Retirement. Are you ready?

[Guest *Ste***cque**]

I'm thinking more and more about retirement. Thankfully, I should be able to collect max CPP and OAS and my wife will receive 50% of max CPP and OAS when we reach 65. On top of that I plan to withdraw 3 to 4% of savings each year. I would love to have a defined benefit(eg. Gov't) pension but we don't all have those so I'll have to hope my savings last.

 

I've read that starting retirement with savings of 40% equities, 60% bonds and rebalancing every year by taking 1% out of bonds and adding that 1% to equities will ensure your money lasts as long as you do.

 

For those who have taken the plunge, any advice? For those still saving, when do you plan on retiring? How much will you need? It would be nice if the government enhanced CPP benefits but I would not leave something so important up to government. Live within your means and save what you can is good advice.

[Ice4fun 78407]

I am at a point where I could retire at anytime... I have a good pension plan and we have made some excellent investments in real estate that will ensure we have a good retirement income flow...

 

Being able to retire and wanting to retire is of course two separate things up till a few months ago I would have said I would stick around for a few more years but the dynamics where I work are changing and frankly I am not at a place in my life where I am willing to put up with much bullshit... so i may leave earlier than I expected.

 

As for finances... don't rely on CPP... or the government... start early and invest in yourself.

 

Just my Opinion

[Brad 49548]

I've quite a few working years ahead of me yet, but I'd love to be able to retire at a reasonable age. I'm planning for the whole freedom 55 thing but will have to see where life takes me and decide how comfortably I want to be able to live in retirement.

 

Still, even on a modest income I've always been careful to live within my means, save and invest a little each month, and my job offers a decent enough pension. So I feel like I'm on a pretty good path.

 

Of course, if working longer means I'm able to spend more time with some wonderful ladies more often, then I may have to reconsider my goals!

[PistolPete 61421]

I often wonder why individuals would not draw their CPP at 60 years of age. Yes I know there is a max say at 1100.00 at age 65, or the 850.00 at age of 60. If you're well set up, with bonds,rsp's, savings, other pension, and other source of income (as I have ) just why would you not take the CPP at 60? I've seen so many close friends, wait until 65 then pass away shortly afterwards. Anyways my financial planner told myself to do it at 60, as you have set yourself up well enough, and why not? Your money take it early and enjoy it in case something happens health wise.

[Guest *Ste***cque**]

I understand wanting to collect CPP as soon as you're eligible but with the new rules you will only collect 64% of what you would receive by waiting to age 65. That is currently a max of $682/month at 60 vs $1065/month at 65. The breakeven point under the new rules is age 74 so if you die before 74 then collecting early works out in your favor. If you live past 74 then waiting to age 65 to collect CPP is the better deal. Given that the average life expectancy of Canadian men is now 80 and only going to get better I will gamble and wait. I could die before the breakeven age of 74 but the odds are with me living to 80 or even beyond.

 

Everyone's circumstances are different but I plan to hold out as long as possible before collecting CPP. I paid a ton into the government for so long, I want at least some of that back and waiting to 65 should mean I get more.

 

Pete, you make a good point about enjoying it while you're in good health. If my health were failing I might take CPP earlier.

[PistolPete 61421]

Here is a link to a very interesting article, from the The Star...reference CPP

http://www.thestar.com/business/personal_finance/2013/02/07/cpp_5_things_you_need_to_know.html

[roamingguy 300292]

I understand wanting to collect CPP as soon as you're eligible but with the new rules you will only collect 64% of what you would receive by waiting to age 65. That is currently a max of $682/month at 60 vs $1065/month at 65. The breakeven point under the new rules is age 74 so if you die before 74 then collecting early works out in your favor. If you live past 74 then waiting to age 65 to collect CPP is the better deal. Given that the average life expectancy of Canadian men is now 80 and only going to get better I will gamble and wait. I could die before the breakeven age of 74 but the odds are with me living to 80 or even beyond.

