CPP Deferral debate - Fred Vettese article discussion

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Re: CPP Deferral debate - Fred Vettese article discussion

Post by longinvest » 22 Jun 2017 10:20

I can only hope the next generation of FWF retirees will take the time to consider my calculations earlier in this thread (based on current CPP rules) that show how delaying CPP to age 70 allows for safely spending more in the earlier years of retirement than taking CPP early.

Increasing CPP and OAS by delaying them is extremely valuable for the those without a DB pension. That's a lot of people.
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Re: CPP Deferral debate - Fred Vettese article discussion

Post by adrian2 » 22 Jun 2017 10:42

longinvest wrote:
22 Jun 2017 10:20
I can only hope the next generation of FWF retirees will take the time to consider my calculations earlier in this thread (based on current CPP rules) that show how delaying CPP to age 70 allows for safely spending more in the earlier years of retirement than taking CPP early.

Increasing CPP and OAS by delaying them is extremely valuable for the those without a DB pension. That's a lot of people.
:thumbsup:

OTOH, every person who ignores the math and takes CPP early makes a small contribution to the enhanced long term sustainability of CPP, so thank you for keeping the contribution level low!

That's in the same vein as thanking all lottery players for voluntarily paying more to the government, and keeping taxes lower than they would have to be otherwise.
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Re: CPP Deferral debate - Fred Vettese article discussion

Post by Shakespeare » 22 Jun 2017 10:44

Note that my decision was based on different rules.
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Re: CPP Deferral debate - Fred Vettese article discussion

Post by AltaRed » 22 Jun 2017 11:39

Shakespeare wrote:
22 Jun 2017 10:44
Note that my decision was based on different rules.
That is indeed a good qualifier... I am remiss in not having said that myself. While I agree with longinvest in principle (delaying CPP and OAS in a variety of cases), it is not a slam dunk due to DB pensions (or not and size), size of one's RRSP relative to other assets, and of course, it ultimately depends on knowing the date of your death. The best info remains actuarial numbers (at the time one is making the decision), adjusted for one's belief in whether they have good genes and lifestyle (longevity) versus making an early exit.
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Re: CPP Deferral debate - Fred Vettese article discussion

Post by steves » 22 Jun 2017 11:48

AltaRed wrote:
22 Jun 2017 11:39

it ultimately depends on knowing the date of your death.
Wow!.... ya think?
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Re: CPP Deferral debate - Fred Vettese article discussion

Post by Koogie » 22 Jun 2017 11:57

AltaRed wrote:
22 Jun 2017 11:39
...it ultimately depends on knowing the date of your death.
Science says it slightly more likely to be a Monday, if that helps... :P

deadliest-day-of-the-week
https://www.livescience.com/54429-deadl ... -week.html
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Re: CPP Deferral debate - Fred Vettese article discussion

Post by longinvest » 22 Jun 2017 12:24

People with more money than they'll ever need make for a really tough crowd.

I thought that I had clearly explained that delaying CPP and OAS is not about guessing one's expiry date or maximizing the probability of extracting as much money as possible from the system, but that it's a way to safely maximize spending regardless of one's date of death. Obviously, I have failed at making my explanations clear.

Surprisingly, many are envious of the DB pension of public servants. People seem to understand that a pension is a very valuable thing, even though a significant portion of public servants will die before age 80 and will have wasted year and years of contributions.

Yet, when it comes to CPP and OAS, suddenly the importance of the pension disappears; what gets more important is to beat the system by taking the pension early and dying young, even though this leads to spending less during the earlier and healthier years of retirement.
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Re: CPP Deferral debate - Fred Vettese article discussion

Post by AltaRed » 22 Jun 2017 14:36

Longinvest, I (and I am sure many others) do get it, but safely maximizing ones spending' is related to optimizing getting the most out of the system. Deferring CPP/OAS to 70 requires something else supplementing cash flow to the age 70. It is a matter of perspective when someone wants to do the bulk of their spending and it depends on degree of clawbacks. It is going to be situational.
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Re: CPP Deferral debate - Fred Vettese article discussion

Post by Chuck » 22 Jun 2017 15:46

longinvest wrote:
22 Jun 2017 12:24
I thought that I had clearly explained that delaying CPP and OAS is not about guessing one's expiry date or maximizing the probability of extracting as much money as possible from the system, but that it's a way to safely maximize spending regardless of one's date of death. Obviously, I have failed at making my explanations clear.
You sold me, I thought you were pretty clear. To Altared's point, it may be situational, but outside of the "I simply can't afford to" crowd (generally not represented on this forum), I would say the situations that would lead to early CPP being optimal if you can afford the safe strategy are very rare.

