When Should You Take Your CPP If You Have A Defined Benefit Pension?
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- Опубліковано 1 чер 2024
- Learn more about our services: www.parallelwealth.com/planning
In this video, we'll go through an example using our software to plan when you should take your CPP if you have a defined benefit pension plan.
If you have any further questions about this video's topic or any financial planning questions in general, I encourage you to find a certified financial planner in your area or book a consultation with us to get your savings plan on track. You can learn more about our services at www.parallelwealth.com/planning or email Info@Parallelwealth.com
OUTLINE:
0:00 - Introduction & Case Facts
3:57 - CPP at 60
6:40 - CPP at 65
8:52 - CPP at 70
9:57 - CPP at 66
12:38 - Change Investment Risk
15:15 - Summary
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DISCLAIMER: The videos and opinions on this channel are for informational and educational purposes only and do not constitute investment advice. Adam Bornn is not registered to provide investment advice and as such does not provide recommendations - those looking for investment advice should seek out a registered professional. Adam is not responsible for investment actions taken by viewers and his content should not be used as a basis for investment trades.
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My sister who retired a few years early had this "when should I take CPP" question for me as she had an indexed DB plan with a bridge to 65 (neither the pension nor the bridge is as generous as in your example) and she knows I keep up on these sort of things. While she had a small amount of savings it is completely different from my situation of no pension & totally dependent on retirement savings so all I could do is tell her what I am doing, what the basic alternatives were (I am no CFP or anything) and it was really up to her to decide what she thought was best. In the end she took her CPP & OAS at 65 which pretty much matched her bridge benefit. Essentially she had no change to her retirement income when she turned 65, which I suppose is the purpose of the bridge, and in many of cases I think there's a lot to be said for that. As you say every situation is different and everyone needs to think about their own plan and what works for them.
Great video. This definitely relates to me as I too have a defined benefit. 35 years in and have been thinking of when to retire (60 or 65). I am 55 years young 😊
For my purposes this was the best video that you have presented to date. Thank you. Max
Best info so far. Good job.
Great video! Thanks Adam.
Excellent video - thanks!
OH yes! This one is relevant in this household...ADAM...thank you. 💯👍🇨🇦🍁
Superb video Adam!!
yes numbers really help. when comparing different scenarios
Inspired and informed. Running the numbers is like a financial mental workout. FFS in April most likely.
Thanks Adam. I am going to book a session.
Great video Thank you
Also, appreciate actually seeing the program you use to help with financial decisions. Thanks Adam. Helpful. I like how you showed how the program worked with numbers put in. If you had a few other scenario's...have you thought about once a month using a different income amount and using your program? Maybe one where the income earned isn't as high as $100,000 per year with a very generous "bridge." What about 50,000 per year....and a bridge of $800 to 65 yrs of age. RRSP would be $100,000 at 61 with dividends generating $12,000 per year or $1000 per month. TFSA is $125,000 and dividends generate $9,600 per year, or 800/month. The TFSA contribution per year gets maxed ; be it $6000 or $5000 or $6500 pending what the max amount is set at. Would a person take the CPP at 66 like this client in your example or would it appear to be wiser to wait until 68 or 70 and meltdown the RRSP until the CPP would be drawn? Looking forward to your input if you are interested in using these numbers as another example. Keep up the very interesting and helpful work. Awesome!👍💯😉
Great video. I fit the scenario to a tee (except I also have a corporation). Thanks!
Thanks for the video as always! Videos about FIRE seen through your school of thought would be very interesting, maybe you could run us through what kind of strategies could be used in regards to RRSP meltdown, CPP and OAS, defined pension plan and so on in scenarios where someone would plan to retire at 40 or 45 and would thus need to fill a gap before being about to claim most of these benefits?
Great video Adam! Appreciate seeing the #’s broken down. Would be interesting to see a similar video with the same $’s but the client is married and his wife doesn’t have a pension. Cheers!
Great info. Sent you an email today about your services!
Love the software. It is great to see the tax consequences of running various scenarios.
