# Deferring CPP and OAS



## My Own Advisor (Sep 24, 2012)

Great article
https://www.theglobeandmail.com/inv...article-why-do-retirees-fear-taking-cpp-late/

We're nowhere near age 70 but I've often wondered why more folks don't defer CPP and/or OAS until at least age 65 or even up to age 70. You can have more income through the deferral, you don't have to worry as much about your money outliving you, you therefore transfer the longevity risk from your personal portfolio to the government - great benefits all around.

What say you?


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## twa2w (Mar 5, 2016)

Well for most people I suspect a bird in the hand is worth two in the bush.

Given that few know how long they will live or how long they will be healthy, they prefer to take it and enjoy it now while they can. Golf, travel, whatever, spend on fun while you are still able.
Rational or not, they prefer to delay spending their own hard earned money.


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## 319905 (Mar 7, 2016)

I say ... my RPP and CPP were integrated meaning at age 65 my RPP was reduced by an amount equal to my CPP at age 65 ... ~$12K. Waiting till say 70 and down ~$60K? I dunno, doesn't sound like that would have been a good idea ... still really liking my new to me Jeep, thanks CPP irate:


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## naysmitj (Sep 16, 2014)

Still work full time but started CPP at age 67 because break even was a about 86. I still pay into CPP and have PRB accrue annually. PRB provides about a 14% return to me on my approx $2,600.00 annual contribution.


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## Beaver101 (Nov 14, 2011)

I wonder if the author of that book practices what he preaches.


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## Mookie (Feb 29, 2012)

Yes, very good article. I never would have thought to weigh the gains or losses based on the probability of dying at any particular age, but this makes total sense. I was already planning to defer until 70 myself, but this provides further reassurance that this is generally a wise move.

Of course, most people aren’t this analytical when it comes to when to take their CPP, and instead go with their gut feel or other factors to make the decision.

A friend of mine recently told me he’s retiring next year at 65, and he plans to start CPP immediately. He basically said that life is short, and he would be a fool not to take it now when he’s entitled to it. He’s in good health, so from a probability perspective, he’ll probably end up leaving money on the table, but he won’t know that until the day he passes his break-even point, and by that time he probably won’t remember or care. So long as he has a happy retirement, then I guess it’s all good.


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## RBull (Jan 20, 2013)

For some people it may be best to take it now but probably better to delay for a lot more than do now. CPP does has some wacky rules that need correcting like survivors benefits.

I believe for many people the reasons they don't defer is one or several of these: 

they need the money now, 
they think they're best off to get their money back fastest (start early/bird in the hand), 
it's physcologically hard to dip into their own money when cpp is available, 
they don't do the math and mistakenly believe they'll have more to fund their lifestyle by taking less earlier, 
give little consideration to outliving their money & the benefit of govt taking on longevity risk

With lifespans increasing an extra year each decade that goes by there should be even more consideration to deferring.

We're getting close to inititial eligibility but plans now are to defer to at least 65 and ideally closer to or at age 70. Maybe we'll succumb to one of the reasons I listed.


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## RBull (Jan 20, 2013)

Beaver101 said:


> I wonder if the author of that book practices what he preaches.


I believe he's right around age 65. I believe he does or will since:

he's a numbers guy - actuary
he's wealthy and doesn't really need the money (father was wealthy entrepreneur)
it's doubtful to me he wouldn't practice what he preaches


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## heyjude (May 16, 2009)

It was an excellent article. If only we had a crystal ball to find out how long we will live! Certainly, for the “average Canadian” who has no medical conditions likely to shorten life, and who has worked in Camada for his/her whole career, and retires at approximately 65 years of age, and who has a modicum of resources, it makes logical sense to delay taking CPP and OAS as long as possible, and think of them as an inflation-adjusted annuity.

I immigrated to Canada in my early 30s and retired in my late 50s. If I wait too long, my maximum CPP calculation will decrease due to the inclusion of too many years without earnings. So I am going to take CPP at age 65. So while the rationale of the article is sound for many if not most Canadians, there are some exceptions to the rule.