 

Everyone's circumstances are different but I plan to hold out as long as possible before collecting CPP. I paid a ton into the government for so long, I want at least some of that back and waiting to 65 should mean I get more.

 

Pete, you make a good point about enjoying it while you're in good health. If my health were failing I might take CPP earlier.

 

Yes but between 60 and 65 you draw 0 $$$ and don't get that money back

retroactively at 65. So in fact you lose money waiting till 65. And not being morbid but your lifespan is reduced by age 65 so you may draw a higher CPP income but will draw it for less years than if you draw a lower pension income at age 60 and draw it over more years. In real terms you will have more years drawing your CPP if you draw it earlier than later

Use it sooner, the only one who benefits from you drawing it at age 65 is the government and they won't even say thanks.

Another thing, while 60 is when you can draw it, you can apply and start the paperwork rolling at age 59 so day after my 59th birthday I'm running down to Service Canada and get the ball rolling on my CPP so on my 60th birthday I start drawing my benefit

 

RG

[Ice4fun 78407]

I agree with most of the comments... in most cases it makes sense to take the money early in fact even if you are still working.

 

Just my Opinion

[blacklabdog 3049]

I am just over 50 and could retire anytime. I have same credentials as any financial planner (circa 1984) although I never did the job as a career and this is still a super hard question. To answer I;d need to know with some amount of certainty of my lifespan. I have no defendants which makes it simpler but its stil tough.

% of income to equities is really too simplistic as equities which provide a high dividend yield have aspects of both.

But only 40% equities is to low IMO given your inferred age.

Its a good idea to get a good financial adviser who doesn't work on commission who can help

PS for most peeps in good health and are able to wait, its best to take CPP at 65 statistically speaking

[EsQ69 1338]

Maybe this will help....

 

 

http://www.financialpost.com/scripts/story.html?id=d9830c15-3f9b-45a8-9f77-cf50cbc255aa

[Ice4fun 78407]

Maybe this will help....

 

 

http://www.financialpost.com/scripts/story.html?id=d9830c15-3f9b-45a8-9f77-cf50cbc255aa

 

Great article thanks

[Guest *Ste***cque**]

Yes but between 60 and 65 you draw 0 $$$ and don't get that money back

retroactively at 65. So in fact you lose money waiting till 65. And not being morbid but your lifespan is reduced by age 65 so you may draw a higher CPP income but will draw it for less years than if you draw a lower pension income at age 60 and draw it over more years. In real terms you will have more years drawing your CPP if you draw it earlier than later

Use it sooner, the only one who benefits from you drawing it at age 65 is the government and they won't even say thanks.

Another thing, while 60 is when you can draw it, you can apply and start the paperwork rolling at age 59 so day after my 59th birthday I'm running down to Service Canada and get the ball rolling on my CPP so on my 60th birthday I start drawing my benefit

 

RG

 

 

Thanks for the links. Some of them are older and don't reflect the current penalty changes to taking early CPP. Also, the government has reduced the RRSP/RRIF withdrawal minimum at 71 to 5.8% from 7.2% which should make an RRSP last longer. Nevertheless, they are appreciated.

 

RG, all things being equal so to speak, if you take CPP at 60 you monthly check is considerably less than if you work to 65 and take CPP then. That smaller amount stays basically the same until you die. Wait to take CPP later and you get a much bigger monthly check until you die. Yes, you collect that smaller check for 60 months more than if you wait until 65 but the break even point is 74 years of age. Live to the average age of 80 and you will have gotten more from the government even though you collected the bigger check for less time than taking CPP at age 60.

 

As an example, let's say you live the average lifespan, which is 80. Let's say you would get $1000/mo if you work to 65 and then take CPP. If you take CPP earlier at 60 the government will only give you $640/mo. There are 240 months from age 60 to 80 so multiply 240 x $640 = $153,600 that you would get by age 80. Now, take CPP at 65 and the amount is more but for 5 years less time. So, 65 to 80 is 180 months x $1000 = $180,000. By working til 65 and then taking CPP and only living to the average age in Canada for a male you are ahead $26,400 and the gap gets bigger if you live longer than the average. You would need to die by 74 to lose out when taking CPP at 65. Sorry about all the math but it's an important subject to understand.

