Sunday, April 15, 2007

Canada Pension Plan #2

In the not to distant future- I will decide when to start receiving my Canada Pension Plan (CPP).

The Canadian Human states,

"The age you start your pension makes a difference... forever.

The normal age that you start receiving a CPP retirement pension is 65. However, you can start receiving your pension as early as 60 or as late as 70. If you start your pension before 65, you must stop working or earn less than a maximum amount for a required period of time.If you start your pension early, it is permanently reduced by 0.5 percent for each month that you are under 65. If you start your pension later, it is increased by 0.5 percent for each month that you are over 65, up to the age of 70. "

The benefit rates, at age 65, range from a maximum of $864/month or $10,365/year (2007) to an average of $473/month or $5,677/year (Oct. 2006). The payments are not automatic, one must apply for this pension. and they recommend applying at least 6 months in advance of one's start date.The rules allow some flexibility. So one must decide to accept a lower amount, for life, starting as early as age 60, or wait until later and receive a larger pension, for life.

The "for life"part part is important. I guess pension plans in general are a crap shoot, in that those who live longer get more and those who die at an early age receive less. Death benefits and survivor benefits offset this fact to some degree. I believe Canada requires that a surviving spouse receive at least 50 percent.

When it comes to life expectancy...its a little bit like a roulette wheel picking an age. I recall a number of guys that never even made it to retirement. Some only lived a short time after retirement and others lived past age 80.

If one enjoys a physical activity, then one of the realities is that as we age we get less bang for our buck . For many people, if not for most, they can expect to have less energy and less enthusiasm. It doesn't mean that extra money cannot be spent on other things one thinks are worthwhile. Maybe you want to leave a larger estate to relatives or more to a charity.

I'm crunching some numbers for comparsion and will post them in the future.

No comments: