Lowering the age for public pension eligibility reduces senior poverty rates: report
Most financial planners recommend that you delay claiming public pension benefits to maximize your monthly payments, but a new report says lowering the early eligibility age can help one group in particular: workers with lower incomes.
Currently, Canadians can start claiming their public pensions as early as age 60, and a report published by the Global Risk Institute said that claiming pensions earlier than 65 can put lower-income seniors in a better place financially and reduce the poverty rate among seniors as well.
The report, which examined two Canadian pension reforms that took place in the 1980s, which dropped the early eligibility age (EEA) to 60 from 65, concluded that lower-income retirees have financially benefited by claiming their pensions earlier.
If you claim your Canada Pension Plan (CPP) before 65, you can expect your payments to decrease by 0.6 per cent each month (or by 7.2 per cent each year), up to a maximum reduction of 36 per cent if you start claiming after you turn 60.
On the other hand, waiting to claim means your payments will increase by 0.7 per cent each month, or 8.4 per cent each year.
But lower-income retirees have a shorter life expectancy than retirees with higher incomes, which means they might not live long enough to reap those benefits. They might also require a boost in funds sooner just to accommodate the rising cost of living, which means claiming early isn’t just the smarter financial decision; it’s often the only financial decision they can afford to make.
“It’s a no-brainer,” Bonnie-Jeanne MacDonald, director of financial security research at the National Institute on Aging (NIA), said, adding that lower-income Canadians who defer claiming their pensions could also face higher
Read more on financialpost.com