 

As Pete said, it may be better for some to take a smaller check at 60 but enjoy it while they can still get it up! Ok, I'm paraphrasing a bit but maybe I need to rethink this. :)

[Ice4fun 78407]

Thanks for the links. Some of them are older and don't reflect the current penalty changes to taking early CPP. Also, the government has reduced the RRSP withdrawal minimum at 71 to 5.8% from 7.2% which should make an RRSP last longer. Nevertheless, they are appreciated.

 

RG, all things being equal so to speak, if you take CPP at 60 you monthly check is considerably less than if you work to 65 and take CPP then. That smaller amount stays basically the same until you die. Wait to take CPP later and you get a much bigger monthly check until you die. Yes, you collect that smaller check for 60 months more than if you wait until 65 but the break even point is 74 years of age. Live to the average age of 80 and you will have gotten more from the government even though you collected the bigger check for less time than taking CPP at age 60.

 

As an example, let's say you live the average lifespan, which is 80. Let's say you would get $1000/mo if you work to 65 and then take CPP. If you take CPP earlier at 60 the government will only give you $640/mo. There are 240 months from age 60 to 80 so multiply 240 x $640 = $153,600 that you would get by age 80. Now, take CPP at 65 and the amount is more but for 5 years less time. So, 65 to 80 is 180 months x $1000 = $180,000. By working til 65 and then taking CPP and only living to the average age in Canada for a male you are ahead $26,400 and the gap gets bigger if you live longer than the average. You would need to die by 74 to lose out when taking CPP at 65. Sorry about all the math but it's an important subject to understand.

 

As Pete said, it may be better for some to take a smaller check at 60 but enjoy it while they can still get it up! Ok, I'm paraphrasing a bit but maybe I need to rethink this. :)

 

Basicly your math is right but like most of life's decisions it is not really that simple... you have not factored in inflation or any investment of the money you might receive earlier or if the money might have been used to paydown or pay off a high interest debt earlier.

 

Bottom line there is a break even point but it is different for every person's individual situation...

 

Just my Opinion

[Guest *Ste***cque**]

Thanks for the posts, Ice4fun. How does inflation change my math? It can be applied to whatever number you wish to use whether it's the smaller one or the larger number. Also, I won't carry any debt into retirement. I guess I should have stated that from the outset. Debt in retirement is not a good idea.

 

To me the only downside I can see to working to 65 and taking CPP then is if:

1. I die before 74

2. I make so much from my investments and larger CPP check that it puts my annual retirement income above $115,000 and my OAS gets clawed back. That's a good problem and one I plan on having.

 

Also, CPP is like an annuity. The markets can tank and I'll still get my larger CPP check to help ride things out until the markets bounce back.

 

I agree though that it's whatever gives you comfort and let's you sleep at night.

 

P.S My math is exactly right. :)

[roamingguy 300292]

Well for me I'm already retired at age 54, drawing my Public Service Pension (Superannuation) If I was to keep working till 65 to draw full CPP it means in my case I'd have worked 41 years. The pension plan we have allows pension contributions to a maximum of 35 years (that's a full 70% pension) It means I would be working for 6 extra years, not drawing my Superannuation, just to get the full CPP...that makes no sense to me

CPP at age 60 nicely supplements my current pension

 

RG

[Ice4fun 78407]

Thanks for the posts, Ice4fun. How does inflation change my math? It's applied to whatever number you used, whether it's the smaller one or the larger number.

 

To me the only downside I can see to working to 65 and taking CPP then is if:

1. I die before 74

2. I make so much from my investments that my OAS gets clawed back fully at $115,000 annual income. That's a good problem and one I plan on having.

 

Also, CPP is like an annuity. The markets can tank and I'll still get my larger CPP check to help ride things out until the markets bounce back.

