The upside to waiting until age 70 to take CPP benefits
There are two pieces to the puzzle: CPP monthly increases and the spread between the rate of inflation and the MPE. When both are taken into consideration, the report suggests the CPP increase from age 65 to 70 will be closer to 50%, not 42%.
To help you make good financial decisions today, models and spreadsheets are built on today’s assumptions, projected into the future. The challenging part is things are constantly changing, so models and spreadsheets can hide risks.
Think back over the last 25 or 30 years. What has changed? Inflation, interest rates, medical advances, things you enjoy?
Do you know that with inflation at 2%, it takes about 36 years for $1.00 to be reduced in value to 50 cents? What do you think the chances are of inflation increasing during your retirement?
What do you expect to earn on your investments? As you get older, what might cause that rate of return to reduce?
What will happen if you live 10 years longer than you expect? What is your plan if you won’t have enough money?
One role of a financial planner is to help get you positioned so you can maintain your lifestyle over your lifetime, no matter what happens. Delaying CPP helps take care of that second part, no matter what happens.
Now, I don’t know if in your situation you should take CPP at 70, and the study does list some exceptions, particularly if your GIS or OAS is going to be affected. But for most people, if you have an investment account large enough to bridge you to age 70, then delaying makes sense if you want to build more guarantees into the later stages of your life.