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## Retiredguy (Jul 24, 2013)

I decided to start my CPP next January.- age 65 plus several months.
While waiting to age 70 had some appeal for a larger indexed pension in later years, the drawbacks for me are;

The survivors pension for my spouse is based on the age 65 amount . It is not based on the age 70 amount. (If it was based on the age 70 amount I would have waited to 70)
My DB pension drops 10K at 65 and I would have to self fund about 40K (after tax) to age 70. My CPP age 65 (plus) will be 13.5 K plus the 2019 AYMPE increase.
I'm waiting to start in Jan as new pensions are based on the AYMPE which as a trend for the last 10 yrs is greater than the CPI - which is applied to pensions already granted. (A small fun gamble)

The article was interesting but was wrong in suggesting that she will get 60% of her husbands CPP as a survivor benefit. In the example she gets her own age 65 CPP of 700 month while he gets 1000 per month. Given the way survivors benefits are calculated I think she will only get 36% of his ($360). Maybe the expert Dogger can confirm?

None of us know how long we will collect ...... Its a gamble for everyone and some times the final decision on when to start comes down to "Just because".

PS we will both be waiting to 70 for OAS.


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## Dogger1953 (Dec 14, 2012)

Retiredguy said:


> I decided to start my CPP next January.- age 65 plus several months.
> While waiting to age 70 had some appeal for a larger indexed pension in later years, the drawbacks for me are;
> 
> The survivors pension for my spouse is based on the age 65 amount . It is not based on the age 70 amount. (If it was based on the age 70 amount I would have waited to 70)
> ...


Hi Retiredguy - You are 100% correct when you say that the survivor's pension will be 36% of the deceased contributor, when it's combined with the survivor's own retirement pension.


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## Dogger1953 (Dec 14, 2012)

heyjude said:


> It was an excellent article. If only we had a crystal ball to find out how long we will live! Certainly, for the “average Canadian” who has no medical conditions likely to shorten life, and who has worked in Camada for his/her whole career, and retires at approximately 65 years of age, and who has a modicum of resources, it makes logical sense to delay taking CPP and OAS as long as possible, and think of them as an inflation-adjusted annuity.
> 
> I immigrated to Canada in my early 30s and retired in my late 50s. If I wait too long, my maximum CPP calculation will decrease due to the inclusion of too many years without earnings. So I am going to take CPP at age 65. So while the rationale of the article is sound for many if not most Canadians, there are some exceptions to the rule.


Heyjude - Not arguing with your decision, but if you're going to wait until age 65 anyway, your calculated retirement pension would not decrease any further if you waited until age 70, as any zero-earning years after age 65 can simply be dropped out under the over-age-65 dropout (in addition to 8 low years prior to age 65 under the 17% dropout).


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## RBull (Jan 20, 2013)

^do you mean "would NOT decrease any further"? Or am I reading that wrong?


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## heyjude (May 16, 2009)

Dogger1953 said:


> Heyjude - Not arguing with your decision, but if you're going to wait until age 65 anyway, your calculated retirement pension would decrease any further if you waited until age 70, as any zero-earning years after age 65 can simply be dropped out under the over-age-65 dropout (in addition to 8 low years prior to age 65 under the 17% dropout).


Thank you Dogger. Actually, I would have 10 low years before age 65. I presume you mean that my calculated retirement pension would NOT decrease any further. I’m not convinced that waiting beyond 65 would be of great benefit, especially since I would have to withdraw taxable income to make up the difference in cash flow.


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## Dogger1953 (Dec 14, 2012)

RBull said:


> ^do you mean "would NOT decrease any further"? Or am I reading that wrong?


RBull - You are 100% correct. I have now inserted my "not" above.


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## milhouse (Nov 16, 2016)

RBull said:


> I believe he's right around age 65. I believe he does or will since:
> 
> he's a numbers guy - actuary
> he's wealthy and doesn't really need the money (father was wealthy entrepreneur)
> it's doubtful to me he wouldn't practice what he preaches


+1.

