Timing your Retirement Properly

When that day begins to rapidly approach, the day when you get to hang up the uniform or put away the business suit in exchange for a track suit and sneakers and stuff the briefcase into a closet there is a sense or trepidation felt by some and a sense of freedom felt by others.   The feeling is compounded when you are forced to consider exactly how you are going to fund that retirement.

Whether you have a company pension or not will also determine when you should access the old age benefits from the government right away or wait until later.   The decision will affect the size and duration of your payments. If you choose to take advantage of the CPP and OAS benefits right at retirement out of necessity or by choice your payments will be a little smaller but you will obviously receive them for a longer period of time.  If you have no choice because you lack any other source of retirement income then obviously you are forced to take the money as soon as retirement is foisted upon you or you have chosen to leave the workforce. The facts are that the benefits can be accessed any time after you have reached the age between 60 and 70 for the CPP portion and between the ages of 65 and 70 for the OAS funds. The experts agree that if you hit your early 60s in relatively poor health then the wise thing to do would be to apply as soon as possible in order to get the maximum you can before anything untoward happens.

They also agree that from financial perspective there is very little difference in the amount of money you can expect to receive overall whether you choose to begin at exactly the allowable time or wait and defer the payments for a few more years if you are healthy and are expected to live for the average life expectancy of an adult in Canada.   One thing to consider and many have over the past few years is the sustainability of the funds themselves.   CPP is considered sustainable for the foreseeable future as it is derived from contributions from the workforce of which you have been most likely for many years and is largely independent of government fiscal pressures.

The Old Age Security portion however is a vastly different story in that it is subject to the pressures of fiscal policy and with an aging population in Canada there are many who wonder about the viability of the system as it is currently being funded and run.   For this reason, any who is eligible now should seriously consider taking it now, whether you really need it or not. You could always re-invest that money and see a better return than you may expect in years to come.   All food for thought.

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Sam Seidman, CPA, CA, LPA
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Toronto, Ontario
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