There would be two groups I can see:

1) The I've got so much clawback might be a concern crowd, so it's actually better to minimize CPP to reduce tax (so worse for your CPP but better overall).
2) Those so brilliant at investing they can whup the CPP by taking that safe money ASAP (and no GIC's for them) and investing instead in their outperforming portfolio. (PS> I should note if they are correct, they would also almost certainly fall into category #1, so maybe there is only one group).

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Re: CPP Deferral debate - Fred Vettese article discussion

Post by SQRT » 22 Jun 2017 16:41

adrian2 wrote:
22 Jun 2017 10:42
longinvest wrote:
22 Jun 2017 10:20
I can only hope the next generation of FWF retirees will take the time to consider my calculations earlier in this thread (based on current CPP rules) that show how delaying CPP to age 70 allows for safely spending more in the earlier years of retirement than taking CPP early.

Increasing CPP and OAS by delaying them is extremely valuable for the those without a DB pension. That's a lot of people.
:thumbsup:

OTOH, every person who ignores the math and takes CPP early makes a small contribution to the enhanced long term sustainability of CPP, so thank you for keeping the contribution level low!

That's in the same vein as thanking all lottery players for voluntarily paying more to the government, and keeping taxes lower than they would have to be otherwise.
Agree with both of you. Adrian: I sometimes think of all the ways "dumb"or"unlucky" people make it better for me as well. Probably not the most sensitive or likeable approach. Glad I'm not alone.

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Re: CPP Deferral debate - Fred Vettese article discussion

Post by Jo Anne » 22 Jun 2017 23:06

steves wrote:
22 Jun 2017 11:48
AltaRed wrote:
22 Jun 2017 11:39

it ultimately depends on knowing the date of your death.
Wow!.... ya think?
If you've had cancer, that is something that is always in your mind.

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Re: CPP Deferral debate - Fred Vettese article discussion

Post by Shakespeare » 22 Jun 2017 23:16

If you've had cancer, that is something that is always in your mind.
Or if all your relatives have.

Added: before the current rules came into effect, there were no deferral provisions past 65. Pretty well everybody who took early retirement and had reduced earning years due to lengthy education was essentially forced to take CPP early - a decision which was much discussed on this forum and its predecessor and was entirely reasonable at the time.
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Re: CPP Deferral debate - Fred Vettese article discussion

Post by Koogie » 23 Jun 2017 10:04

Shakespeare wrote:
22 Jun 2017 23:16
Added: before the current rules came into effect, there were no deferral provisions past 65. Pretty well everybody who took early retirement and had reduced earning years due to lengthy education was essentially forced to take CPP early - a decision which was much discussed on this forum and its predecessor and was entirely reasonable at the time.
Care to give a precis of the changes for those of us looking at early retirement under the new rules ?
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Re: CPP Deferral debate - Fred Vettese article discussion

Post by kcowan » 23 Jun 2017 10:05

Is there anywhere that the old rules are compared and contrasted with the current ones?
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Re: CPP Deferral debate - Fred Vettese article discussion

Post by Dogger1953 » 23 Jun 2017 12:05

kcowan wrote:
23 Jun 2017 10:05
Is there anywhere that the old rules are compared and contrasted with the current ones?
As far as I recall:

The old rules were simply that your CPP was reduced by 0.5% for every month that you took it early (max reduction of 30% at age 60) and increased by 0.5% for every month that you took it late (max increase of 30% at age 70). To take it early, you had to have "wholly or substantially ceased employment" (at least for the month prior to taking your CPP and the month). Once you started your CPP, you could no longer contribute.

