What say the financial brain trusts on the forum

dobber

dobber

Old Mossy Horns
Up here we have something called CPP (Canada Pension Plan) sort of like old age pension, we put into it every paycheque and they calculate how much you get each month when your 65. Now the trick to this also is do I take it early? which comes with a penalty of course, or wait till 70 and get a bigger monthly sum.
I know people who take it early, and if smart enough put it into something that gains better interest than the bank.
I would "lose" money at age 74 which is the breaking point if I took it early
So 14 years of collecting the early amount, or do I wait till 65 and collect the same amount in 9 years.

I am fully aware of what I am asking, where I am asking, and who I am asking lol
 

hunter

Eight Pointer
Contributor
I have contemplated the same here in the States. Ultimately, it is an individual choice and what works best can vary a lot or even be the opposite of what works for someone else. It may also change over time so think on it a bit before locking an approach in! In good health and men in your family tend to live into their 90s might indicate going in one direction. In poor health or men in your family rarely live past 75 might suggest a different approach.

For me, I am trying to work an approach that I can retire early enough, likely in good enough health to do a few bucket list things, and still have enough savings to help out my wife if she outlives me by a bunch. Also plan not to carry debt into retirement so if I want a new truck, tractor, etc. the plan is to work long enough to pay it off or replace the initial hit on my savings. Just what works for me and likely not the right approach for others! Part of my thoughts are impacted by a work colleague of mine that retired relatively early. Said that men in his close family rarely lived past their 60s. He had a few good years of doing what he wanted, enjoying his retirement, and then died at age 62. So he never really benefitted from Social Security, just lived off of his work pension, savings, and doing part time work when and where he wanted to.

Good luck whatever path you take. I suggest maybe starting a list of pros and cons, put it aside for 6 months and then see if it still makes sense, and go from there!
 
dobber

dobber

Old Mossy Horns
hunter said:
I suggest maybe starting a list of pros and cons
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I have 8-10 months before I decide I believe, so yeah been weighing the options, figure the 5 years worth if taken early can be tossed into RRSP which gets me some tax savings and could get a 5-10% return
 
“J”

“J”

Twelve Pointer
dobber said:
I have 8-10 months before I decide I believe, so yeah been weighing the options, figure the 5 years worth if taken early can be tossed into RRSP which gets me some tax savings and could get a 5-10% return
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Can you still work and collect a certain amount without penalty if you go early?
 
Moose

Moose

Administrator
Staff member
Contributor
I would figure out the $ amount and @ what age you would break even if you took the early as opposed to the late. Then look at your family history for average length of life for males. Then factor that into your decision.
 
UpATree

UpATree

Ten Pointer
Contributor
For us Americans, it works like this: Everyone has a "full retirement age" (FRA). If you were born after about 1962, it's 67. For every year you start taking it before your FRA, they will reduce your check by about 8% (so you'll get only about 60 cents on the dollar if you start at 62). And for every year you delay starting SS, they will add 8%, until you reach 70. After 70, you can continue to delay it but your check won't increase any more, so there's no reason to delay past 70.

So what's the "break even" point where the larger check you will get at 70 will eventually amount to more than the checks you forfeited between 62 and 70? For most people, that's around 82. If you live beyond that and waited, congratulations, you beat the system. If you didn't wait, you will never collect as much as if you had waited.

There are other considerations, like if you need the money at 62 to live indoors and buy groceries. Or if you job is stressful and killing you and you need to get out. Or like my wife, you have a terminal disease. Another thing, if you are still working between 62 and your FRA and earn more than about $12,000 a year, they will take back half of your SS check until you reach your FRA.
 

Packfan

Eight Pointer
You will never make up the difference of those missed checks by waiting a few extra years if you are in a position to do so. It’s simple time value of money. Also, tomorrow is never guaranteed. Too many work too long and never see the fruits of the prior years holding on for that extra $300/mo.

