Get both a bird in the hand and two in the bush

Written by Doug Dahmer  |  November 19, 2015

Canadians from across the country are starting to look at their Canada Pension Plan with the respect it deserves. The reaction to our CPP Optimizer research report has been overwhelming. In a nutshell, the CPP benefit for a couple can be in excess of $700,000 over their lifetime and the research study demonstrates that the difference between starting your benefit at the least beneficial date and starting at the best date is over $300,000.Birdinhand

Unfortunately, not everyone knows these statistics. From comments in social media, I can see that many people are trapped in the old school, conventional wisdom that you take your benefit as soon as you retire. “A bird in the hand…” is a common thread of discussion. For some people, this choice will be a mistake of enormous proportion.

Their concern is that they might die early and miss out. This a possibility, but with $300,000 at risk, a wise man will assess the probability of this possibility. For those people with adequate assets and an expectation of living for a while, I can understand their desire to have incremental income coming in during their Go-Go Years (why would I defer my CPP to my Slow-Go Years?) Let me encourage you to consider the following question: If you could find a 5 year GIC with a Canadian Government AA rating and 8.4% interest rate which is also indexed for inflation, how much money would you move into this investment? For an extremely low risk investment with a great return, I bet the answer is: everything.

It pays to consider your CPP much like your RRSP. They are both ‘investment’ vehicles designed to give you an income stream in retirement. The guaranteed and compounding 8.4% return on deferring CPP is much higher than the forecast 4.71% long-term return on a 50:50 bond/equity portfolio forecast by the C.D. Howe institute. It makes sense to drawdown the lower return investment and let the higher return investment build a bigger and guaranteed recurring income stream. In other words, replace the income stream you would have received by taking CPP early with incremental drawdowns from your RRSP. Later in life, when you start your CPP, based upon your specific optimal start dates, you can back off on your RRSP drawdowns knowing you have a guaranteed, much higher income from CPP for the balance of your life.

So, if you have adequate investments to afford to draw more in your early years, less in your later years, look at the timing of your CPP as a secure investment opportunity. A Retirement Income Specialist can help you figure out the exact formula to maximize your sustainable retirement income.

To determine the best time for you to start drawing your CPP benefits please visit you may be amazed at the dollar value of the right decision and understand how you can have both a bird in hand and two in the bush.

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