The new rules are that your CPP is reduced by 0.6% for every month that you take it early (max reduction of 36% at age 60) and increased by 0.7% for every month that you take it late (max increase of 42% at age 70). To take it early, there is no restriction on employment. Once you start your CPP, you must still contribute to CPP if you're under age 65 and you can choose whether to contribute if you're between age 65 and 70. Every year of contributions after you're receiving your CPP will generate a "post-retirement benefit".
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Re: CPP Deferral debate - Fred Vettese article discussion

Post by kcowan » 23 Jun 2017 13:05

What are the new dropout provisions? I am asking for a 58 year old friend.
Are the added post retirement benefits quantified?
Thanks
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Re: CPP Deferral debate - Fred Vettese article discussion

Post by Koogie » 23 Jun 2017 13:11

Dogger1953 wrote:
23 Jun 2017 12:05
To take it early, there is no restriction on employment. Once you start your CPP, you must still contribute to CPP if you're under age 65 and you can choose whether to contribute if you're between age 65 and 70.
To clarify, should this read you must still contribute under age 65 if you are still earning eligible income ? If "retired" under age 65 one presumes there is no requirement (or option) to contribute to CPP.
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Re: CPP Deferral debate - Fred Vettese article discussion

Post by Descartes » 23 Jun 2017 13:48

The amount you contribute is based on your employment income. If you ain't employed then you ain't got no employment income.

For your illumination:

http://www.cra-arc.gc.ca/tx/bsnss/tpcs/ ... h-eng.html

Under the new rules, an employee who works and receives a CPP or QPP retirement pension has to contribute to the CPP if he or she is:

60 to 65 years of age;
65 to 70 years of age, unless the employee has filed an election with you or another employer to stop paying CPP contributions (the election will take effect on the first day of the month following the month the employee provides you with a completed and signed election form);
65 to 70 years of age, if the employee revoked his or her election to stop paying CPP contributions.
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Re: CPP Deferral debate - Fred Vettese article discussion

Post by Dogger1953 » 23 Jun 2017 14:44

kcowan wrote:
23 Jun 2017 13:05
What are the new dropout provisions? I am asking for a 58 year old friend.
Are the added post retirement benefits quantified?
Thanks
The new dropout provision is 17% of the person's contributory period (from age 18 until their CPP starts), so about 86 months if they take their CPP at age 60 or a full 8 years if they take their CPP at age 65 or later. In addition to the 17% dropout, there were no changes to the child-rearing dropout, the disability pension dropout or the over-age 65 dropout.

The PRBs for a year of maximum earnings are 1/40th of the maximum retirement pension for the year following the contribution, adjusted by the age of the contributor as at January of the year following the contribution.
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Re: CPP Deferral debate - Fred Vettese article discussion

Post by rharvey199 » 24 Jun 2017 08:16

Just a quick post to say thank you to all of the contributors in this thread. the info is very valuable and helpful, especially the cpp estimators/calculators.

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Re: CPP Deferral debate - Fred Vettese article discussion

Post by gaspr » 07 Aug 2017 07:35

longinvest wrote:
31 Mar 2017 08:12
Peculiar_Investor,
Peculiar_Investor wrote:
30 Mar 2017 09:30
Is there any chance there is a spreadsheet (or spreadsheets) that could be shared? Perhaps via our wiki article on Canada Pension Plan?
I have a personal spreadsheet I've built to estimate my future QPP pension, but it's not fully automated (it requires a manual selection of drop-out years). It would be an interesting project to build an easy-to-use CPP/QPP spreadsheet for Finiki. As with all my other shared spreadsheets, it wouldn't make use of macros so that users won't have to worry about security issues. (That's always a challenge).

OK. Thanks for the suggestion. I'm adding it to my set of projects. I'm not committing to any specific schedule, though.
Just a bump to ask if the above project is still in the works? :) :)
It would make a wonderful addition to finiki!
Last edited by gaspr on 07 Aug 2017 07:46, edited 1 time in total.

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Re: CPP Deferral debate - Fred Vettese article discussion

Post by longinvest » 07 Aug 2017 07:45

gaspr wrote:
07 Aug 2017 07:35
Just a bump to ask if the above project is still in the works? :) :)
Yes, it is, but on a very lazy schedule.
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Re: CPP Deferral debate - Fred Vettese article discussion

Post by gaspr » 07 Aug 2017 07:48

Great to hear! Thanks for all you share and do on this forum. Much appreciated!

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