I’ll probably never fully stop working but I can assure you that I will draw from SS on day 1 of availability …. Even if I give it all back in taxes elsewhere.
 
sky hawk

sky hawk

Old Mossy Horns
Contributor
When I walked through this with a financial advisor for my parents, I was a little surprised by the answer. Every situation is different, but when he ran the calculations, he said it was better to begin taking it on the earlier side. I figured he would say wait as long as you can.

I wouldn't take it earlier than is standard - did I understand correctly that if you take it before 65 there is an extra penalty? I think somewhere in the mid-60's is the best for the average person and that's why the range is set the way it is for U.S. SS.
 
ddavenport

ddavenport

Six Pointer
Contributor
sky hawk said:
When I walked through this with a financial advisor for my parents, I was a little surprised by the answer. Every situation is different, but when he ran the calculations, he said it was better to begin taking it on the earlier side. I figured he would say wait as long as you can.

I wouldn't take it earlier than is standard - did I understand correctly that if you take it before 65 there is an extra penalty? I think somewhere in the mid-60's is the best for the average person and that's why the range is set the way it is for U.S. SS.
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If your date of birth is 1960 or later, 67 is your full retirement age. If before 1960, it is between 66-67. You are eligible to draw at 62 but you will only get around 70% of the amount that you would get at full retirement age. Also, you are capped at $22k of earned income if you draw early. Go over that amount and you have to repay some of your benefits. The % that you can draw increases the closer your get to the full retirement age. For instance, if you decide to draw at 65 and your full retirement benefit at 67 is $2,500 per month, you would draw about 88% of your full retirement benefit or $2,200 per month.
 
wl704

wl704

Twelve Pointer
A lot of good thinking above, two other factors that come to mind:
-how stable is the Canadian fund? In the US, our equivalent Social Security is speculated to be bankrupt in the next x years (x moves around frequently, but it's around 10 years at present)
-do you have other sources of income? E.g. Investments, land, assets, savings, pension or other retirement funding (401k, 403b, IRA, SEP, etc) you also intend to use for retirement...
 
sky hawk

sky hawk

Old Mossy Horns
Contributor
ddavenport said:
If your date of birth is 1960 or later, 67 is your full retirement age. If before 1960, it is between 66-67. You are eligible to draw at 62 but you will only get around 70% of the amount that you would get at full retirement age. Also, you are capped at $22k of earned income if you draw early. Go over that amount and you have to repay some of your benefits. The % that you can draw increases the closer your get to the full retirement age. For instance, if you decide to draw at 65 and your full retirement benefit at 67 is $2,500 per month, you would draw about 88% of your full retirement benefit or $2,200 per month.
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Is that for Canada?
 
Firedog

Firedog

Old Mossy Horns
Contributor
By no means a guru, but it is just a math problem. You just have to make a lot of assumptions on some unknown variables.

Do the problem multiple times with different assumtive variables and see what it says then decide based on the likelyhood of the variables.

For me, i dont intend to work one day more than i need or want to. So i start by trying to figure how much i need to live the lfestyle i want and work backwards from there.
 
sky hawk

sky hawk

Old Mossy Horns
Contributor
ddavenport said:
No, United States. I originally thought your question was regarding the US system but after rereading, I see you were more responding to Dobber and the Canadian system.
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Good info still for the 99.9% of us that don't live under Trudeau.

Mr.Gadget said:
If you die before 70 you have nothing.

Something is always better than nothing!
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And if you live until 90, but the system becomes insolvent and only pays out 80% of what it is supposed to (like is predicted in the US within the next 10 years), you might need that extra money.

The other question is, do you NEED the money? If you're taking it early and you don't really need it, especially if you're still working, that's different than if you're taking it early because of financial hardship, or expenses.

Consider both scenarios: If you die at 70, wherever you go at that point, you won't be worried about not taking that Social Security. But if you live to 90 or 95, you may well regret taking it early, when you didn't really need it. You only really NEED the funds if you're retired, and still living, not if you're dead.