Thanks for the video. Would be great to see a video scenario on someone under 65 who is receiving a CPP survivors benefit and the best time to take their CPP. I believe the benefits are combined up to the individuals maximum so it may make sense to collect it earlier, correct?
Hey Adam. I'm new to the channel and playing a bit of catch up. Really love your videos. Well explained. In this case would it make sense to take CPP at 60 PLUS meltdown your RRSP in 5 to 7 years to create the laddered income you talk about here and in a more recent video?
My numbers are about the same. I took cpp at 60, for various reasons concerning my government pension.
Thank you for another good advice. I am collecting defined benefit pensions, RRIF, OAS and CPP.
I have a Non registered account and max'd out on TFSA. Should I draw funds from the Non registered account or taking out more than the minimum from RRIF if I need more cash flow from the tax point of view.
Hello Adam, another well presented video on when to take your CPP and drawing down your TFSA.
My wife and I have both a defined pension plan and after all expenses are paid we are still saving $2000 a month on her pension along. We both retired at 55 and did our homework. Therfore, we push my pension to 60. However, we both have pension bridges through our employer. Question 1: would it still make sense to push my pension to 65? In this scenario do you take the clients break-even point into consideration. All the information we have been able to find our bridge benefit terminates at 65. Question 2: wouldn't it make sense to start our pension earlier at 60 and when our bridge benefits terminate at 65 then start our CPP to compensate for the loss in bridge benefit? We have been drawing down our RRSP and bolstering our TFSA and we still have on one pension $2000 extra a month which we put into our TFSA. Just wondering if starting at 60 would makes sense or should we still push my pension to 65? Thank you again
Great video today!!! Would love to have you do my scenario
We do fee for service plans. Check out our website.
Can you do a video on RRIF & the annual tax free withdrawal benefit ?
Calpers 2 percent at 50 . Retired with 72 percent.
Love thé vidéos, keep it up.
Thanks Mike!
Great video as always Adam! I really enjoyed you showing the software side and I definitely would love to see more as I’m a numbers guy.
Video idea: Show us a high-level example of what your company does from A to Z. I know everyone’s situation is different, but you could make up a scenario of what you see the most.
Thanks! :)
Will do!
That makes a lot of sense, the only thing you didn't talk about is the 5 years you've been collecting from 60 to 65. That's a pile of money that you have already before you even start collecting at 65.
Can you do a video about Survivor Benefit and when to start CPP? Because of the maximum that CPP will be capped at does it really matter? In my case I will always get the maximum when they add my CPP benefits and what I’m currently receiving as a Survivor Benefit. So I’m not sure if there are any benefits to delaying the start of my own CPP Benefit. Thank you.
69 thousand a year pension plan. ..OMG... WOW! 😨
NET ~$52K after appx 30% taxes. Most pensions paid into from every pay over many yrs. No free lunch. But still good and now rare.
I agree. I also feel that taking CPP later helps to hedge against inflation.
100%
Adam, one unknown I have been dealing with revolves around identifying what the CPP payouts will be when retiring early. In my case, my wife (who has a defined benefit plan) wants to retire at age 57, which is in 3 years. After nursing her entire career, she is done. I can look at her CPP now on the Canadian website to see what it estimates she will have at age 65, but how do we adapt this number for forecasting when she will stop paying in 8 years early? Similarly, I plan to retire at about age 62, which is just under 5 years away, but also cannot predict what my CPP payout will be when I stop contributing 3 years early. I'm sure this topic would be of interest to a broad group of people.
James, we have been working on this video for a few months to be honest. We can accurately calculate without the drop out provision and child rearing years. We have a calculator coming that will also give us those in the calculation. Stay tuned and we will do a video and how to access this calculator as soon as we have it. Right now there is no way - which is crazy! So we are trying to change that.
@@ParallelWealth I gave you a thumbs up on this response a few days ago, but thought I'd echo Daniel P's sentiments to looking forward to figuring out how the zero cpp years will effect benefit if retiring pre 60.
thanks for your continued wealth of insight Adam!!
