The majority of Canadians claim their Canada Pension Plan (CPP) benefits before the age of 70. In fact, approximately 95% of Canadians begin receiving their CPP benefits before turning 70. In fact, many opt to start as early as 65, the standard age of eligibility.
This is despite the fact that delaying CPP until age 70 can increase the monthly benefit by 42% compared to starting at age 65. The early claiming trend reflects a preference for accessing retirement income sooner, even though waiting could result in significantly higher lifetime benefits. So, what gives?
When it’s worth it
Waiting until 70 to start your CPP payments can seem like a savvy move, but it’s not always the best choice for everyone. If you’re in good health and enjoy a secure financial situation, delaying CPP might be great. However, for many Canadians, especially those with health concerns or shorter life expectancies, holding off on those payments might not be worth it. The extra monthly boost is enticing, but if you’re not confident you’ll get to enjoy those higher payments for many years, it might make more sense to start sooner.
Moreover, if you’re finding it challenging to make ends meet in your 60s or want to enjoy your retirement with fewer financial constraints, waiting until 70 could mean missing out on using that money when you need it the most. Retirement is about enjoying the fruits of your labour, and if you’re struggling to cover basic living costs or hoping to tick off items on your bucket list, tapping into your CPP earlier might give you the freedom to do so.
Finally, if you have other sources of retirement income, delaying CPP could lead to an unnecessarily high tax bill later on. These sources could include a Registered Retirement Savings Plan (RRSP). When all your retirement income kicks in at once, you might find yourself in a higher tax bracket. This diminishes the value of your hard-earned CPP. In such cases, starting your CPP earlier could help balance your income stream. Plus, you can avoid giving too much back to the taxman. So, while waiting until 70 can offer a bigger monthly payout, it’s not always the best financial move for everyone.
How to maximize your CPP
If you’re considering taking your CPP early, investing in Manulife (TSX:MFC) on the TSX could be a smart way to maximize your financial benefits. Manulife offers a forward annual dividend yield of 4.7%. This means that even if you start your CPP payments sooner and the monthly amount is slightly lower, Manulife’s reliable dividends can help supplement your income. With a payout ratio of 65.1% as well, Manulife has a solid track record of distributing profits to shareholders, making it a dependable choice for long-term investors.
The company’s recent earnings also paint a promising picture. Manulife reported quarterly revenue growth of 12.8% year-over-year and a healthy profit margin of 17.3%. With a trailing Price/Earnings (P/E) ratio of 14.6 and a forward P/E of 9.3, the stock is attractively priced. This suggests it could offer good value for those looking to balance income with growth potential. The consistent dividend payments combined with the possibility of capital appreciation make Manulife a well-rounded investment option, especially when you’re planning for a longer retirement.
By investing in Manulife, you can enjoy the benefits of your CPP sooner while ensuring that your portfolio continues to grow. Whether you’re looking for stable dividends or potential stock price appreciation, Manulife offers a strong combination of both. So, set yourself up for a more comfortable retirement, giving you peace of mind as you enjoy your CPP benefits early.
