CPP Pension: Should You Start Your CPP Payments Earlier Now?

Investing in Fortis stock could help you defer starting your CPP payments amid the COVID-19 crisis.

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With COVID-19 wreaking havoc across the world, we are entering what could be a financial crisis worse than that of 2008. The coronavirus pandemic has brought global economies to a grinding halt in its wake. The situation is worrisome for Canadian investors of all ages.

While I write this, the S&P/TSX Composite Index is down by just over 27% from its February 2020 peak, and things are likely to get worse. Canadian retirees, in particular, might be concerned about their Canada Pension Plan (CPP) payments.

I have always recommended deferring your CPP payments until you turn 70 to maximize your benefits from it. With the economic landscape becoming more hostile, you might be wondering whether I’ve changed my opinion regarding when you should begin collecting your CPP.

Before I give my opinion, some background.

Difference between collecting at 60 and 70

If you begin collecting your CPP before you turn 65, you earn 0.6% less every month before your 65th birthday. Starting at 60 means that you stand to receive CPP payouts that are 36% lower than what you would get if you defer until you are 65.

Similarly, deferring your payments beyond 65 means that you can earn 0.7% for each month you delay after 65. If you begin collecting your CPP payments at the age of 70, you can receive 42% more than what you would get by starting at 65.

There is a significant difference in how much you can earn through CPP by deferring your payment for 10 years. Delaying the start of your CPP payments as much as possible can maximize your overall retirement income.

How to stay afloat until then

If you delay the collection of your CPP, you might be wondering what to do about your retirement income until you begin collecting it. This is where I would recommend investing in a recession-resistant asset. You need a high-quality stock that pays dividends to its investors. It will create a secondary source of passive income you can rely on until the markets recover.

The utility sector is ideal when it comes to recession-proof companies. I would recommend considering Fortis Inc. (TSX:FTS)(NYSE:FTS) to this end. No matter how bad the situation gets, people will still need heat, electricity, and water. Fortis is a utility company that retains a healthy income despite the situation because it provides an essential service.

I also like Fortis because it is a generous dividend-paying stock. It has a dividend growth streak of more than 45 years. The company increased its dividends even during the last major financial crisis that saw companies in other sectors go belly up. Fortis manages to increase its earnings in a time where other companies are reeling from a recession.

Foolish takeaway

I would recommend that you keep deferring your payments if you can help it. Begin building an investment portfolio of recession-proof stocks. If you compose a portfolio of enough recession-proof and income-generating assets, you can use them to supplement your retirement income until the markets recover.

Fortis is a stock that has stood firm through challenging economic times in the past, and it has everything to support it through the ensuing crisis.

I think Fortis is an excellent choice to begin building such a portfolio.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

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