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A retirement crossroads
Canadians on the cusp of retirement often struggle with one question above all others: when should they officially start living off their savings?
Many choose to retire on schedule, at 65, drawing income from a mix of their Registered Retirement Savings Plan (RRSP), Canada Pension Plan (CPP) and Old Age Security (OAS). What they may not realize, however, is their contributions will continue growing between the ages of 65 and 70 – if left untouched.
Waiting to access these assets has clear financial upsides: Canadians who delay collecting their CPP can see payments rise by 0.7% per month after the age of 65, up to a maximum of 42%.
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Ownership of joint bank accounts and the tax consequences of property transfers were among the topics raised in recent reader letters. Here’s what they wanted to know.
Q: “In my father’s will, his wishes were to divide his assets equally between my sister and me. The assets were my parents’ home and money in his bank accounts. Unfortunately, one of the bank accounts was a joint account with my sister, which meant that on paper I can only receive a quarter of it. Is this how it gets divided or can I actually get half of the money in that account? The will clearly stated that the assets should be divided equally.”
CPP Pensioners: 2 Reasons to Delay Your Payout Till Age 70 Image source: Getty Images
The Canada Pension Plan, or CPP, is a monthly taxable benefit that aims to replace a part of your income during retirement. The typical age for Canadians to start receiving CPP payouts is 65. However, you can start receiving the pension as early as age 60 or delay it till you reach the age of 70.
Let’s take a look at why it makes sense to delay your CPP payout.
Higher CPP payout
There is a strong incentive for pensioners to delay their pension payouts. You will benefit from an 8.4% increase in payouts for each year you delay the CPP. This means your CPP payment will increase by 42% if you wait till the age of 70 to start the pension.