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What would you do?
Old 11-08-2011, 12:55 PM   #1
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What would you do?

I got my Canada Pension Plan (CPP) statement yesterday.

If I wait until I'm 65, the pension will give me $955/month in today's dollars, or $11,460/year.

If I take the pension at age 60, it will be $655/month or $7,860 per year. However, I will be collecting the pension for an additional 5 years, for a total of $39,300.


I don't need the money - my work pension will cover all of my needs and then some. However, when I turn 65, I will lose the 'bridge benefit" which approximates the CPP, so my work pension will drop by about $850. By then CPP will kick in so I won't really notice any difference in my income.

Do I take the extra five years and invest the money? Or do I leave it for 5 years and collect the max?
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Old 11-08-2011, 06:24 PM   #2
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Of course, different individuals will have different answers to this. That said, if it was me, I'd wait until 65 to take it. Sounds like a good yield for waiting, given that it is sure and involves no risk.
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Old 11-08-2011, 08:25 PM   #3
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I would wait, most definitely, as you say you don't need it now. It will then feel like a swap with the loss of part of your work pension (probably just what was intended).
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Old 11-11-2011, 07:53 AM   #4
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What if he takes it now, does not use it, but just invests it?

But then, if his work pension drops at 65 by $850...that's the $850 question. Difference is $39300.

Not related in a way...I would say it also depends on your health and life expectancy. Are you in good or bad shape? Also, you never know what may happen with retirement packages in the future. Things could change and be taken away, although generally people are grandfathered. I would tend to take the money and invest it. The older you get, the less chance you may get to enjoy it, (health reasons, etc).
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Old 11-11-2011, 08:14 AM   #5
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You know that your income will drop by $850/month in 5 years and by waiting that shortfall is sure to be covered.

If you take it now and invest it then in 5 years you can't be certain that shortfall will be covered.

I would wait.
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Old 11-11-2011, 08:31 AM   #6
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My own circumstances were different......I have no company pension so I took CPP at age 60......a 'napkin calculation' indicated that those who waited until age 65 wouldn't pull ahead of me, in monies received, until somewhere around age 85......and although the females on my mother's side are given to longevity the males on either side aren't.

So I took the money (and ran).
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Old 11-11-2011, 09:54 AM   #7
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Quote:
Originally Posted by Nemo2 View Post
My own circumstances were different......I have no company pension so I took CPP at age 60......a 'napkin calculation' indicated that those who waited until age 65 wouldn't pull ahead of me, in monies received, until somewhere around age 85......and although the females on my mother's side are given to longevity the males on either side aren't.

So I took the money (and ran).
I'm surprised that yours is the only semi-quantitative approach............
tho it may not be any better than an intuitive swag answer, it does point out some variables to think about. For OP's case, a top-of-the-newspaper calculation.........delta for 5 yrs earlier pension results in 39.3K head start;
higher pension has favorable delta mo. income resulting in 3.6K/yr so
breakeven is about 11 yrs or age 76. Assumes 0% return on 5 early yrs.............if you will do better in this low interest environment adjust for that; will you live longer than this?.........unknowable answers so the calculation may not result in a better decision in the end, but at least you know where some of the uncertainties are.
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Old 11-11-2011, 11:18 AM   #8
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Quote:
Originally Posted by kaneohe View Post
breakeven is about 11 yrs or age 76.
Upon reflection I believe you're right....it was over 9 1/2 years ago since I applied and I likely 'misremembered' 75 as 85.
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Old 11-11-2011, 12:46 PM   #9
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The loss of bridge benefit is not relevant as it will happen whether you draw at 60 or 65.

Breakeven is given by x(11,460)=(x+5)(7860)

Doing the algebra gives 10.92 years or a breakeven at age 76 (straight breakeven with no interest accrual on the earlier benefits - given that risk free investments are returning about zero that sounds right!)

So do you feel lucky and will live a long time? Or are you in poor health? A spouse or heirs to worry about?

Personally - I would rather have some cheap longevity insurance against living a long time vs. a possible regret that I could have left a slightly bigger estate if i drew early and then soon died. If I draw early and live a long time, I will be miserable, if I wait to draw and die before I collect much, well, I will be dead.
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Old 11-11-2011, 01:42 PM   #10
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I'd wait until age 65 in order to be able to collect the price of an additional 10 steaks per month or $3,600 per year.
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Old 11-11-2011, 02:55 PM   #11
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I would wait since you don't need the money now and earnings rates are so low, unless your health or family history is poor such that you don't think you'll make it to 76.
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