CPP Pension Users: Start Your CPP at 60, 65, or 70?

Starting your CPP at 60, 65 or 70 will not make retirement life any better. CPP users must supplement the pensions to enjoy the sunset years. The BCE stock is the dream investment for retirees.

COVID-19 is the bummer in 2020, mainly to soon-to-be retirees. The health and financial crisis make it doubly hard to firm up retirement decisions. An early retirement is no longer an option unless you have a cash stockpile that can last a lifetime.

For the average Canadian contributing to the Canada Pension Plan (CPP), picking three options to draw the pension is agonizing. Any miscalculation could lead to financial dislocation in the sunset years. You also hear stories from current retirees that the CPP is only the foundation, and the payments aren’t enough to survive in retirement.

If you’re approaching retirement and banking on your CPP, assess when it’s best to start the payments. Will it be advantageous to receive the pension at 60, 65, or 70? There are various reasons why CPP users choose one age over the other. But mostly, it depends on specific circumstances.

First option – 65

Based on actuarial studies, the CPP pegs the “standard” retirement age at 65.  On average, the monthly payment is $672.87, nothing more and nothing less. Thus, annually, you would be receiving roughly $8,074.44.

At 65 years old, you’re eligible for the Old Age Security (OAS). If you elect to claim your CPP and OAS simultaneously, the monthly pension payment bumps up to $1,286.40 or $15,436.80 yearly. Not bad, considering an additional 91% to the CPP.

Second option – 60

A CPP pensioner can request to start payments as early as 60. This option is okay because you have a head start. However, you should consider the drawback. Your CPP reduces by 7.2% per year before 65, which translates to a 36% permanent decrease. Usually, the second option is for retirees with health problems or urgent financial needs.

Third option – 70

Barring any health concerns or pressing need for money, claiming your CPP at 70 gives the most significant financial advantage. You’re availing of the incentive if you pick the third option. Deferring your CPP until 70 increases the payment by 8.4% per year after age 65. Overall, it improves your CPP by 42% permanently.

Retirees’ best option

Regardless of choice, your decision is half-baked because the CPP replaces only 33% of the average pre-retirement income. Aside from the CPP (and OAS), you need other income sources to enjoy a comfortable standard of living in retirement. I would say BCE (TSX: BCE)(NYSE: BCE) is the best asset for retirees given the current environment.

Telecommunication and Internet services are in demand 24X7. Nearly everyone needs them, whether for personal matters or business dealings. If you want exposure to the telco industry, your number one option should be the largest telecom in Canada. The market capitalization of BCE stands at $51.8 billion, followed by Telus and Rogers Communications.

With $137,500 capital and BCE’s 5.87% dividend, you match the $672.87 monthly CPP payment at age 65. The potential for capital appreciation is also high as the next technological revolution begins via the fifth generation telecommunications.

So if you’re due to retire, save as much and start investing in BCE. The top 5G stock in Canada is a dream investment.

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool recommends ROGERS COMMUNICATIONS INC. CL B NV.

More on Dividend Stocks

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

How I’d Structure My $14,000 TFSA for Constant Income

If you have $14,000 saved in your TFSA, here is one easy investment strategy to earn $50 of tax-free monthly…

Read more »

woman looks at iPhone
Dividend Stocks

I’m Not Selling Telus After the 55% Dividend Cut: Here’s Why

Contrary to what the market seems to be saying, Telus Corporation (TSX: T) still has a lot going for it.…

Read more »

monthly calendar with clock
Dividend Stocks

A No-Nonsense 3.7% Dividend Stock That Can Pay Retirees Monthly

This no-nonsense dividend stock has returned more than $3.4 billion to shareholders through dividends since 2013.

Read more »

dreaming of financial success
Dividend Stocks

3 Questions to Ask Before Buying a Dividend Stock

Buying a dividend stock? Here are three questions to help you look beyond the yield, with examples from Enbridge, Fortis…

Read more »

Woman in private jet airplane
Dividend Stocks

Make $100 a Month Tax-Free: How Much to Invest in Diversified Royalty and Where

The TFSA is the ultimate investment account to place your money and earn tax-free income.

Read more »

man in bowtie poses with abacus
Dividend Stocks

Passive Income From Dividends: What Canadians Can Realistically Expect

Here's the actual dividend math the passive income gurus won't show you.

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

RRSP, TFSA or Both? A Quick Guide by Income Level

Your RRSP and TFSA are complementing accounts that you can use to shield your income from taxes.

Read more »

Real estate investment concept with person pointing on growth graph and coin stacking to get profit from property
Dividend Stocks

Buying Your First Home? The $8,000 FHSA Deduction Most Renters Miss

An eligible renter's $8,000 FHSA contribution can save $2,400 at a 30% tax rate, with the purchase date guiding investments.

Read more »