Few Canadians “defer” their Canada Pension Plan or Old Age Security to a later start date

Writing in the Globe and Mail, Patrick Brethour reports that “only a tiny fraction” of Canadians are deferring public retirement benefits like the Canada Pension Plan (CPP), “a decision that could cost each of them tens of thousands of dollars in foregone payments.”

You can collect CPP as early as age 60, but can defer receiving it until age 70, he explains. While CPP benefits are reduced if you start collecting them while you are age 60 to 64, “CPP benefits increase by 0.7 per cent for each month of deferral past age 65, hitting a maximum increase of 42 per cent at age 70.”

You can also defer your Old Age Security (OAS) payments, he notes.

“Deferring the OAS is slightly less lucrative, with those payments rising by 0.6 per cent for each month of deferral, to a maximum of 36 per cent at age 70. A person who was eligible for the maximum regular payments under CPP and OAS and who opted for a full five years of deferral would receive an additional $10,168 a year excluding clawbacks, based on current rates,” he writes.

Citing data from Employment and Social Development Canada, the Globe report notes that 62 per cent of us start our CPP while age 60 to 64. Twenty-seven per cent start it at age 65. Seven per cent start it while age 66 to 69, and just four per cent start it at 70.

For OAS, “the picture is even more lopsided,” as almost no Canadians defer their payments – 93.6 per cent of us start it at 65.

So why aren’t more people deferring until age 70 (and getting up to $10K more per year), as experts like Dr. Bonnie-Jeanne MacDonald have urged?

The article cites several reasons for not waiting – many “can’t afford the delay,” and start receiving benefits as soon as they can. For poorer Canadians who lack other retirement savings, the federal payments are “a lifeline,” the article notes, adding that senior poverty rates for Canadians “fall as they enter their 60s” due to receiving CPP and OAS.

Next, if you don’t expect a long life, deferring the benefits is a poor idea. Save with SPP has had relatives and friends who passed away before even reaching age 70.

Finally, those of us still working as we hit age 65 tend to opt to receive CPP, because if we don’t, we still have to pay into it without getting any additional benefit from it.

Save with SPP’s circle of friends and family is split on this issue. Those without workplace pensions took CPP as soon as it started. Some who did have a pension started it at 60, asking “why leave money on the table?” Others with workplace pensions that have a “bridge” benefit (which ends at 65) have long planned to start CPP and OAS when the bridge benefit ends. We have one friend who started CPP at 60 and is now about to turn 67 and is still working (and still paying into CPP). We have one relative who plans to take her CPP at 70 to max out the benefit, even though she is not working steadily at the moment.

It would seem it’s a personal choice for most people, based on their unique financial circumstances. The one important takeaway here is simply to know that you do have the option to get a bigger payment if you choose to start it later.

The Saskatchewan Pension Plan allows you to collect your benefits at any time you choose between age 55 and 71. The SPP’s Retirement Guide provides full details on your options for your SPP account when it comes time to retire, including SPP’s range of lifetime annuities. And you don’t have to stop working (as is the case with most company pension plans) to start collecting SPP! Be sure to check out SPP today.

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By Sheryl Smolkin

Going to school after high school can be costly.

A student attending trade school, college, CEGEP or university full-time today can expect to pay between $2,500 and $6,500 per year—or more—in tuition. Books, supplies, student fees, transportation, housing and other expenses will only add to that total.

In fact, full-time students in Canada paid an average of $16,600 for post-secondary schooling in 2014–2015. That is more than $66,000 for a four-year program.

If you are saving for your children’s post-secondary education, give yourself a pat on the back. Canadian parents are ahead of their counterparts in other Western nations in saving for their children’s post-secondary education.

Close to three-quarters (72%) of Canadian parents are saving for their children’s post-secondary education, putting them ahead of parents in the U.S. (65%), Australia (53%) and the U.K. (46%), according to The value of education: foundations for the future report, which includes responses from parents in 15 countries and territories.

However, only 30% of Canadian parents are funding their children’s university or college education through a savings plan specifically for education. Almost one-quarter (22%) are taking that funding from general savings, investments or insurance policies and 66% are using their day-to-day income to get their kids through school.

RESP
That’s a shame because by saving in a registered educational savings plan you are eligible for the Canada Education Savings Grant and the growth in the fund can be tax-sheltered until the student eventually withdraws money for school expenses when he/she is likely to be earning less than you are now.

Employment and Social Development Canada pays a basic CESG of 20% of annual contributions you make to all eligible RESPs for a qualifying child to a maximum CESG of $500 in respect of each beneficiary ($1,000 in CESG if there is unused grant room from a previous year), and a lifetime limit of $7,200.

ESDC will also pay an additional CESG amount for each qualifying beneficiary. The additional amount is based on net family income and can change over time as net family income changes.

For 2015, the additional CESG rate on the first $500 contributed to an RESP for a beneficiary who is a child under 18 years of age is:

• 40% (extra 20% on the first $500), if the child’s family has qualifying net income for the year of $44,701 or less; or
• 30% (extra 10% on the first $500), if the child’s family has qualifying net income for the year that is more than $44,701 but is less than $89,401.

Unused CESG contribution room is carried forward and used when RESP contributions are made in future years provided that the specific contribution requirements for beneficiaries who attain 16 or 17 years of age are met.

Impact on your retirement
Given the increasing cost of post-secondary education it is not surprising that many Canadian parents are also concerned about how their children’s educational costs will affect their own finances, with 43% worrying about the cost and 31% concerned about how paying that expense will affect their other financial commitments. If their financial situation becomes difficult, many parents’ long-term savings and retirement plans may be in jeopardy.

Exactly half of Canadian parents believe funding their children’s schooling is more important than contributing to long-term savings and investments and 43% state that they prioritize their children’s post-secondary educational expenses over saving for retirement. More than half (54%) said they would be willing to go into debt in order to afford university or college expenses.

In addition, survey results reveal that Canadian parents are thinking about these expenses early in their children’s lives as 28% of parents start planning ways to fund these expenses when the child is born; 9% before the child is born; and 24% look at these issues before their child begins primary school.

Even so, half of Canadian parents expect their child to contribute financially toward those educational expenses and 39% say their university-aged children are helping to fund their own education, which is one of the largest proportions of all of the markets surveyed, the study notes.

To estimate your child’s future education costs and see how your planned RESP including contributions and grants will cover those costs, plug some numbers into the GetSmarterAboutMoney.ca RESP Savings Calculator.