He seems to be a fairly big advocate of maximizing your reliable income stream like annuitizing parts of your portfolio at key points in your life. So I can see maximizing his CPP payments as fitting into that theme.


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## milhouse (Nov 16, 2016)

There are lots of articles out there. Personally, I'm still undecided.
A counter for not waiting is that I'm not getting bang for my contributions. You could instead, use your CPP payments to decrease your reliance on your investments fund your retirement income stream at age 60, and hope the capital you didn't touch continues to grow.


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## fireseeker (Jul 24, 2017)

milhouse said:


> There are lots of articles out there. Personally, I'm still undecided.
> A counter for not waiting is that I'm not getting bang for my contributions. You could instead, use your CPP payments to decrease your reliance on your investments fund your retirement income stream at age 60, and *hope* the capital you didn't touch continues to grow.


I think Fred Vettese would seize on the word highlighted above. Spending your capital first (whether reg or non-reg) *guarantees* you growth on your future CPP income. Plus, your CPP income will never run out.


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## RBull (Jan 20, 2013)

milhouse said:


> +1.
> 
> He seems to be a fairly big advocate of maximizing your reliable income stream like annuitizing parts of your portfolio at key points in your life. So I can see maximizing his CPP payments as fitting into that theme.


Yes, several books and countless articles. 



milhouse said:


> There are lots of articles out there. Personally, I'm still undecided.
> A counter for not waiting is that I'm not getting bang for my contributions. You could instead, use your CPP payments to decrease your reliance on your investments fund your retirement income stream at age 60, and hope the capital you didn't touch continues to grow.


Definitely lots to think about. For those very confident in their investing skills and the markets long term this "could" work better, or not. 

We've decided to pass by the 60 option coming in another year or so. I feel we have enough at "risk" in markets for decades ahead and with 2-4 decades to potentially live. Delaying CPP to between 65 and 70 to gives us a bigger share of "guaranteed" income that increases with wage growth (3-4% historically) and we never have to concern ourselves with this running out. I plan to utilize mostly our fixed income assets during these years (rising equity glide path) until pensions (OAS as well) kick in. As time marches on we'll see if my thinking stays the same.


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## RBull (Jan 20, 2013)

fireseeker said:


> I think Fred Vettese would seize on the word highlighted above. Spending your capital first (whether reg or non-reg) *guarantees* you growth on your future CPP income. Plus, your CPP income will never run out.


I agree.


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## My Own Advisor (Sep 24, 2012)

fireseeker said:


> I think Fred Vettese would seize on the word highlighted above. Spending your capital first (whether reg or non-reg) *guarantees* you growth on your future CPP income. Plus, your CPP income will never run out.


This is the major benefit I see, and what Dogger helped me better understand myself in my 40s - when I consider taking CPP decades from now:
https://www.myownadvisor.ca/when-to-take-your-canada-pension-plan-benefit/

"One, if you believe your genes are good, and you have a strong chance to live beyond age 85, then depending if you need the cash it may be beneficial to defer CPP until age 70. This is only if you can afford to defer the income until age 70." Therefore by spending most of your capital, *first*, it a) guarantees your fixed income stream will grow and b) you assure yourself that higher fixed income stream doesn't run out. 

I get the entire "bird in hand" stuff, I'm a dividend investor primarily but for many reasons..._.if you can_....it seems to make sense to defer these government benefits.


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## Retired Peasant (Apr 22, 2013)

Another possible factor is your estate. CPP leaves little/nothing for your estate vs your capital.


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## fireseeker (Jul 24, 2017)

Retired Peasant said:


> Another possible factor is your estate. CPP leaves little/nothing for your estate vs your capital.


That's absolutely true. That's the biggest downside with the deferral plan. If you wish to leave some financial assets to your benefactors, then deferral may not be for you.
OTOH, if you live to a ripe old age, you may wind up spending those assets anyway.


