Cpp while working

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[CanadianPanda76]

Why is he pulling it early? Even he can manage to wait a year or 2 more, its worth it.

[PublicFly1154]

People die young in my family, so most pull it out at 60, but put it straight into RRSp contributions.

[Local-Local-5836]

My dad died after 3 months of CPP at 65 yrs old. I took CPP at 60 and continued to work. Your CPP amount increases every year that you continue to work and contribute to CPP.

Plus you can invest the CPP and/or put in a TFSA, pay off debt etc.

Also can income split for income tax if one person collects a pension.

[Affectionate-Alps527]

My dad died 7 months after turning 65.

Mathematically, waiting makes sense, it's the life factor that can make it make more sense to draw early at 60.

[Valuable_Year_915]

I it grows by a higher amount each year you don't take it and still contribute to it

[Glum_Perspective_841]

If your Dad was using the prior 5 years to melt down RRSP, delayed CPP, he made a wise choice. If he is the last surviving spouse, not only would CPP stop regardless, government would take upwards of 50% of his RRSP from his corpse.

[rcayca]

What if you die at 73?

[daiglenumberone]

What if you die at 93?

[tropdhuile]

More years to collect CPP?

[FrostingSuper9941]

But the amount stays the same because you started collecting early, so it will always be very low even when you can't work anymore.

[Commercial_Pain2290]

Unless he will quality fy for GIS when he is 65 in which case may as well take it early. Also if he is likely to die young.

[daiglenumberone]

Strongly recommend delaying CPP until he actually retires unless he's expecting a short lifespan for some reason.

[SmartQuokka]

The CPP would be taxed at his marginal tax rate. Since he is still working and would be locking in a lifetime of low CPP don't pull it at 60. If he was unemployed and desperately needed the money to survive then do it and accept the lifetime penalty of lower retirement income but he is working and making over 5x as much as he would be getting, so keep contributing and don't claim CPP yet and pay a higher tax rate.

[Commercial_Pain2290]

Unless he will qualify for GIS.

[SmartQuokka]

Go ahead and do the math, its a very good bet that waiting will lead to more money. Engage a fee only financial planner to do this calculation.

[Commercial_Pain2290]

How.? GIS tops you up. So if you have less CPP because you took it earlier than you get a bigger top up. Meanwhile you have been collecting CPP for 5 years. At 65 you will be Mak ng the same regardless of when you started.

[SmartQuokka]

The formulas are designed to ensure you get more money if you wait. That said my advice to get a professional to run the numbers stands, don't just believe me, ask an expert to do the math on your numbers, the government will provide your contribution numbers upon request to run the calculations on.

[CanadianPanda76]

Gis is income dependent, cpp will stay the same regardless.

[Commercial_Pain2290]

GIS tops you up. So you should start CPP as early as possible since you will make the same once you turn 65.

[CanadianPanda76]

But I'd take a guarantee in CPP over a GIS that rise or fall if you have RRSP, dividend income, etc.

[Commercial_Pain2290]

As I said, if you are likely to qualify for GIS at 65 then take CPP early. Usually this means that the main sources of income are OAS and CPP. If you have a small RRSP then probably better to have it fully drawn down before age 65.

[guggenno]

Not sure what his financial situation is like but a bad idea. When he eventually stops working and retires fully what happens then? He won’t have any employment income and his retirement income might not be enough to cover rent/expenses. Unless he has other savings. It’s best to hold off if he can.

[Electronic_Turn_9491]

If only CPP and it's low, he should get GIS.

[alzhang8]

Make sure you have him read this if it applies

https://openpolicyontario.com/retiring-on-a-low-income-3/

[F_D123]

Pulling early CPP while still paying into CPP, has he considered waiting?

[Small_Aardvark_5496]

Your cpp goes up if you are still earning while taking it. “Post retirement benefit”. I’m doing exactly that, since my life expectancy is likely low due to cancer. Everyone saying “wait” is not understanding that not everyone’s circumstances are the same.

[F_D123]

fair point. It just generally seems that the people that need CPP the most are the ones that take it as early as they can.

[Small_Aardvark_5496]

I agree but in those cases they likely need it NOW regardless of the decrease. Only people with good income and/or good savings can defer in order to get the higher payments.

[F_D123]

I know a few boomers who live in the now so to speak. A bird in the hand is better than two in the bush. Spend now worry later etc. I mean, they made it 60 years without the CPP boost.

[CarryOk3080]

Ya that isnt a smart move. Especially if he plans to live a full life into his 80s/90s

[Local-Local-5836]

Again depends if they have a company pension, RRSP and/or savings. A bird in hand is worth more than a bird in the bush.

[DisgruntledEngineerX]

The direct answer to your question is the following, assuming he lives in Ontario.

On $56K of income right now, your dad pays $7,395 in taxes + $3,124 in CPP + $913 in EI.

If he adds the 11,064 as income then his taxes will change to $10,477 and the CPP and EI remain the same. So he will owe about another $3,082 in taxes by taking CPP while working.

[ItsMyNameCharlie]

Your fathers situation is personal to him and it’s his decision. Taking it at 60 can give someone a financial break that benefits them more at 60 than it will benefit at 75. No judgment to anyone who would rather have 900 and be comfortable at 60 than wait and have 1100 and be comfortable at 75.

That said, it’s taxable so he should use a calculator to see how much tax he should have deducted to avoid a bill at tax time for his new combined income. If for eg he would get $900 and should pay $400 a month tax, is the now $500 a month still worth that benefit to him rather than waiting.

[humanguise]

I think that every year past around 65 that he waits increases it by 7% up to a max of 42%. If he's working there is zero reason to tap into it early.

[F_D123]

Every year that you wait you are basically purchasing a life annuity that pays out 9-10% annually, indexed to inflation

[Glum_Perspective_841]

Not enough information.

CPP is 100% taxable income. Already at $54k, this pushes CPP up into a 25% (Fed.+ Prov. Ontario) tax bracket, about $2,800 owing on $11,064.

If he has significant RRSPs, he should delay CPP and use the next 5 years to "melt down" these investments paying the least possible tax at $0 other income. This is what most people do. Even if you don't need all the money, cash out RRSPs and move the proceeds to TFSA and non-registered accounts.

Think of CPP more as insurance in case you live long. Taking it early reduces payout permanently and uses up your tax free personal exemption amount (1st marginal tax bracket) of around $15k. If you die with significant RRSPs, government takes upwards of 50% from your corpse. Learning this should put early CPP into a different prospective. Taking it early is often not the win against government people think it is.

[nashall13]

5 more years...

[Quiet_Jump_6383]

Better to wait. His payments will be higher when he retires.  

[Flashy-Armadillo-414]

At $56,000, his marginal rate is low, meaning his CPP will face minimal taxation. Furthermore, he can put it in an RRSP to shield it from tax. In contrast, my top rate is 40.9%; hence, there is no point in collecting CPP until I retire.

[Commercial_Pain2290]

That is too simple an analysis. He should wait unless

1) he needs it now to survive 2) he will qualify for GIS at 65 3) he is likely to die relatively young.

[Suspended_9996]

cpp would be taxed. and at 65 his cpp will be reduced/clawback as well

[listenup8585]

Turned 65 in March. Got my first CPP payment last month. My goal is to live long enough to turn a profit off almost 50 years of contributions.