Author: kiara

One of the questions we get the most about retirement planning is, “when is the best time to take CPP”? As people enter the retirement phase of their lives, they switch from saving money to making decisions about when and what type of income to receive. When to start taking CPP is a big decision, and like many financial decisions, there are many aspects to consider when deciding when to take CPP.

What is the Canadian Pension Plan (CPP)

There are countless articles on what precisely the CPP is. One of the best places to look is the Canadian government site and their CPP Overview. It outlines details into qualifications needed and how to apply. We encourage our clients to sign up for the My Service Canada Account online service to review their specific CPP contributions and Estimated monthly benefit.

The typical age to start the pension is 65. However, you can start receiving it as early as age 60 or as late as age 70. If you start receiving your pension earlier, the monthly amount you’ll receive will be reduced. However, if you decide to start later, you’ll receive a larger monthly amount.

For 2020, the current maximum monthly CPP benefit is $1,175.83. The average CPP benefit is much lower than the maximum. For March 2020, the average is $696.56

When should YOU start your benefit?

The honest answer is “It all depends”. The answer is not straightforward, and ultimately the decision on when to apply for CPP should be part of a broader retirement plan. It’s essential to develop as clear a snapshot of your retirement income and expenses as possible. It’s necessary to determine if there is a gap between the money you will need and the money you will have.

There are advantages and disadvantages to taking CPP early or waiting a little later. We highly recommend you take a little time and weigh the options. Failing to do so could damage your retirement — and your wallet.

3 Advantages of Taking Early

Reduced Life Expectancy – If your health is deteriorating and you have concerns about your longevity, taking CPP early could make sense. Without sufficient personal savings or income to support your lifestyle in your 60s, you may have no choice but to take CPP early.

OAS Clawback – High-net-worth individuals might take the CPP payment to lower overall taxes and maximize the OAS benefit. Taking earlier payments and decreasing the annual CPP income will reduce the risk of having the OAS benefit clawed back.

Late Stage Retirement spending – The rationale of enjoying early retirement activities — like travel, dining out, a new car, etc. is higher expenses and the need for higher income. For the Late stage of retirement, people often don’t have the ability or desire to spend more money, and those extra expenses don’t relate — so having a higher monthly CPP is excellent, but they may not be able to spend it.

3 Advantages of Delaying

You Are Still Working: After age 65, CPP contributions become optional if you are still employed. However, CPP benefits are included in your taxable income and thus increase your taxes. If you don’t need the extra income, deferring CPP income by a couple of years could result in tax savings. The same goes for OAS payments.

Average Life Expectancy or Better: If people in your family generally live past age 90 and are in good health, it may make sense to delay CPP to age 70 for more benefits and minimize your longevity risk.

The length of time you contributed to the plan: Other factors can also affect your pension amount, each year you contribute to the CPP will result in an additional post retirement benefit and increase your retirement income. If you were out of work or moved to Canada during your career, the extra contribution years could help.

What we have learned in working with clients is that financial decisions are often emotional. Financial decisions with spreadsheets and calculators are an essential part of reaching a decision, but if we ignore our clients’ comfort level or peace of mind, that is not wise advice.

Readers are invited to share their comments; however, the author cannot address questions regarding an individual’s specific financial situation. If you have a technical question regarding your CPP, please contact your Wealth Management Advisor.

Links:

Average CPP

CPP Overview

My Service Canada

OAS Pension

The past three months have been stressful for everyone. The many uncertainties surrounding COVID-19 along with, at times, conflicting reports can take an emotional toll. We are still in the midst of a global pandemic though certain areas have started to cautiously reopen. Numerous variables are still unknown like how prepared we are for a second wave? How might it impact us or how long will it take to develop a vaccine?

It’s okay to acknowledge that many of us feel challenged and tensed. It is a normal human response. But we are not powerless! The current situation might last a while. To better cope in the long run, we should try to manage stress by limiting our time watching TV, listening to the radio or following news on social channels. Stay informed once or twice a day with a reliable news source, adhere to official distancing rules and focus on self-care and what feels right to you. Luckily, we can now take advantage of the nice weather and encouraging sun rays to get started.

SOME IDEAS ON HOW TO RELIEVE STRESS AND PROMOTE WELL-BEING

1. Petting an animal has relaxing and therapeutic benefits to humans. It increases the release of feel-good endorphins and may lower your blood pressure and improve your overall health.
2. Reduce your caffeine intake. Caffeine is a powerful stimulant and a moderate consumption of it can bring both health benefits (beside keeping you alert and energized) and negative effects. Consuming over 400 mg of caffeine a day can lead to uncomfortable symptoms like: elevation of blood pressure and/or stress hormone levels, irritability, headaches, disrupted sleep, nervousness, anxiety or magnified perception of stress. The definition of moderate intake may vary from person to person, so it is important to monitor your current daily intake and watch for jitters and shakes or any of the listed sig ns and try to adjust accordingly.
3. Laughter as a therapy? It’s no joke! Did you notice that you can’t feel anxious while you’re laughing? It’s a simple good tool to relieve stress response and relax your muscles. Studies revealed that humor has multiple short- and long-term benefits and is one of the most frequently used complementary therapies with cancer patients. In addition to its established psychological benefits, laughter may have physiological effects on the immune system, encourages the body to produce natural painkillers and improves your mood and sense of well-being. Try watching a funny TV show or hanging out with people who make you laugh.
4. Exercise & Nutrition. It has long been proven that exercise helps lower your body’s stress hormones and release endorphins, which are chemicals that improve your mood and act as natural painkillers. It can also improve sleep quality, otherwise negatively affected by stress and anxiety.

