal survivor income.

[@niceguy8305]

4 people i know past last 2 months age 60 n under they all were. Ill take my cpp at 60.5

[@TheSerenityV]

And what is the value of money in future if you delay?

[@DoneByD]

CPP is a fully index benefit meaning you shouldn't lose any purchasing power by delaying CPP, in fact, prior to starting CPP your benefit goes up with average industrial wage (AIW) up to YMPE, which has historically gone up faster than the consumer price index (CPI). CPI is what CPP is index by after you start receiving your benefits therefore you actually will gain a little more purchasing power by deferring as well because of AIW beating CPI .

[@mikethomas6715]

If someone retires at 60, no income from 60-65, therefore not paying into CPP anymore after age 60. Then they chooses to start taking CPP at 65, does it affect your CPP benefits at age 65? That is in terms of taking it at 60 or at 65.

[@danielepp3113]

Your CPP will be 42% larger...0.7%/month.

[@tariqjan400]

If someone leaves work at 60 . Is it beneficial to wait till 65 OR just start taking CPP at 60

[@CitizenTurtleIsland]

Who can afford to defer until they are 70 years old... to get even more CPP... not the people who need that support the most? I wonder if it's an advantage for the government to offer this incentive... as some people who defer won't live too many years past 70. Why do they have to make it so stressful?

[@sholbech22]

The average Canadians is working after the age of 65, (some by choice and some by necessity) and given the average life expectancy in Canada is now 80+, there are a fair of people that can AND should consider defer (for maybe a year or two!). A GUARANTEED 8.4%+inflation adjusted yearly rate of return with no risk is a solid return.. I do recognize that there are also some Canadian's the NEED to take CPP early. - there is no advantage for the government (remember that the CPP isn't government money!!, it is in a big pool of employee/employer contributions!.

[@davidbarlow372]

do not wait to 70....wrong move

[@laed3520]

@@davidbarlow372 for some maybe but not for me. I'm receiving $1,754/mo by waiting till 70 and I will easily live to 90. My goal is 100. My secret is donating my blood every year since I was 17. I have removed 86 litres of contaminated blood from my body in the past 57 years and still I'm still donating. I'm hoping to get to 100 litres before they turn me away. Ever try running a car for 80 years by only adding oil and not removing the contaminated oil. Food for thought. Women live longer than men on average because of their monthly loss of blood. Which their bodies quickly replenish with clean fresh blood from their bone marrow. Men can donate every 56 days while women can only donate every 84 days due to my previous comment.

[@rebeccalowe4476]

What if you are disabled? How does this affect CPP?

[@SteadyhandInvestments]

For those who are disabled AND receiving the CPP disability benefit, the time the person receives the CPP disability benefit is excluded from their retirement benefit calculation. This removes the low-income period from the retirement benefit calculation.

[@1flames952]

Do you pay CPP if you work after you are 65? If you do do those years count toward your work years in calculating CPP

[@SteadyhandInvestments]

If you are above age 65, you can apply to not make future contributions if you wish. If you do decide to continue to contribute, the ultimate retirement benefits will be enhanced as those years will count towards your work years.

[@sholbech22]

www.canada.ca/en/services/benefits/publicpensions/cpp/cpp-post-retirement/eligibility.html

[@Wtfizdat]

You spend more between 60-70 and less after 70. Why wait until the time when you don't need as much money to get more money?!?! I'll be taking it at 60 and spending it on enjoying life while I'm young. I have $1M+ in RRSP and will let that grow more while I get back what I can from the government as soon as I can.

[@sholbech22]

i would really guide you to an tax professional (i am not one!)... it is usually far better (for most individuals) to utilize your RRSP funds between age 60-70 and defer their OAS and CPP until age 70... Don't forget that when individual dies the GoC will take a BIG portion of the remaining RRSP/RRIF (on a $1M RRSP portfolio, your estate will lose 50%). Withdrawal $100K per year 60-70 for 10years. After 70, live off of TFSA+OAS+CPP (+ any cash saving).

[@Wtfizdat]

Yes. You are correct about drawing down the RRSP. I plan to do that as well. But I don't trust the government enough to wait 10 more years to get my money or to find they changed the rules.

