CPP – Now or Later? (Part 2)

Last week in Part 1 of CPP - Now or Later, we discussed that one of the more difficult decisions for those approaching retirement is when to start receiving their CPP retirement pension.

In Part 2, we look at a case study.

Case Study – Twin Brothers

Frank and Martin are each entitled to a CPP retirement pension of $1,000 per month at age 65.  Both will retire at age 60 but Frank will start his CPP pension at age 60 and Martin will wait until he is 70.  Who will receive the most from CPP?

The answer depends on how long each of them lives.  Frank’s CPP pension will be $640 per month while Martin’s will be $1,420.  However, Frank will receive $76,800 (indexed) before Martin gets his first cheque.  Clearly if they die before age 70, Frank will have received more as Martin’s only benefit will be the CPP death benefit.

The table below shows the accumulated pension received by each at various times in the future.  Amounts shown are in current dollars (i.e. not indexed for inflation).

By starting early, Frank receives more pension than Martin until they reach age 86.  If they live beyond age 86, Martin’s accumulated pension will exceed Frank’s.