The retirement balancing act: small changes help savings last for life

Tip: Postpone receipt of your CPP, OAS until age 70


Postponing the start of your Canada Pension Plan (CPP) until age 70 could improve your chances of having a financially successful retirement.

This is according to Fred Vettese, Chief Actuary at Morneau Shepell (TSX: MSI), the largest company in Canada offering human resources consulting and outsourcing services.

Vettese explores this option in the current issue of Vision, the Company’s newsletter that provides in-depth analysis of a major pension or benefits issue of long-term significance.

“The CPP offers a secure and highly predictable amount of retirement income,” says Vettese. “By starting payments later, the amount payable can be up to 50 per cent higher, and these higher payments continue for the rest of one’s life.  Doing this may not only increase the total amount of retirement income one can draw, it can also reduce investment and longevity risk.”

Relatively few baby boomers now retiring have a pre-determined retirement income amount from a defined benefit (DB) pension plan.

Today’s retirees are more likely to have to rely on their savings in a defined contribution (DC) pension plan or RRSP.

This creates a great deal of uncertainty about whether one has saved enough to enjoy a reasonable standard of living in retirement and cover unexpected circumstances, like changes in health.

In the October 2016 edition of Vision, Vettese sets out examples to show how the CPP-deferral strategy can work.

The broader issue of decumulation (drawing down one’s life savings), will be a major one in the years to come as DC pension plans mature and baby boomers start to retire in large numbers. The October Vision is the first of several issues on the subject of decumulation.

Source: Morneau Shepell Inc.