 

I agree though that it's whatever gives you comfort and let's you sleep at night.

 

P.S My math is exactly right. :)

 

In terms of inflation and the impact it might have... well to compare any financial item over time you have to compare constant dollars so inflationary impacts must be considered especially if we are talking about something spread over 15 to 20 years. For example if the taking of the early payments allows you to purchase a retirement property now versus waiting 5 to 10 years when the value may have gone up 10% or more a year then it becomes easy to see why inflation and the usage to which the funds will be put to becomes important.

 

Frankly it's not really possible to know which option is better without knowing all the details related ti the individuals situation... that said discussions like this are important because it gets people thinking ahead of time about retirement... thanks for starting th thread.

 

Just my Opinion

[Guest *Ste***cque**]

RG, you lucky bugger! :) I do realize with "bridge benefits" under government defined benefit pensions it can make sense to retire early as you get topped up. As well, since you won't contribute to CPP anymore you are better off taking it early so as not to be penalized with a bunch of zero earning years between 60 and 65 which would negatively impact your CPP benefit calculation.

 

Ice4fun, I know the impact of inflation on "purchasing power". My point was simply that inflation has an equal affect percentage wise on a smaller CPP check at 60 or a larger CPP check at 65. In fact, inflation will have less of an effect if you start CPP at 65 as there is less time (15yrs vs 20yrs at 60) for inflation to work its negative effect. Let's be realistic, a $640 CPP check is most likely going to go towards consumables than to some investment. Even then, a larger CPP check allows for a larger investment and inflations effect would be negated when compared to the smaller CPP checks investment impact.

 

I'm not saying anyone is wrong in taking CPP early since it's whatever makes you happy that's important. I just wanted to put some numbers out there in case anyone wanted an example. It's a complicated subject. One could die at 65 but the averages say not til 80. Exceptions are dangerous assumptions to use when it come to finances.

 

I appreciate all the feedback.

[Ice4fun 78407]

Ice4fun, I know the impact of inflation on "purchasing power". My point was simply that inflation has an equal affect percentage wise on a smaller CPP check at 60 or a larger CPP check at 65. In fact, inflation will have less of an effect if you start CPP at 65 as there is less time (15yrs vs 20yrs at 60) for inflation to work its negative effect. Let's be realistic, a $640 CPP check is most likely going to go towards consumables than to some investment. Even then, a larger CPP check allows for a larger investment and inflations effect would be negated when compared to the smaller CPP checks investment impact.

 

Yes you are making my point exactly... the devil is in the detail of the individual situation...

 

If you plan on using it simply on consumables and not investing and you factor inflation as a constant the basic math is spot on. But if you factor in the realities that... ie. if the money is needed earlier just to pay rent ( a consumable) or that you plan to invest it in an appreciable asset then you have to look beyond the basic numbers.

[PistolPete 61421]

For those interested (yes you should get a annual CPP report from them) OR go online to Service Canada then you can log on using your own financial bank, create your log in security questions, and voila you can see all your past history of contributions to CPP.

 

That said, yes the link I posted was dated however when you read what happened to poor George at that magical age, his job loss it seriously makes you think about key issues on how Service Canada can f*** a individual over after putting all those years into a job and contributed to CPP.

 

I'm not telling anyone how to organize their retirement and I hope everyone that hits the magical age, do research. I did what was in my best interest, I asked my financial planner.

 

BTW I still have 5 years and 10 years before those ages to collect, just goes to show you are never too young or a little older to plan for your future. Yes I wanted that freedom 55 and I'm still at it because it is difficult to not work (I took off 6 months and hated it, but loved the travel, I like to keep busy) and being able to sweeten the retirement pot. ;)

[Guest *Ste***cque**]

Yes, if you lose your job a few years before retirement you shouldn't wait too long to collect CPP as those zero earning years will kill your payout. Good advice, Pete. I requested my CPP history a year ago to get an idea of where I stood. It provides lot's of info. If you can't obtain it online Service Canada will send you one in the mail.