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## gibor365 (Apr 1, 2011)

Dogger1953 said:


> Heyjude - Not arguing with your decision, but if you're going to wait until age 65 anyway, your calculated retirement pension would not decrease any further if you waited until age 70, as any zero-earning years after age 65 can simply be dropped out under the over-age-65 dropout (in addition to 8 low years prior to age 65 under the 17% dropout).


As Heyjude, I immigrated to Canada in my early 30's and retired last year at 51. I don't understand this point that


> my maximum CPP calculation will decrease due to the inclusion of too many years without earnings


, question, what is better for me , take CPP at 60 or 65?

P.S. I was planning at taking it at 60 (even though, not likely we wouldn't need income then) considering my family history (my dad passed away at 48 from heart attack) and my style of life (smoking, drinking, unhealthy food)


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## GreatLaker (Mar 23, 2014)

I retired last year at age 59. No pension. I plan to delay CPP to 70. Not sure about OAS since the benefit of delaying OAS to 70 is less than for CPP. Also CPP is really a govt administered DB pension that I and my employers contributed to, whereas OAS is paid for from general tax revenue and may be more susceptible to changes to benefits.

All my friends, family, co-workers and the guys down at the union shop all plan to take it at 60. Most of them feel that money now is better than money later, the govt may reduce the benefits, you may die before ever collecting, etc. Plus if you defer benefits it makes budgeting harder since your income will increase later when it may be harder to spend because of age concerns. Most people can't budget for things like that. Yet many financial and pension experts like Michael Kitces and Fred Vettese say you are better deferring to 70.

Deferring indexed, guaranteed for life govt sponsored income means you have more guaranteed income later in life when you could be most vulnerable and have the lowest chance of earning more income. To me, deferring government benefits is not about trying to get the most money under normal economic conditions and lifespan. It is about protecting you later in life against poor market returns that could eat away you savings, high inflation that erodes purchasing power, or failing to die in a timely manner leading to running out of money before running out of life. 

Many of my friends have govt pensions that cover all their living expenses, so they don't worry about ever running out of money. On the other hand a very wealthy person that plans to leave a huge estate to family or charity also has minimal worries about outliving their money. But for the many people that do need to depend on their own savings and may run out of money due to adverse economic conditions or living a long time, deferring benefits can give greater financial certainty later in life.

Think about deferring govt benefits as _Long Life Insurance_. You don't buy term life insurance then get to the end of the term and say "darn I did not die so all those life insurance premiums were a waste of money". You don't buy home insurance then years later say "dang my house was not robbed or burned down so I wasted all that money on insurance". You are happy you did not need the insurance.

If you defer govt benefits and die before the breakeven point, your beneficiaries will get a bit less money. You won't care because well... you're dead. The consequences of living a long time and outliving your money are rather more severe.

This article by Michael Kitces explains it well. It is US based but the same principles apply in Canada.
https://www.kitces.com/blog/the-asy...cial-security-benefits-as-the-ultimate-hedge/


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## Italicum (Feb 10, 2017)

Retired Peasant said:


> Another possible factor is your estate. CPP leaves little/nothing for your estate vs your capital.


Absolutely. The is the reason why I will not defer past 65. I intend to leave a stream of income to my children. Can't do that with Cpp, oas.


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## sags (May 15, 2010)

The government and CPPIB are guaranteed winners as some of the people who defer will collect nothing or less than they could have.


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## sags (May 15, 2010)

There is no law that you have to spend the money if you collect early or at age 65. Spend or save..........your choice.


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## sags (May 15, 2010)

From the Kitces article :

_However, what most retirees fail to recognize is that while there is a *risk to delaying benefits and never fully recovering them*, the upside for living past the breakeven point isn’t just that the money is made back; it’s that the retiree can make exponentially more_

But that isn't the complete bet. 

The bet is that between the ages of 60 and 70 people will pass away and those who deferred to 70 *collected nothing*. Those who die before the break even will also lose.

In 2010 Economical had about 1200 mutual policyholders. They were mostly older people who acquired the policies decades ago.

