When does it make sense to start collecting CPP?

Up to 74, your friend who takes their CPP payments at 60 is ahead of you, but after that, you are ahead of them.

I love points cards and as soon as I reach the first redemption level, I cash them in.

I don’t care if it’s only $10. I want it now.

You may wonder, “Don’t you want to wait until you have more points and can redeem them for even more money?” To that I reply, “Never.”

What if I get hit by a truck and never get a chance to redeem them? A bird in hand is better than a dead bird that has been hit by a truck with uncashed points.

I apply that same philosophy to the dilemma of whether to take CPP early at age 60 or wait until the standard age of 65. I say “Go for it!”

But then I have to take a step back and realize that it isn’t such a slam dunk decision. It depends on many factors and the answer is different for every individual.

Many choose to collect their CPP early, hoping to enjoy the money during the early, healthier years of retirement.

Others may wait to collect, knowing that the back end of the golden years can be full of healthcare costs.

The first question to ask: How long am I going to live? Now none of us knows when we will be called up to the big retirement home in the sky, but if your people are like mine and live into their 90s, you may want hold off on taking the cash.

You can’t complete this exercise without crunching some numbers. According to the rules for 2016, anyone choosing to start collecting their CPP before 65 will have their payments reduced by 0.6 per cent each month until they reach that age.

If you wait until you turn 70 to take the cash, you’ll even get a premium of 0.7 per cent on your payments and enjoy approximately $2,400 more per year after tax and inflation.

Number crunchers have studied the break-even: the point at which waiting to take the higher payments at 65 will catch up to your friend who started taking them at 60. That’s around the age of 74. So up to 74, your friend who takes their CPP payments at 60 is ahead of you, but after that, you are ahead of them.

Every year you delay your CPP, you must live one year longer to get it back.

The next question to ask is: Will I still be working?

With 60 being the new 40 and company pension plans disappearing, many people will continue to work after age 60. The new CPP rules allow you to collect while you are working.

If you don’t need the money, you might want to hold off because that extra cash might put you into a higher tax bracket.

Taking your CPP benefits now could have a negative impact on your income, but so can waiting to take it. If you are looking at large RIF or pension payments, the higher CPP payments could cost you more tax or even create clawbacks.

Conversely, if you have a small RSP or one that has suffered a correction, you may wish to start payments early so you can keep your RSP untouched and let it grow.

The answer to this question lies within you, your financial situation and what you want from your life. Make an appointment today to meet with your adviser to discuss your strategy.

I’ll be cashing in my own CPP. I plan on it being mad money. Don’t tell my husband.