 

I also have a financial advisor at a reputable company whom I trust but I still want to understand the ins and outs for myself. Funny enough, they tell me if you need the money you should work until 65 and collect as much CPP as allowed and if you don't need the money, collect it early at age 60. While I won't need it they did agree, after age 74 I'm getting less overall CPP than if I waited to 65. Oh well, if you need the money to pay rent it's a moot point. What happens after 74 isn't a big concern in that case.

 

No one has a crystal ball so decide for yourself. It's important to realize though, there are always exceptions to a typical rule but someone else's exceptions are not always the best example for you to follow. You're safer with averages as that is what works for the vast majority. Don't take CPP early, or late, because someone else did. Look at your numbers and make an informed decision.

Bianca, the Quebec equivalent is RRQ. I don't know anything about how it works although I'm going to assume it is similar to CPP.

[mrrnice2 157005]

I'm not sure if I am changing the intent of this thread or not, but it is certainly related. Retirement is a big thing financially as has already been written about but also psychologically. I know a few individuals who were in high stress jobs that upon retirement were bored out of their minds. They found that they needed something to occupy their time, and regretted the decision. Another friend who had an amazing professional career went to work at the take out window at Tims and absolutely loved it.

 

When I retired I figured that I could take a year and putter on my beautiful old home and property. Now here I am seven years later and still puttering and not the least bit bored and I am loving it.

 

Life is short enough for some so for me to retire from a job that I truly loved was a wonderful decision. The passing of my wife two years afterwards and before she had decided to retire was a huge blow and I always now encourage people to retire when they can financially and take some well deserved time to relax and enjoy.

 

As for CPP I took it at 60 because I have no vibes that I am going to live past the break even point. Not morbid, just a bird in the hand sort of thing. :)

[drlove 37204]

I have a good mix of investments and real estate, well diversified. I'm not worried about any fluctuations in the market since I still have a relatively long time horizon. I plan on taking my CPP early and continuing to work, since I enjoy it. It actually feels more like a hobby which I happen to get paid for. More than that, though. It's all about being productive. It doesn't matter what you do, just do something. Perhaps it's just my work ethic, but I don't ever want to retire! I'd be bored stiff after the first week lol. I've always thought that it doesn't matter if you have one dollar, or a million dollars - the idea is to get up and go to work every day, even if you don't have to. After all, at the heart of it - working is its own reward.

[Guest *Ste***cque**]

No hijack, your post is exactly the intent of this thread, mrrnice2. When I asked "Are you ready for retirement?" I meant financially and philosophically.

 

I run a very stress filled business with continual demands by suppliers to "feed them" more business. On top of that, my industry is seeing massive technological change. I am burned out but still have another 9 years to 65. Retirement at this stage seems like a dream to me. I have money but I ask myself "is it enough?". Should I ride this out for another 9 depressing years just so I have a bigger pile of money or do I get out in the next couple of years? I don't want to do something I may regret later, hence my question about other members retirement stories. Thanks for sharing yours, mrrnice2. Drlove, you are a lucky man to love what you do. I agree, it's good to be productive. I don't have a university education and always thought I'd like to get a degree when I eventually do retire.

[Boomer 33202]

I will make a few points, in no particular order to illustrate there are many ways to provide for retirement. I was downsized by a firm in 2000 and for various reasons never returned full time to the workforce. With the passing of my wife I officially considered myself retired. We always thought we would have a combined income in retirement, not to be.

 

One decision I made during the nineties was to convert to a defined contribution from a defined benefit plan and control my own destiny.

 

I have all my life invested 10 percent of my income in a stock savings plan.

 

I have a reasonably sizable investment portfolio, so able to adjust my income every 5 years. I still max my TFSA. With longer life spans, I still invest in a less conventional strategy for my age, I'm 60% equity and only 40 fixed.

 

The last thing I'm doing even though I live alone, is to maintain my home, which can be sold to provide an income at a layer date.