Discuss taking lump sum pension vs monthly annuity payments in DB plans
ua-cam.com/video/VZV1NIl_X64/v-deo.html
We have one from a year ago. Will be doing an updated one soon.
I got lost half way !
Good information, thanks! I have a similar situation, however we have two defined benefit pensions (each spouse has one) upcoming- how might this affect our CPP (QPP in our case)?
Won't affect your CPP, just want to look at timing on when to take it.
Hey Adam... Thank you for making people think about making a more perfect retirement plan. You explain concepts in broader strokes, and remind people that their individual situations always differ, so get personalized post-advice.
God bless, and long health.
Thanks so much. Always appreciate the positive feedback and to hear we are making change - it's why we do it
I'm puzzled that you didn't do the CPP at 70 scenario by having your client draw down their RRSP starting at 65. That would cover the period between losing the bridge benefit and starting CPP/OAS.
I did it, but the numbers didn't work as well. Every situation is so different, so have to play with the numbers and concepts.
Maybe it’s better to illustrate the analysis using more typical defined benefits pension plan numbers. That way more people can relate to the to it.
Although my experience is limited, at least one of the biggest defined benefit pension plans in Ontario behaves exactly like this where there is a substantial bridge benefit between the retirement age and 65 when the bridge benefit is eliminated. The pension plan is designed to assume (but it is not required) that the pensioner will start their CPP benefit at age 65. With this approach, the pensioner can receive a constant pension amount from the point of retirement forward, but CPP is factored into the pensioners total income to arrive at that constant amount. It is common, for members of many DB plans to be able to retire in their late 50’s which is why this bridge benefit is so helpful (but temporary).
Thanks for the mental financial workout. Im a 54 year old retired Veteran of the Canadian Forces and hitting the end of my second career. Too many variables to throw out here so my question is who do I get to do a sit down and run the numbers and what should it cost?? I have investments but want a third party look at what to do going forward. Thanks
Jeff you can learn more about our fee for service plans at www.parallelwealth.com/planning These plans will give an outside 'look' and breakdown of best way to reduce tax, increase income and create solid retirement plan.
Great
Great video!
Is this software available to buy?
Unfortunately not.
Do you have any videos on which countries are the best to retire in for tax purposes? Meaning becoming a resident and severing ties with Canada and CRA? Tax treaties and taxed at source stuff?
No I don't, but there are a few good ones out there is you search YT
Understandably, each person's cpp benefit is unique to their situation, however, everyone loses .6% per mth for early cpp. That's the standard percent. Is there a standard percentage loss/hit for each zero cpp year. Similar to losing 7.2% per yr for early cpp, is there a standard percentage loss for each zero cpp year?
Will the timelines change significantly if you don't have significant/any RRSP holdings and you are already at retirement age? I suspect this is a more common situation where people assume their pension _was_ their retirement savings. Also, could you run the numbers for a small RRSP meltdown, of say, $50k? Should you be as aggressive; is is time-centric, or amount?
Hi Adam - very instructive video. What happens when someone is receiving CPP disability benefits when they turn 65? Are they obliged to convert to regular CPP or can they delay receipt of the CPP as you talk about in your video?
Quite certain you are forced to take your reg CPP.
@@ParallelWealth Thank you.
Hi Adam. I am really enjoying your videos and like your enthusiasm for the subject. After I watched the video I had one burning question that your video did not adequately answer for me. Both my husband and I retired at at ages 56 (we are a year apart in age). We both have small pensions from work whereby one of us collected at age 56 with a bridge and the other will start collecting at age 59 also with a bridge. We have no other source of income others than from maxed out rrsps, tfsas and non registered savings. We wanted to know if it was better to collect CPP at 60 or 65. In your examples the individuals retire at 60 and likely have the correct number of years and maximum for CPP contributions and already have a sizeable pension and savings and therefore makes more sense to draw down rsp and defer CPP to age 65. However, if you retire at 56 there are clearly 9 years of 0 contribution to CPP. Also each of us have several years of 0 contribution years already from living abroad, school etc. As such by the time either of us reaches 65 we will be well in excess of 8 years with zero contribution years. In this case would it not be better to take CPP at 60 as the number of zero years would not add the 5 years from 60-65 age?
