tag:blogger.com,1999:blog-5465015914589377788.post3147174711613329523..comments2024-03-20T09:32:16.592-04:00Comments on Michael James on Money: The Case for Delaying CPP and OAS to Age 70Michael Jameshttp://www.blogger.com/profile/10362529610470788243noreply@blogger.comBlogger28125tag:blogger.com,1999:blog-5465015914589377788.post-1569708252588744012017-08-15T09:49:25.198-04:002017-08-15T09:49:25.198-04:00@Ken: Don't forget that some benefits are mean...@Ken: Don't forget that some benefits are means tested based on total income of a couple as well. But none of that really matters. Favouring some people over others is a goal, even if it isn't stated that way. Our tax system is designed to encourage marriage. This necessarily means it slightly discourages being single, even though no politician in his or her right mind would say so. Allowing single people "to designate a 'comparable to spouse' beneficiary" would lower benefits for everyone without supporting the CPP system's goals. Seeking fairness can drive a person crazy. If you can't see ways that unfairness is benfiting you as well, you're probably not looking hard enough.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-50183860112838322352017-08-14T23:10:25.861-04:002017-08-14T23:10:25.861-04:00Well, then maybe single people should have the rig...Well, then maybe single people should have the right to designate a "comparable to spouse" beneficiary. That would level the playing field.<br /><br />And don't forget that married people already get tax breaks that are not available to single people. CPP is just one of many...Anonymoushttps://www.blogger.com/profile/14193922399286790279noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-32818261687329139832017-08-14T18:11:47.025-04:002017-08-14T18:11:47.025-04:00@Ken H: I suspect the original justification for ...@Ken H: I suspect the original justification for the spousal benefit is to help a widow who never worked and had no CPP. Capping the combined CPP at the maximum for one person is consistent with this justification. To be completely fair to single people, there would be no spousal support at all. On the other hand, even just capping CPP at the maximum for one person leads to the problem Susan described of a sudden reduction in income. There are problems no matter what you do, and the cap seems to be a reasonable compromise.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-84620477689772403742017-08-14T17:42:05.534-04:002017-08-14T17:42:05.534-04:00"What I am always frustrated by is that if yo..."What I am always frustrated by is that if your spouse dies, you only get their CPP to the maximum for one person."<br /><br />If you're single, you only get CPP for one person. They also have to pay utilities, rent, taxes, etc.<br /><br />By forcing others to subsidize additional money to a spouse, that actually rewards married people and punishes single people.Anonymoushttps://www.blogger.com/profile/14193922399286790279noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-25305429484741920642017-03-26T15:30:14.343-04:002017-03-26T15:30:14.343-04:00Good article Michael. Thanks.
In response to peop...Good article Michael. Thanks.<br /><br />In response to people that say you should take CPP early because it is a bird in the hand, I tell them I prefer to ensure that my nest has enough eggs if I am fortunate enough to live a long life. Delaying CPP or OAS does that.Anonymoushttps://www.blogger.com/profile/10594524454582376044noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-42312360248166567422017-03-19T08:26:59.425-04:002017-03-19T08:26:59.425-04:00@Susan Tom: The optics of forcing elderly Canadia...@Susan Tom: The optics of forcing elderly Canadians out of their homes makes this difficult politically.<br /><br />Something else to consider is that a million dollars isn't what it used to be. If you count homes and future pension payments, it's amazing how many retired Canadians are millionaires.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-32716346895492278692017-03-18T23:13:45.671-04:002017-03-18T23:13:45.671-04:00I did taxes for many years and I find the lack of ...I did taxes for many years and I find the lack of clawback on OAS for high net worth individuals vs high income frustrating. TFSAs, while great for many reasons, will only add to the problem. I am of the opinion that individuals with million dollar homes should have to include that when determining OAS eligibility as well as prescription subsidies. Susanhttps://www.blogger.com/profile/13100032503605029357noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-43416171743643804262017-03-18T21:40:39.493-04:002017-03-18T21:40:39.493-04:00@Susan Tom: I agree that this is a problem. But ...@Susan Tom: I agree that this is a problem. But I'm not sure there's much hope in changing it. Governments are very sensitive to criticism of paying a lot of money to rich people. Paying 1.5 times the CPP maximum to a man who has huge savings from the high-paying jobs he and his late wife had just looks bad.