[@DavidHughes-f6c]

​​@@WtfizdatNot to be harsh but your thinking is mathematically flawed and I agree that you seek professional tax help. Also "not trusting the government" as a reason to take CPP early is also flawed: first because your CPP is "locked in" - they can't just take it back or whatever your fear is. And if you fear anything, it should be tax bracket changes, TFSA restrictions, changes to OAS eligibility, RRIF withdrawal rates, etc. If you really don't trust your government why trust them in *any* regard? I'd take all your RRSP money and leave the country. 😂

[@niceguy8305]

​@sholbech22 after watching many videos, this seems to be best strategy. All depends on size of registered assets. If smaller then u can start pulling rrsp/ pension sooner

[@Firul4is]

Didn't talk about the number of working years in the formula, waiting also will keep working until later

[@SteadyhandInvestments]

Waiting for CPP doesn't mean you must continue working. This strategy does require some savings to draw on in the meantime, however.

[@Firul4is]

@@SteadyhandInvestments Periods of low or no earnings You might have years of low or no earnings. When we calculate the base component of your CPP retirement pension, we will “drop out” or not include up to 8 years of your lowest earnings from your earnings history. This will increase the amount of your pension.

[@danieldrouin6857]

What if i take my CPP at 60 and keep on working until 70, what then?

[@SteadyhandInvestments]

Between ages 60-65 you will still be required to contribute to CPP if you are working, but in exchange you will begin to earn a benefit each year called the "Post-Retirement Benefit". From ages 65-70, you have the option to opt out of this benefit and stop making contributions.

[@danieldrouin6857]

@@SteadyhandInvestments Thank you for the info. More questions, So I take the CPP at 60, work until 70, still contribute to CPP, even though I took the CPP at 60 and droped it by about 7%, would I ever reach the same amount of CPP if I would have taken it at 65 by still contributing?

[@connorluka7149]

60. Cmon, people need to start thinking.

[@stevensteve8196]

7:34 the average life expectancy is not 90. The current life expectancy for Canada in 2024 is 83.11 years, a 0.18% increase from 2023.

[@mikelaba6734]

Good Video on opening Service Canada Account. Did not know. I wish investment world would look at 60 for people continuing to work taking pension with no taxes and putting it into RRSP and buying monthly high yield ETFs that generate 10-15% then spreadsheet the snowball at 65 add money income and what you will have. Do the math!?! Think about it if you monthly invest in ENCL BANK BKCL etc etc at 65 look at the math and to income added to taking early and equity you have and protects against those healthy ones that die at 64 waiting until 70.

[@johnnyv5995]

Sorry, but no way. Too much focus on "delay and you'll be rewarded". Retiring at 60 means you have +10years to truly ENJOY life this is the time you need $ Having an extra 40% when you are 70 will give you what exactly if your health is starting to go? Guys, at some point you need to say ENOUGH and start living while you still can.

[@marionsutcliffe1119]

How is is so hard to understand that 40% more cpp+oas at 70+ lets you spend more before 70.

[@johnnyv5995]

@@marionsutcliffe1119 ... what happens if you or spouse pass away anywhere between 70-80...ByeBye +40% + you spent most of your savings. Too risky for my taste.

[@Imsosmrt1999]

You could split the difference and take OAS at 65 and CPP at 70, or CPP at 60, OAS at 70 etc. I guess the point is if you know you’ll have enough, take it whenever you want. If you are not sure, maybe an older car, or one less holiday a year in retirement is a safer option.

[@niceguy8305]

I agree with you. Go go from 60 to early 70s. Live the dream now

[@marionsutcliffe1119]

@@niceguy8305 I agree. Go-Go until 70s (on my own savings). Then rely on CPP and OAS for Slow-Go.

[@marcelmed4574]

Not sure how the title of this video has anything to do about the discussion. The discussion is related to when to take CPP. Nothing new here, well known fact that if you live past your early 80’s it’s best to wait till 70. Hundreds of videos on KZbin on when to start CPP.

[@philc824]

Average life expectancy is not 90 years

[@garo52]

Using pure math is naive...quality of life is my #1 value...

[@AndyStewart-zo4nc]

It kills me when people have a podcast but their sound is terrible. The guest his audio sounds very professional but the host, his audio is TERRIBLE!!! Lets take some cash out of savings and buy a new mic.