17 March, 2015

Filed Under: Retirement Planning


I just returned from my holidays and received an email from my friend of 35 years. She is turning 65 this summer and was somewhat panicked about all the decisions she needs to make regarding her retirement.

What she was finding particularly frustrating, given she is an impeccable researcher, was the Government website where she was trying to find some answers to her fantastic questions. I reassured her that I too find those websites difficult to manoeuvre and often prefer to talk to a real live person instead, although that is becoming much more difficult these days with all the cut backs to government services (a topic for another day perhaps).

She is still working, has a pension plan (albeit a small one - her words not mine!), been contributing to her RRSP's and, as we all know, is eligible to begin receiving her Old Age Security (OAS) and her Canada Pension Plan (CPP®).

Her first question was:

Do I have to start taking these pensions when I turn 65 or do I have the option to postpone them?

The simple answer is, you can start taking them whenever you want. Determining the best time to begin taking them as a source of income, depends on your situation and more specifically what you want to do for your own retirement. So, I asked her

What do you want to do about your retirement? When do you want to retire?

Well, she told me, what she'd like to do, ideally, is to cut back working three days a week and she needs to replace her current vehicle so wonders how she can do that on a reduced income. This of course, is an assumption that her income will be reduced from working 5 days a week as it could turn out that her CPP & OAS payments may = her current income when you add in 3 days of employment, to that mix.

That would be great, she replied, do you think that's possible?!

The only way to find out is to call CPP and ask them for an updated report on your CPP contributions and your income eligibility. Ask them for that report, I said, and then let's talk some more!

Next question, she said, does CPP work the same as my pension when it comes to survivor benefits? In other words, do you have the opportunity to choose what percentage of a survivor benefit you would like to have. Short answer is no, you don't!

However, I said, speaking of which, we need to look at the numbers to see if selecting a 100% Survivor benefit would work better for you & your spouse, rather than selecting a 60% Survivor benefit amount.

How will we figure that out, she asked.

My response, I need the numbers and they'll give them to you, once you tell them you are thinking about retiring and need to make some decisions regarding this.

We also need to look at the impact on both your CPP and your pension if you decide to reduce your work hours and go down to three days a week. It's all about the information, the questions you need to ask both yourself and the providers of your retirement income. Once we have that information we can talk about your options.

Information is power, we used to always say. Unless you have the relevant information and know what questions to ask in order to obtain the information, like in my friends case, your anxiety about these decisions can build and working with a Financial Planner should help to reduce your anxiety while answering your questions.

Not only that, I said to my friend, you tell me what you want to do & I'll show you how we can make that happen.