Tracy, would need to do a full plan to answer this. Much more to it than what's on the surface. www.parallelwealth.com/planning
I’ll ask the question another way that might be easier for you to answer. When calculating CPP for someone to collect at age 60 or at age 65 and this individual has complete maximum earning from age 18 to 55 except for 5 years where there was no contributions to CPP. This individual is retiring at 55 so by age 60 they will have 10 years of zero contributions and by age 65 they would have 15 years of zero contributions. In this scenario, and assume the individual does not care about any other income streams or anything what so ever, what would a person get for a CPP benefit at age 60 and at age 65 in this scenario? Basic question! If this can’t be answered I would be very unsure of the services you may be marketing would help me. Thank you
Take CPP at 60 in this scenario
Lots of good information available elsewhere, but your software presentation is difficult to process. I recommend a graphical representation like they use for the Government of Canada retirement planners. The annual bar graph is much more easy to understand in terms of the options about when to start these benefits, and more importantly to see the transition as you age toward final accomodations and costs for travel / health care. Finally, one option not well covered are your plans for couples - and what happens when one pre-deceases the other - survivor benefits matter in planning, as does insurance. Insurance is a dirty word for most people, but it is part of the planning process too, as cash values can be accumulated and used, or left to the estate. You learn a lot when someone dies!
We have all the bar graphs and more - will share in future videos. We usually keep those for our clients eyes only!!
@@ParallelWealth duly noted. I just prefer them as a visual aid to the spreadsheet. The numbers (and thus the trends / rate of growth / decline) are harder to visualize over time. The government retirement planning tools are okay at it, but their system is not as flexible as one would ideally have it (so many options), but they do have the bar chart for the review.
My main purpose for the bar chart is to show my spouse (who is not the money savy one) that even if I predecease, that there will be enough left to pay the bills and live. That is the main stressor, and spreadsheets simply do not convey that as well as a plot where the various income streams can be shown coming on-line (CPP from 60-70 etc.) and they can see the difference by trusting the plan, and deferring even one month more does in the overall balance. The pressure from so many of our peers is to take CPP as early as possible, and all our situations are different. Also seeing the mortgage deadline relative to income in the future (and the impact of insurace /death benefits wiping it out) also helps greatly to understand both mortgage pre-payment and what it means to our future fixed income.
Wouldn't the client lose the bridge benifit ($21,000) after 65 (since the bridge is only from thier retiremnt until CPP starts at age 65?) Could not follow where the loss of the bridge is in the cacluation.
I would be curious to know the age of death where the 2 scenarios would be the same. CPP at 60 vs 65
Age 74
Kinda dumb question lol but is a defind pension plan considered the same as a union pension, my wife has a LAPP pension.
Thanks
Never a dumb question! Yes, every pension plan that pays a set payment for life is what's called a DB or defined benefit plan. Each one varies, but the concept is the same.
Love your videos! How does this situation change for a married couple retiring next year (age 58 and 57) that have large investment funds ($1.2M in RRSPs, LRSPs, TFSA). Investments are currently exceeding 20% annually (will be over 30% this year).
Deregister as efficiently as possible. Work with your planner to run some realistic numbers around when to take CPP versus RRSP drawdown. Again, not spending the money necessarily, but getting it out of taxable accounts. Also, I would not run projections at 20%!
@@ParallelWealth Have you ever done any videos on when to de-register accounts and possible strategies?
@@dankarau2307 ua-cam.com/video/40_u-ArK4MY/v-deo.html
@@ParallelWealth Thanks...I'm super bullush on Tesla out to 2030 and it represents about 85% of my invested portfolio right and climbing. It pains me at the thought of selling a single share, but momma wants to eat...LOL I really need to move $ from my RSP's to TFSA's as they are not max'd.
