FP Answers: How will retiring early and working part time impact my CPP payments?
By Julie Cazzin and Allan Norman
Q: I’m 58 and planning to retire and draw my Canada Pension Plan (CPP) at age 60, and then winter in my townhouse in Panama each year. My wife Emily will be 48 and will retire then as well. She has worked full time for 23 years. We both plan on working on our return to Canada in the summertime for only about four months total each. What will the impact be on drawing my wife’s CPP at age 60 or 65?
FP Answers: Mario, typical summer employment will add a little to your CPP, but not much. Your bigger question is when to start taking CPP. If you follow the math and assume you are going to live a long and healthy retirement, most people are better off waiting until they are 70 before starting CPP. Of course, there are always exceptions, such as whether a larger CPP impacts your Old Age Security (OAS) or Guaranteed Income Supplement (GIS) benefits.
But deciding when to start CPP is not always about the math. Your decision has to align with how you want to live in your retirement years and your thoughts around CPP. I recently did some work for a couple who might start their CPP at age 60. I’ll walk you through their thought process to give you some ideas on when to start your CPP.
As background, Jill and Bob are 58 and 62, respectively. Bob is collecting his CPP plus a $52,000-per-year indexed pension with a 100 per cent survivor benefit. Their home is worth $850,000 and they owe $150,000 on a line of credit. Jill earns $100,000 per year, has registered retirement savings plans (RRSPs) of $500,000 and plans to retire this summer with a joint after-tax annual income of $100,000 to age 90.
The couple wants to spend their extra time after Jill retires doing more travel and they think the best
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