<br /><br />This goes back to the days when the NDP used to criticize the government in power about the number of millionaires who paid no income tax. This was a big driver for the alternative minimum tax.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-57764134277391054482017-03-18T21:32:43.650-04:002017-03-18T21:32:43.650-04:00@Garth: There's so much emotion tied up in th...@Garth: There's so much emotion tied up in these decisions that maybe a great line like this is more persuasive than anything I can write in a post.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-81429091725755064022017-03-18T21:24:29.014-04:002017-03-18T21:24:29.014-04:00What I am always frustrated by is that if your spo...What I am always frustrated by is that if your spouse dies, you only get their CPP to the maximum for one person. I've never crunched the numbers to see what the actual numbers are but anecdotal evidence from my parents shows that they would go from a combined amount of $1700 per month to the max of $1100 if one dies. That is because they both worked all their lives. They are then in worse financial shape because the expenses don't go down much eg rent utilities etc. I believe this unfairly penalizes couples who have both contributed throughout their lives vs the antiquated model of stay at home moms and part time low income earning wives that the CPP cap uses. Susanhttps://www.blogger.com/profile/13100032503605029357noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-38099096994921463942017-03-18T18:24:48.801-04:002017-03-18T18:24:48.801-04:00I like the cheeky comment by Jonathan Clements on ...I like the cheeky comment by Jonathan Clements on this topic...<br /><br />"If you fully intend to die early in retirement, then yes, take your benefits as early as possible." ;)Garthhttps://www.blogger.com/profile/14367654772040176371noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-57536728567440604972017-03-18T00:09:07.703-04:002017-03-18T00:09:07.703-04:00@Garth: It's true that advisors have a financ...@Garth: It's true that advisors have a financial incentive to have their clients not sell assets through their 60s. However, I think the more powerful incentive is to tell clients what they want to hear -- that it's OK to take the money as soon as possible.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-16022866352846359272017-03-17T20:40:14.257-04:002017-03-17T20:40:14.257-04:00Well done article Michael! Always amazes me how r...Well done article Michael! Always amazes me how resistant many are to believing that you may actually be able to safely spend more by delaying benefits... Very few financial advisers preach this gospel because of perverse incentives.Garthhttps://www.blogger.com/profile/14367654772040176371noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-40208760592786936652017-03-17T13:16:35.985-04:002017-03-17T13:16:35.985-04:00@James: You are probably correct about Rempel. I d...@James: You are probably correct about Rempel. I didn't dig deep enough in its assumptions. However, being frugal spenders, my wife and I figured that we have enough in our portfolios to last. Awhile back, I did some spreadsheet calculations assuming the government would stop funding OAS (and even CPP), meaning that we would have to live without them, and we are good "until the end." Naturally, you have to take into accounts that we don't have any inheritance to give away. And if we pass away early, then our charitable organizations will be very happy. Conversely, if we stick around in our late 90's then they won't be as much happy.<br /><br />JFUnknownhttps://www.blogger.com/profile/15352770696636456752noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-62187419336743290482017-03-17T12:49:32.440-04:002017-03-17T12:49:32.440-04:00@JF: To start with, as I said in a reply above, R...@JF: To start with, as I said in a reply above, Rempel doesn't show the assumptions he put into those calculations and I don't believe the results. <br /><br />There is no reason why delaying CPP and OAS to age 70 has to mean that you spend more when you're old than when you're young. Knowing you'll have larger payments coming during old age makes it far safer to spend your savings in your 60s.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-2378370359358122312017-03-17T12:45:26.318-04:002017-03-17T12:45:26.318-04:00@JackF: Unless you're planning to leave yours...@JackF: Unless you're planning to leave yourself with no money at all after some point, your reasoning doesn't hold up. You would actually have more to safely spend from 60 to 70 if you delay taking CPP and OAS to age 70. Whatever amount of savings you choose to hold back for old age, you wouldn't have to hold back as much if CPP and OAS payments are larger. This leaves more money to spend in your 60s.