This video is very timely for me as I am currently trying to answer same question on timing of CPP collection. Would love to have access to your software.
Bert, Unfortunately the software isn't available for purchase. All of our fee for service clients get a full plan built on this software - so that's the way to get it!
@@ParallelWealth I understand. Here's an idea for your next video. Could you do a video on a scenario where the decision is whether to melt an RRSP or a non-registered account while waiting to collect CPP at 70? Both accounts with a $500K balance and a small non-indexed pension of $30K. I figure it is more beneficial to melt the RRSP as long as the non-registered account is in growth investments. Withdrawal from an RRSP is 100% taxable whereby a withdrawal from a non-registered account would trigger capital gains tax which is only 50% taxable. Your thoughts?
I was thinking about taking my CPP at 60 and investing it because of my pension clawback ? Any thoughts on that? Thank you 🇨🇦
But you can just not take it and 'earn' 7.2%
@@ParallelWealth Hi Adam thank you for all your videos it has really help me think about my retirement . At this moment my 2020 pension statement says at age 60 , I can retire early with a 21,958.56 annual pension BUT at 65 it will be reduce to 14,767.32. Is there anyway that I can get around this government clawback ? Thank you for any help you can give me . 🇨🇦
@@debrapearse5116 Hi Debra, I’m assuming the pension statement you’re referring to is your work pension, the reason it’s less at age 65 is likely because you lose the bridge benefit at that age, it has nothing to do with a government clawback. The purpose of a bridge benefit is to help you get by before your OAS kicks in at 65. If you were to retire at 60 you could always hold off on taking your CPP until age 65, but keep in mind there is a maximum of 8 years of low/zero income that they will excluded from the calculation of your CPP, so those 5 years from 60 to 65 are part of that 8. If you haven’t had more than 3 years off due to unemployment or university or something then it could be worth it to hold off on taking CPP till 65 if you can do without it those 5 years.
I love your Video's watchthem all the time. Adam...My situation. I work for Fed Gov't. I'm 60 and I plan to work till 65 witha definded benefit of 48,000. I won't draw my CPP until 65. How much money will I lose with the Gov't claw back? Maximum CPP. I understand they will claw my definded benefit pension back by over 50%. Is this true?
Never heard of it, so doubt it. Talk to your HR to confirm tho.
it is not true! LOL
@@ronbonora7872 I understand I lose the bridge portion. That is 60% or more. When I talk about claw back I'm talking about the bridge portion, I lose a percentage of that. A large portion from what I understand?
Remember I work for the federal gov't. Private business doesn't have bridge portion but gov't's do. Tell me about this and how I'm losing a portion of my defined benefit equal to a percentage of my CPP?
@@daveaird96 I just came across your comment. I'm a bit late but in case you're still wondering, the best thing to do is to check your pension details, then call the fed govt Pension Centre with questions about the bridge. With fed govt pensions, the bridge is designed to "fill in" for CPP until age 65, so it's not the majority of your total, only a part of it. When you hit 65, the bridge ends and you can take CPP if you wish, or delay CPP and use your own savings in the interim as Adam has explained. Hope that helps.
@@GT-tm1ft thanks for getting back. I was told I'll get the maximum. I believe I still lose about 750. month because of the bridge, is this true. I think you're gonna take this right off my work pension?
You need to do some of these videos for folks that have a slight bit more money like earning after retirement 7000 bucks a month. All of your examples are people that are living off of 50 grand a year which makes no sense for current professional couples.
I try to pick a middle ground. So many ppl complain I only do examples of rich people...I can't win! Lol
@@ParallelWealthYou are in an interesting space. I live in Ottawa and most professionals and government folks are making between 110K and 160K per year. Usually dual income people so household income around 300K. That said, they are looking at 8K per month pre tax with a life expectancy to 90. So how much needed in savings and given a 50% RRSP, 20% TFSA, 10% GICs and 20% investments. With CCP and OAS taken at 65. Income splitting of course.
