Canada Pension Plan (CPP) Bird in the Hand or Two in the Bush?

I am often asked when doing retirement planning whether you should apply for early CPP or wait until age 65 for the unreduced pension.  Just so you know, no one ever wants to defer the pension to age 70 for an increased pension but it is an option.  Although I cannot make the ultimate decision for you I can give you some food for thought options of why you may want to consider an early reduced pension.  This is where the bird in the hand comes in. 

Taking an early pension allows you up to five years of receiving money that you did not have before.  Since most of us certainly do not have a crystal ball as to when our number is up, you may want to enhance your lifestyle by using this additional cash.  If you decide to take the money and do something more conservative, this money would certainly help to increase your savings by investing in your TFSAs or RRSPs.

CPP comes with a maximum monthly amount of $1,065 currently. If are a married couple who have both contributed to CPP and one of you dies, the death benefit will be limited to the maximum allowed.  For example, you have both contributed to CPP and one of you have a reduced monthly benefit of $650.00.  The second spouse passes away, the monthly death benefit may be increased by an additional $415.00 to bring it up to a monthly amount of $1,065.  If you were both receiving the maximum CPP benefit, then your monthly death benefit would be increased by 0.  

If longevity does not run in the family; you have health problems; you are a married couple that are both CPP contributors; or you just want the bird in the hand; you should discuss with your investment advisor if taking a reduced CPP makes sense for you or should you wait until age 65 or older for the two in the bush, so to speak.