The type of recommended exercise and nutritional modifications do vary according to ages. We tried to summarize a few suggestions per life decade.

In your 20s

At this age your body is at its peak and extremely adaptable, so consider cross-training by combining both anaerobic (strength/resistance training) with aerobic (cardio) elements. Be sure to incorporate weight training twice a week, cardio three to five days a week, balance work, and stretching. Vary your routine and keep it fun.

Nutrition Tip: We build bone well into the mid-20s so focus on calcium, folate, iron (dairy, fortified non-dairy beverages such as soy, rice and almond milks, calcium-fortified juices, green vegetables, salmon, almonds, tahini). Women who plan to get pregnant may add B vitamin and folic acid supplements.

In your 30s

Priorities often shift in our 30s and career and family obligations leave less time for exercise.

At the same time muscle mass and strength begin their steady decline – but you can slow that process. People lose strength faster than they lose muscle, therefor strength training (at least twice a week) can offer a good remedy. High-intensity interval training combining flexibility work, strength work, and cardio can keep you fit. It is a good point in time to start keeping an eye on your daily steps/stairs count, while trying to squeeze fitness (some squats, push-ups or taking the stairs) into your demanding schedule.

Nutrition Tip: The body’s metabolism and calorie requirements begin to decline. Cut down starchy (processed) foods, continue to consume foods rich in calcium, folate, and iron, and focus on magnesium (helps regulate blood pressure and blood sugar and maintain strong bones).

In your 40s

With age, bone density, strength, and muscle mass tend to decline. At this point you can expect your performance to plateau and recovery to take a bit longer no matter what your sport of choice is. Sedentary jobs can have significant effects after a decade or two and our back, neck, hips, and knees begin to tighten. By now you might have broken your training habit a few times and the best way to get back at it is to forgive yourself and try out new types of activity. How about dance, martial arts, or outdoor exercise? All of those can help mix things up and lift up your spirit. Slow down the natural progression by adding 2-3 a week strength training exercises to your moderate-intensity cardio routine. Try to develop strength-building activities you can practice and improve for the long run like hiking. Pilates and Feldenkrais can help building core strength to protect against back pain.

Nutrition Tip: Start preparing for the coming decades by making nutrient-dense food choices and including antioxidants. Sources of vitamin C: red and green pepper, citrus fruit, kiwi, broccoli, Brussels sprouts, strawberries and tomato juice. Vitamin E: almonds, sunflower oil, hazelnuts, peanut butter, and sunflower seeds. Other recommended antioxidants include beta-carotene (e.g., carrots, sweet potato, apricots, green vegetables) and selenium (e.g., Brazil nuts, tuna, shrimp, turkey).

In your 50s

At 50, though you might have accumulated a few injuries or receive reminders of chronical conditions from time to time, often, telling yourself that “you’re over the hill” may hurt you more than the training you are missing. Leisurely pursuits are wonderful, but it will not be sufficient if you don’t break a sweat. Generally, when people include high-intensity interval training, their cardio health remains high. However, consult your doctor before starting a demanding routine and allow for more recovery time between workouts. Listen to your body; some may opt for high-intensity interval training only once a week vs. multiple times. Weight-bearing exercises, such as fast walking (5 days a week), and resistance training – primarily for hips and shoulders – are recommended to improve bone density and slow the loss of lean body mass.

Nutrition Tip: women often benefit from calcium intake of 1,200 mg a day. After 50 both genders should supplement with vitamin B12 (supports production red blood cells, nerves and DNA) and vitamin D. With age our capacity to produce vitamin D through sun exposure decreases. The official recommended dietary allowance for vitamin D of from 600 IU increases to 800 IU (in your 70s), though many experts recommend an intake 1,000 to 2,000 IU each day after 50.

In your 60s

Maintaining a high level of physical activity can help prevent several types of cancers and post-menopausal conditions. It helps reducing the risk of developing chronic conditions, such as heart disease and type 2 diabetes. Do what you can to maintain your physical condition and independence. Keep a routine of brisk walking a few times a week (or mix it up with swimming), attend a Pilates and/or Yoga class (1-2 times a week), and aim to squeeze a few bodyweight exercises in between (e.g. sit-ups, push-ups, or wall sits). Taking up social activities like ballroom or Zumba dancing can be physically beneficial and a lot of fun.

In your 70s

If your health allows, you can continue with strength and balance training, hiking, cardio, or slightly lower-impact activities — as long as you pace yourself, monitor your body response, and adjust accordingly. If you suffer from any chronical conditions consult with a physiotherapist or other exercise professional first. During and after our 70s, exercise supports our cognitive function (why not take up Tai Chi?) and helps prevent falls.

In your 80s, 90s and beyond

Any activity you consistently do will benefit your body and mind. By now, while almost everyone has physical limitations and aches, too much rest may do more harm than good and can lead to loss of strength and endurance or weaken your cardiovascular system. Resistance and balance training are crucial to reduce fall risk and guided weight training may reduce the need for walkers and the likelihood of cognitive decline and Alzheimer’s. Your muscles, joints, and entire body remain adaptable so find an activity you enjoy without risking injury and stick to it – you’d be surprised at the results!

Do not forget to take the time to stretch and decompress after exercising at any age, adapt your nutritional intake to match your needs as you grow older, and from your 20s to any later stage of your life be aware of harmful little habits we tend to pick up along the way, try to shake them off and maintain a healthy lifestyle simply by following moderation.