Given @dobber's penchant for working on wooden stands deep in the Northwoods, hours away from anyone....I'd say he should take it as soon as he can!
 

.35Rem

Eight Pointer
Contributor
Strong arguments either way, but @wl704 is spot on with “-do you have other sources of income? E.g. Investments, land, assets, savings, pension or other retirement funding (401k, 403b, IRA, SEP, etc) you also intend to use for retirement...”

This factored into our planning for SS at 62. I have an inherited IRA I must use in 10 yrs. If I mete it out right it will cover me from 62-65 at almost the same level than if I took SS at 62. Using it as a bridge will allow my SS to grow a bit before I pull the trigger on it. That said, without it, I would have pulled it at 62 because if I live to 65 I will have outlived my dad, brother and other males in the family. I’m taking it as a challenge 😁.
 

LIZZRD

Eight Pointer
I quit work at 54 years old , started collecting SS at 66.5 , my 'full' amount .
FYI , if you happen to die before or after you start , your spouse can collect yours...
 
QuietButDeadly

QuietButDeadly

Old Mossy Horns
Contributor
I was laid off six months prior to my planned retirement date that happened to be at age 64. I went ahead and signed up for SS at age 64 as I had planned. I have not had any W2 income since I started drawing my SS. I do have retirement from 2 fortune 500 companies along with other benefits, most important, health coverage. Also 401K that I have been taking the required minimum withdrawal since I turned 70. I probably would not have touched the 401K if it was optional but the required minimum distribution is mandatory.

I have no real regret about the way I handled my situation but there is a situation with the SS system that I probably should have considered. If you start drawing early, and you do not need the money to maintain your lifestyle, you can set the money aside and repay 100% of what you have drawn to date and then start drawing again based on your age at that date. I probably should have done that after a couple of years but did not. As it is, I have been drawing SS for almost 15 years and have not worked a day for W2 wages since I started drawing. I have had some 1099 income and some self employed income so I have actually had to pay more into the SS system.

As many have said, tomorrow is not guaranteed, and I highly recommend retiring as early as you you can, especially if you work for corporate like I did.
 

Homebrewale

Old Mossy Horns
QuietButDeadly said:
I have no real regret about the way I handled my situation but there is a situation with the SS system that I probably should have considered. If you start drawing early, and you do not need the money to maintain your lifestyle, you can set the money aside and repay 100% of what you have drawn to date and then start drawing again based on your age at that date. I probably should have done that after a couple of years but did not. As it is, I have been drawing SS for almost 15 years and have not worked a day for W2 wages since I started drawing. I have had some 1099 income and some self employed income so I have actually had to pay more into the SS system.
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Unfortunately, they closed the start, stop, start loophole back in 2016. It was one of the strategies I was going to use until it closed.
 
dobber

dobber

Old Mossy Horns
I did the math on the cost side, 14 years to break even if I take it at 60 vs 65 so that would put me at 73-74. Dad is still kicking at 85 which is a surprise to everyone lol
And yes there are other monies, so won't be dependant on $800 a month.
I figure if I work till 65 I can dump this into our RRSP which is like the 401K, which means I should get a tax break and whatever benefit the markets bring

The goal was to work till 2033 when my wife can retire, then both up and leave the same day and enjoy things
 

hunter

Eight Pointer
Contributor
dobber said:
a medical miracle is my dad
smoked since the age of 10
lead pipes, lead paint
was present for 2 H bombs with a nice white tyke suit for protection lol
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Amazing how that works out for some folks. Must be a bunch of luck with good genes and maybe a touch of divine intervention thrown in. My dad worked in tobacco as a kid and adult up until sometime in his 70s. Usually with little attention to detail regarding chemicals, etc. Started smoking while in the army during WWII and continued to do so until a few months before he died shortly after his 95th birthday. We should all be so fortunate! As for me, I am just happy and a bit surprised to see each birthday as they roll around! :)

Hope your dad has another 20 good years in him!
 
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