tag:blogger.com,1999:blog-5465015914589377788.post2973104911356069334..comments2024-03-20T09:32:16.592-04:00Comments on Michael James on Money: Should You Delay Taking CPP and OAS?Michael Jameshttp://www.blogger.com/profile/10362529610470788243noreply@blogger.comBlogger12125tag:blogger.com,1999:blog-5465015914589377788.post-14080531989546446382020-11-07T13:45:22.534-05:002020-11-07T13:45:22.534-05:00The following exchange is reproduced to remove bro...The following exchange is reproduced to remove broken links.<br /><br />----- Anonymous December 2, 2017 at 8:52 AM<br /><br />Nice analysis and I generally agree. The only argument against that I didn't see listed is the potential for the government to change the rules at any point. It's sort of your bird in the hand argument....except there is real potential that the rules could change, so it's more than just erroneous economic decisions. Low probability, at least from what I can see today. But then a lot can change fast these days.<br /><br />----- BHCh December 2, 2017 at 9:07 AM<br /><br />Once you take the money, it’s yours. Put it into TFSA, invest and it will grow. If you wait, you might get a bit more from the government. So it says. So guaranteed. Because governments never change anything.<br /><br />----- Michael James December 2, 2017 at 9:32 AM<br /><br />@Anonymous and @BHCh: Governments changing rules is certainly a possibility. For example, they could introduce a 1% per year tax on TFSAs. Or they could introduce wealth taxes on all assets as advocated by Thomas Piketty.<br /><br />----- BHCh December 2, 2017 at 11:33 AM<br /><br />True enough. Would certainly do all I can to keep expropriations/commies out of government. If they get anywhere near government... We’ll be out of Canada.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-13536969597903146112017-12-03T00:03:12.525-05:002017-12-03T00:03:12.525-05:00Also note that Garth Turner is a fee based financi...Also note that Garth Turner is a fee based financial advisor who charges a % of assets under management. His advice belies his true incentives. He does not want his clients spending down their savings early in their retirement.Garthhttps://www.blogger.com/profile/14367654772040176371noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-53908520800061307612017-12-02T14:30:05.635-05:002017-12-02T14:30:05.635-05:00@Eric: Garth's numbers don't add up. Ext...@Eric: Garth's numbers don't add up. Extremely few people will earn a high enough return on TFSA savings to match the higher CPP payments. His argument about getting pushed into higher tax brackets by RRSP withdrawals doesn't make sense either. The idea is that you draw on RRSPs before starting to take CPP. Then later RRSP withdrawals will be smaller but by less than CPP rises. Overall, people who have enough savings to make it to 65 or 70 are further ahead waiting.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-73149549227308346712017-12-02T14:22:23.545-05:002017-12-02T14:22:23.545-05:00And the opposite view, for take the money now: ht...And the opposite view, for take the money now: http://www.greaterfool.ca/?s=taking+cpp+earlyEric Darwinhttps://www.blogger.com/profile/01042460139621819388noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-55149186520413937232017-12-01T17:23:57.658-05:002017-12-01T17:23:57.658-05:00@Greg: In all my planning, I always back off from ...@Greg: In all my planning, I always back off from expected portfolio returns. For example, I use 4% real for stocks and 0% real for fixed income rather than the historical figures. Further, I build in plans to spend less if investments disappoint.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-16029584075743546682017-12-01T17:01:15.428-05:002017-12-01T17:01:15.428-05:00@Michael, she may not be better off buying an annu...@Michael, she may not be better off buying an annuity at 70 but I don't think it's fair to compare $252 per month for life backed by the Canadian government with the expected return of an investment portfolio. Guarantees are valuable. Gregnoreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-38449761197325426562017-12-01T13:42:18.517-05:002017-12-01T13:42:18.517-05:00@Greg: I don't think it's fair to make the...@Greg: I don't think it's fair to make the comparison based on buying an annuity at 70. If Alice has $42k at age 70 and hopes to use it to create income for the rest of her life, it's unlikely she'd be best off using it all for an annuity. However, we're in agreement on the final conclusion that it makes sense to defer CPP and OAS.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-69417071870512888562017-12-01T13:20:51.302-05:002017-12-01T13:20:51.302-05:00Another nice article! If you are living primarily...Another nice article! If you are living primarily off your investments in retirement, the first 5-10 years of investment performance has a disproportionate effect on your retirement, so called sequence of returns risk. So I think comparing with stock or balanced portfolio returns is pretty risky. <br /><br />Better to compare with annuity costs, where $50000 gets a 70 year old a $272 a month not indexed to inflation at RBC for example. So if Alice took her OAS at 65 and saved up $50000 for an annuity at 70, she could get in the ballpark of Carol's income for life (lagging by inflation over the long term). If Alice saved her OAS payments and invested them safely, only matching inflation, she'd have $42000 by the time she was 70 so Carol is already ahead by $8000 by delaying OAS. The return on investment around 4-5% looking at it this way, not a certain return as annuity values could change, but probably a lot less volatile than stock or balanced portfolio returns. <br /><br />In any case, the conclusion is the same for me, unless you are really unlikely to live very long past 60 or 65, it's better to defer CPP and OAS. Gregnoreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-71934366855708160082017-12-01T10:07:54.682-05:002017-12-01T10:07:54.682-05:00@Daniel: There is a lot of complexity when factori...@Daniel: There is a lot of complexity when factoring in taxes. The main consideration is avoiding OAS clawback. But, anyone facing clawback is wealthy enough that OAS payments are too small to be very important.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-89358048107671293542017-12-01T09:48:27.650-05:002017-12-01T09:48:27.650-05:00Nice article ! Would have been nice to take into a...Nice article ! Would have been nice to take into account the fiscal implications also Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-59467434305964780562017-12-01T09:09:15.794-05:002017-12-01T09:09:15.794-05:00@Garth: Glad you like it. My guess is that the r...@Garth: Glad you like it. My guess is that the resolution of this puzzle comes down to "I'd like money now instead of later."Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-18382884806270154792017-12-01T07:42:44.866-05:002017-12-01T07:42:44.866-05:00Nicely done! Like you, we plan on delaying to age ...Nicely done! Like you, we plan on delaying to age 70 as well as way to hedge the risks of inflation, longevity, and unfavorable markets. But we are most certainly in the minority as less than 2% of retirees delay to age 70...another puzzle.Garthhttps://www.blogger.com/profile/14367654772040176371noreply@blogger.com