Today.........8 years later, there are about 850 mutual policyholders still alive. That is an attrition rate of 25% since 2010.

I wonder what the natural attrition rate is for people aged 60-80 (breakeven ?)


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## Dogger1953 (Dec 14, 2012)

gibor365 said:


> As Heyjude, I immigrated to Canada in my early 30's and retired last year at 51. I don't understand this point that , question, what is better for me , take CPP at 60 or 65?
> 
> P.S. I was planning at taking it at 60 (even though, not likely we wouldn't need income then) considering my family history (my dad passed away at 48 from heart attack) and my style life (smoking, drinking, unhealthy food)


Hi gibor - I think it might be terminology that's confusing you. It's not really his "maximum CPP calculation" that will decrease due to the extra years of zero earnings, it's his "calculated retirement pension" that will decrease. In your case (because you had more than 8 years of zero earnings after age 18 and before you arrived in Canada), I can safely tell you that your choices will be 64% of your calculated CPP retirement pension at age 60, or you can have 100% of your calculated CPP retirement pension at age 65 (which would have decreased by 10.6% from the age-60 amount. So your real choices are 64% of something at age 60 or 89.4% of that same thing at age 65. My main point to heyjude was that this something doesn't decrease any further in size between age 65 and 70 (due to the over-age-65 dropout), so that if you wait until age 70 you will truly get 142% of the age-65 amount (or 198.4% of the net age-60 amount).


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## GreatLaker (Mar 23, 2014)

sags said:


> The government and CPPIB are guaranteed winners as some of the people who defer will collect nothing or less than they could have.


And some of the people who defer will, as Kitces said, _"make exponentially more"_. And to elaborate, he said:


> the true value of delaying Social Security is a triple-benefit of hedging longevity, poor returns, and high inflation, because of the asymmetrical way that delayed higher benefits compound in the later years. It won’t necessarily win for every client, but as any good hedge should, it wins the most in the times the client will need it the most.


Pensions should be actuarially neutral. They should not care when the pensioner begins collecting. They should not be designed to win or lose if pensioners begin collecting earlier or later. Deferring CPP/OAS is not about trying to get more under normal life expectancy and economic conditions. It's about protecting yourself from running out of money if you live much longer than average and/or experience adverse economic conditions along the way.


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## gibor365 (Apr 1, 2011)

Dogger1953 said:


> Hi gibor - I think it might be terminology that's confusing you. It's not really his "maximum CPP calculation" that will decrease due to the extra years of zero earnings, it's his "calculated retirement pension" that will decrease. In your case (because you had more than 8 years of zero earnings after age 18 and before you arrived in Canada), I can safely tell you that your choices will be 64% of your calculated CPP retirement pension at age 60, or you can have 100% of your calculated CPP retirement pension at age 65 (which would have decreased by 10.6% from the age-60 amount. So your real choices are 64% of something at age 60 or 89.4% of that same thing at age 65. My main point to heyjude was that this something doesn't decrease any further in size between age 65 and 70 (due to the over-age-65 dropout), so that if you wait until age 70 you will truly get 142% of the age-65 amount (or 198.4% of the net age-60 amount).


As per % above, I need to live at least to age 78 to justify postponing CPP to age 65. Probably even longer, if my return collecting CPP gonna beat inflation.


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## RBull (Jan 20, 2013)

sags said:


> The government and CPPIB are guaranteed winners as some of the people who defer will collect nothing or less than they could have.


This doesn't benefit the government or CPPIB in any way. All of that is factored into the plan for members. It would be interesting if there were some way to determine whether the total payout if everyone delayed is more or less than if everything took it early. My guess is delaying would cost (payout) more. 

You're ignoring those who live very long lives and/or who delay and collect a lot more than "average" from the plan.


