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My latest MoneySense Retired Money column has just been published and looks at CPP survivorship issues. Tucked in there I reveal for the first time my personal decision to take the Canada Pension Plan at age 66, which I did last summer a few months after reaching that
It was more of a cash flow issue in light of the fact that just prior to this, my wife had left her full-time and well-paid job in the transportation industry. But I mention another consideration: the quirky CPP survivorship rules. Now I realize most couples in their 60s don’t dwell on our mortality much if they are in good health and keep care of themselves. And bear in mind my decision was long before the Coronavirus pandemic, which disproportionately affects seniors.
The first of a two-part series on this issue you can find by clicking on the highlighted headline: When is the best time to start taking your CPP payments?
We will look at the followup tomorrow.
Normally, those ready to retire contact Service Canada to get a record of past CPP contributions. They send you benefit estimates (both for CPP and OAS) some months before you turn 65 but you can also obtain this information before or after by visiting Canada.ca. There you can find a CPP/OAS calculator provided by Ottawa, providing an estimate of expected sources of income.
Doug Runchey and David Field team up on a new CPP calculator
While OAS is straightforward, optimizing CPP is surprisingly complicated, so much so that Doug Runchey (one of the country’s preeminent experts on both programs) provides calculation services to help individuals make optimal decisions on timing the start of benefits. Runchey used to be at Service Canada, so is intimately familiar with the ins and outs of the timing of receipt of these programs.
Today he runs DR Pensions Consulting in British Columbia, charging $30 to $250 for personal consulting, depending on complexity. Runchey is developing a CPP calculator program in partnership with Mississauga-based advice-only financial planner and programmer, David Field (Papyrus Planning). Note that David recently penned a very useful article for the Hub on 7 ways retirees can protect their income during this coranavirus pandemic.
As for the program, it’s free, although that may change as the team adds functionality. But any fees would be lower than for the personalized service because clients do data entry and calculations are automated.
The tool lets users upload their CPP Statement of Contributions without having to manually enter data. It’s not an estimator: it provides exact calculations in current-year dollars. Initially, it does not include special calculations for combined retirement/survivor benefits, post-retirement benefits, credit-splitting, child-rearing dropout or disability drop outs although his consulting service continues to handle those. (Neither does Service Canada’s calculator.) Runchey and Field may address some of these in a future version.
You can access it by clicking on this site. Included is a CPP Quiz, which explains how CPP integrates with employer pensions and common issues like “bridging to 65.” The calculator takes your age and generates the expected amounts you’d receive at various ages. Runchey says it doesn’t assume any specific future earnings: it lets users estimate future earnings from zero to maximum on a year-by-year basis: unlike current estimates provided by Service Canada.
I found the calculator intuitive and easy to use, and once you have Ottawa’s contribution statements, input is quick and the output a colorful chart showing at a glance the implications of your timing decisions.
CPP’s convoluted Survivorship rules
Now back to my CPP decision. After hiring Runchey a few years ago for his counsel. my initial strategy was the usual one to delay CPP as long as possible. The MoneySense piece goes into detail on my reasons but note that we also decided to hedge our bets by deferring Ruth’s CPP to age 70, instead drawing down on her hefty RRSP (unlike me, she had no DB pension, so no Pension Adjustment that lowered contribution room). We both took OAS as soon as it was on offer at age 65, for reasons articulated in this MoneySense article.
Sure, we could use a second CPP income right now — especially after this stock-market crash and bear market — but my reasoning is women live a few years longer than men, and Ruth is also a year younger. All these factors pointed in the direction of her deferring as long as possible: in the event of her reaching her 90s or beyond, she’d have that invaluable inflation-indexed annuity-like pension described above.
Retired advisor Warren Baldwin also influenced me when he said he took his own CPP at 66, partly because of the convoluted CPP survivorship issues. “If you die the pension stops or only a limited amount continues to a surviving spouse/partner: more limited if the spouse/partner has a decent amount of CPP of their own.”
Of course, couples also need to consider the slightly higher odds that the Covid-19 crisis could mean one or the other partner might not live quite as long as was once thought.
Baldwin plays a prominent role in the followup column, which we’ll flag here on the Hub tomorrow.
