Are you approaching retirement age and wondering whether to take your CPP benefits at 60 or 70?
You’re not alone.
Many Canadians struggle with the decision about whether to take CPP now or later. On the one hand, taking CPP at 60 lets you enjoy retirement sooner. On the other hand, waiting until 70 gives you more benefits per year. Your decision on whether to delay CPP or not will depend on many factors. A big one is health: if you’re seriously ill it may make sense to take CPP as soon as possible, because you will most likely not be able to work.
Ultimately, the decision on when to take CPP is a very personal one. Depending on factors like health, wealth and family, you may have good reasons to take your benefits at whatever age you wish. In this article, I will share a good age at which to take CPP, regardless of your needs.
Age 65
Age 65 is a good age at which to take CPP benefits because it’s a “happy middle” between the ages of 60 and 70. At 60, you’re most likely able to work, which makes CPP benefits unnecessary. At 70, you’re most likely already retired, and you may need pension income before that date. At 65, you are likely just reaching the age at which you can’t work anymore, making it an ideal time at which to take CPP benefits.
The more years you wait before taking CPP benefits, the better. You get a 0.2% higher benefit for each year you delay between 60 and 65. At age 60, the average CPP benefit is just $770 per month. At 65, it can go as high as $1,306 per month. That’s a pretty big difference, going to show that delaying your CPP benefits can be a very wise move.
Why age 60 is not ideal
Age 60 is not an ideal age at which to take CPP benefits for two reasons:
- Most people are still more than able to work at 60.
- CPP benefits at age 60 are very meagre.
Most Canadians who choose to take CPP at 60 get only $770 per month. That’s not even enough to pay for rent, let alone all your bills combined. If you choose to take CPP benefits at 60, you may have to work the entire time you are receiving benefits. That’s not a great place to be.
What to do instead of delaying taking CPP
If you want to boost your passive income in retirement, but don’t want to delay taking CPP, you have options. You can work part time, you can fill out paid surveys, you can participate in focus groups or med school classes, and more. One of the best ways to earn passive income in retirement is to invest your money. By investing in dividend stocks or interest bearing bonds, you can generate passive income that comes into your account each and every month.
Consider Alimentation Couche-Tard Inc (TSX:ATD), for example. It’s a Canadian retailer whose shares have a 0.8% dividend yield. It’s not the highest dividend yield out there, but it has been growing over time: over the last 10 years, ATD’s dividend has increased by 20% CAGR (“CAGR” is a compounded annual growth measure).
How has Alimentation Couche-Tard managed to achieve such high dividend growth?
First, it has invested in expansion. It bought the Circle K chain from ConocoPhillips back in the early 2000s, then expanded it all across Canada. The rapid expansion propelled ATD stock to new heights.
Second, ATD has been prudent in how it has gone about its acquisitions. Instead of financing deals with debt, like many companies do, ATD has simply re-invested its own profits.
Third and finally, ATD is financially sound. Its balance sheet has only a small amount of debt and a high current ratio. The company does not pay a very high percentage of its profit out in the form of dividends. On the whole, it is very well run.