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## RBull (Jan 20, 2013)

GreatLaker said:


> And some of the people who defer will, as Kitces said, _"make exponentially more"_. And to elaborate, he said:
> 
> 
> Pensions should be actuarially neutral. They should not care when the pensioner begins collecting. They should not be designed to win or lose if pensioners begin collecting earlier or later. Deferring CPP/OAS is not about trying to get more under normal life expectancy and economic conditions. It's about protecting yourself from running out of money if you live much longer than average and/or experience adverse economic conditions along the way.


I agree. Very few people seem able to think like this. 



GreatLaker said:


> I retired last year at age 59. No pension. I plan to delay CPP to 70. Not sure about OAS since the benefit of delaying OAS to 70 is less than for CPP. Also CPP is really a govt administered DB pension that I and my employers contributed to, whereas OAS is paid for from general tax revenue and may be more susceptible to changes to benefits.
> 
> All my friends, family, co-workers and the guys down at the union shop all plan to take it at 60. Most of them feel that money now is better than money later, the govt may reduce the benefits, you may die before ever collecting, etc. Plus if you defer benefits it makes budgeting harder since your income will increase later when it may be harder to spend because of age concerns. Most people can't budget for things like that. Yet many financial and pension experts like Michael Kitces and Fred Vettese say you are better deferring to 70.
> 
> ...


Well put. My sentiments too.


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## OnlyMyOpinion (Sep 1, 2013)

All makes sense. The problem is that people who most need the higher, secure income of deferred CPP are the least likely to wait or be in a position to wait. 
Meanwhile, those who aren't dependant on it for their retirement well-being will not suffer irreparably if they take it early (it still pays for life and is cpi-adjusted). They are also likely to own their home which can provide a later source of funds. Finally, there is the fact that in Canada a senior is not refused long term care if their income is limited.
We're in the position to take it early and live with the reduced payout. And living much past the age ~82 breakover is overrated.


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## BC Eddie (Feb 2, 2014)

I am almost 67 and retired at 64 and, until recently, I was going to defer both CPP and OAS until 70. However I now see that the OAS will start to be clawed back after about five years. So my plan now is to still delay CPP but take OAS now as my calcs say I will get more overall by taking OAS now and not deferring.


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## elvajean (Jun 11, 2018)

*CPP*

I chose to start CPP at 64 because the amount I get is not huge, as I stayed home with kids for many many years. Developed a home biz with hubby and we started paying into CPP then. He gets about twice what I get.

My theory is I may as well get what I can while I am still alive, who knows when any one of us will die? For a few extra bucks a month if I waited til 65, it's not worth it.

Our accountant said to not collect CPP until the year after we sold our farm (when I would be 64) as the govt. would claw it back anyway as we had to pay capital gains tax as well, which is another story! The tax hit was less if I waited til I was 64.


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## Jimmy (May 19, 2017)

Here is a good article from the Globe. Delaying CPP to 70 makes much more sense when you factor in the gains/losses x the probability of death.



> Figure 2 also tells us is that there is always the possibility of leaving money on the table no matter what you do. It can happen if you delay CPP until 70 and die young and it can also happen if you take CPP early and die much later on. Just remember that the odds of dying young could be smaller than you might think. The probability that a man age 65 will die by 80 is just about one in five. For a woman, it is even lower.


https://www.theglobeandmail.com/inv...article-why-do-retirees-fear-taking-cpp-late/

But it depends on other individual preferences,situations, tax and income circumstances.


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## like_to_retire (Oct 9, 2016)

CPP for me was integrated with my pension, so at 65 my pension dropped the equal amount I would receive from CPP. So to receive the same overall pension income I started CPP at age 65.

Then there's that bird in the hand and the fact that the government can change rules in a second.

Then there's the fact that if I delayed to 70, then CPP would be greater, and that higher income would clawback even more OAS. Every extra dollar in CPP would claw another 15% from OAS.

ltr


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## ian (Jun 18, 2016)

Everyone's health and financial situation is different hence their best financial options will vary.


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## OnlyMyOpinion (Sep 1, 2013)

ian said:


> Everyone's health and financial situation is different hence their best financial options will vary.


^+1


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