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-34544786239495658312017-03-17T12:22:16.448-04:002017-03-17T12:22:16.448-04:00Just to add to my point, check out the following c...Just to add to my point, check out the following chart:<br />https://edrempel.com/delay-cpp-oas-age-70-complete-answer-real-life-examples/<br /><br />I'm more in the camp of Erin, with a breakeven age for CPP at 86 and OAS at 92. <br /><br />What would I do with all this money at those ages if I wait? :D <br /><br />Note: Asking the question is answering it (for me!)<br /><br />JFUnknownhttps://www.blogger.com/profile/15352770696636456752noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-10527100371441025472017-03-17T12:21:27.649-04:002017-03-17T12:21:27.649-04:00This comment has been removed by the author.Unknownhttps://www.blogger.com/profile/15352770696636456752noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-34083457012865652272017-03-17T11:49:05.344-04:002017-03-17T11:49:05.344-04:00My wife and I took CPP when we reached 60. We just...My wife and I took CPP when we reached 60. We just turned 65 and took OAS right away. Why? We think we are in better physical shape now than when we'll reach 85. We have more money to spend and enjoy right now. We were able to enjoy 5 years of "extra spending" than having to wait 70. We calculated that the break-even point is around 78, so why wait?!<br /><br />My father passed away at 82, my mother is 90... and counting. My wife's mother passed at 83, her father at 78. What are the odds for us of getting to 95? Pretty slim! And looking at our folks when they were 75 - 80... barely able to walk, couldn't drive anymore, lots of pills... not for me (at least now) So, I'm glad I had 5 more years to spend "my" government money. Being DINKS (Double Income No Kids), with a bit more than $1.2M (not including CPP/OAS) we have enough to "endure" the hardships of the market. We want to leave just enough for inheritance to buy a spot in the crematorium... then "back home" on the other side! (Yeap, we know there is life after earth-life!)<br /><br />JFJackFnoreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-25448820271243987332017-03-15T16:44:56.884-04:002017-03-15T16:44:56.884-04:00@Kaunha: That's definitely a possibility. It&...@Kaunha: That's definitely a possibility. It's hard to predict the future. If anything truly big were to happen that impaired the government's ability to fulfill its commitments, stock markets and the rest of the economy would likely suffer too. <br /><br />Some financial advisors like to try to scare potential clients by claiming that there won't be any CPP or OAS for us when it's our turn. This would certainly be enough to get some people to grab CPP and OAS while they can. But I'm not concerned about this.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-15011549959602290962017-03-15T16:21:40.809-04:002017-03-15T16:21:40.809-04:00Is there any risk somewhere down the road of adjus...Is there any risk somewhere down the road of adjustment by the government to the plan? If there is, it likely would be a negative one. Not suggesting it is a big factor in the decision to delay, but lots of things can happen in ten years.kaunhahttps://www.blogger.com/profile/07577987877122710304noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-55266282469468248982017-03-15T15:32:06.615-04:002017-03-15T15:32:06.615-04:00@Ed: It was hard to tell too much from your examp...@Ed: It was hard to tell too much from your examples because you didn't list assumptions like expected returns. I suspect I would come to different conclusions in some of your examples.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-40833439676356616952017-03-15T15:17:29.155-04:002017-03-15T15:17:29.155-04:00Hi Michael,
I recently spent a couple days resear...Hi Michael,<br /><br />I recently spent a couple days researching this. I found that how you invest and your tax bracket working vs retired are the main factors. It is often beneficial to delay OAS to 70, as well: https://edrempel.com/delay-cpp-oas-age-70-complete-answer-real-life-examples/ <br /><br /><br />EdEd Rempelhttp://www.edrempel.comnoreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-61235239486066722332017-03-15T12:08:53.434-04:002017-03-15T12:08:53.434-04:00@J.K. Reid: I should have said the IRR has to be a...@J.K. Reid: I should have said the IRR has to be a _real_ return of 7.2%/year (i.e., above inflation).Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-1119733432646001432017-03-15T12:07:44.073-04:002017-03-15T12:07:44.073-04:00@J.K. Reid: The IRR of the investment would have t...@J.K. Reid: The IRR of the investment would have to be 7.2%/year to match increased CPP to age 95. So, delaying CPP wins if you live long. Wealthy people who have no plans to spend all their money might not worry about living a long life, but in this case, the headwind of taxes in a non-registered account makes delayed CPP look good as well.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.com