Agree and follow your summary, thanks for posting. Argument is if you were pass at 70 rather than 86, you would have passed up CPP and deprecated RRSP that would go to the spouse or estate albeit at a high tax hit. The estate would benefit less with CPP on passing. All assumptions bet on longevity. I think that’s why many prefer the bird in the hand and draw CPP at 60.
Wouldn’t you draw from RRSP first to wind that down as it is taxed at withdrawal etc, then leaving TFSA last as inheritance is free from taxes upon withdrawal to the children? Assuming you have enough RRSP funds, pension and upon death the only funds left are TFSA for the children.
Unless I’m mistaken, this is exactly the scenario that is being discussed at about 8:13 where the RSP is “melted down” as part of the strategy of delaying CPP to age 65. Also, in this particular scenario there is no mention of a spouse or children, but it is an example of the meltdown.
What is define benefit pension??? How do you know how much you have??
When you work for a company and they guarantee a set monthly payment in retirement based on a multiplier around years of service and income.
@@ParallelWealth thank you. I used to be a hairstylist. Hair, Nail salons do not have those.
My question then for those of us, do we wait until we are at least 65??
If you retire at 60 and delayed the CPP until 65, and stop contributions to CPP in those five years, how would that affect the amount you will get for CPP? Or there isn’t any effect
Will depend how many low or zero years you had before age 60 paying into CPP.
@@ParallelWealthThanks Adam for your video. I only discovered your videos recently. I received a statement that I am eligible for $700 per month at age 60. If I delayed my CPP until 65 & stop contributions to CPP at 60, how much will I get my CPP at 65. Will I just multiply $700 by 7.2% for each year till 65? So I would get around $990 by 65. Is this correct?
Hi. What is a bridge benefit? I heard of a defined benefit plan that says if you passed away, it will continue to pay for your wife at 60%.
Bridge benefit is a part of many DB pensions that pay a top up until age 65. It's a 'bridge to CPP' but that doesn't mean you have to take CPP when your bridge stops at 65. The 60% you speak of would just be a survivor benefit
I wonder if my bank advisor will be okay or talk about rrsp meltdown.
Not likely!
@@ParallelWealth figure with the 2.38% on my mutual funds, they'd give me a break. O well, going ask about it next time I meet up with him.
is it true if you put off your CPP and pass away before collecting it your spouse wont receive a portion of your CPP?
Nope. And we have a full video on CPP survivor benefit. Check that out
Were the numbers for a couple?
What about single?
Singles are different. Nothing continues except a death benefit and if you have a child or child with disability.
@@ParallelWealth Adam, correct me if I’m wrong, but the surviving spouse is only entitled to a maximum of 60% of the deceased spouse’s CPP benefit, but the total allowed for the surviving spouse is capped at the CPP maximum for a single person. So, if the surviving spouse already receives the maximum CPP (or close to it) there is little to no survivor’s benefit.
I'm turning 62 I'm in a wheelchair unable to walk how much is cpp
I have trouble understanding all of this as I am not a numbers guy. I rely on simple logic to understand these things. If I understand correctly if you start drawing your pension at 60 at $54,531 or wait to 65 at $ 56,430 a gain of $70,000 over 35 years. So my question is this, By waiting 5 years you gain $2,000 a year or $70,000 over 35 years but you gave up $54,531 over 5 years a total of $272,655. Why is waiting to my advantage?
Nope, you get the higher income from day 1, it just comes from other sources until you start your CPP. So higher income the whole way through. If you watch the video again, when I share the screen you will see the income start right away at a higher number. Hope that helps explain it better!
@@ParallelWealth I rewatched the video to see what the other sources are and all the sources you mentioned are from my money not an outside source like the government. So in fact by starting to take CPP at 65 I am giving the government somewhere between $150,000 to $270,000 depending on my life span.
Yeah 95 will not happen. I think if you do not need the income and you are healthy hold off on CPP until 65 or later.
Hell ! 69k is rich ! ! ! . . . live on 50k, give the rest away.
I'm might be Dead at 65 maybe 55