This article explores the reasons behind Canadians' early retirement from the Canada Pension Plan (CPP) and the Quebec Pension Plan (QPP), despite a potential reduction in income. It delves into behavioral economics, individual circumstances, and financial considerations influencing this common decision.
It’s human nature for Canadians to take their Canada Pension Plan benefits as soon as possible, according to behavioral economists. That’s because people tend to focus more on the present when making decisions, a human trait known as present bias. Still, there are other nuances behind the decision of when to take the CPP .
In the Planning for the CPP series, Globe Advisor reporter Brenda Bouw tackled several key considerations around the beloved and much-debated government-sponsored pension plan. What triggers Canadians to take their CPP benefits when they do? When the CPP was introduced in 1966, it was in response to concerns that too many Canadians were retiring poor. Almost 60 years later, the CPP – and the Quebec Pension Plan (QPP) for those in Quebec – remains a cornerstone of most Canadians’ retirement plans. A tough decision for many is when to start taking their CPP benefits to optimize the money they contributed during their working years. The standard age for Canadians to take their CPP or QPP retirement benefits is 65. Yet, about one-third of Canadians start taking their CPP benefits when they turn 60, the earliest age possible. Lisa Kramer, a finance professor at the University of Toronto who specializes in behavioral economics, shares her thoughts with The Globe about what compels Canadians to take their CPP benefits early. A voluntary reduction in income of up to 36 per cent may not sound like a good idea, but it’s a conscious choice many Canadians make when they take their CPP or QPP benefits at 60. For example, some need the money sooner, others may have a lower life expectancy owing to health issues, or some take the benefits and invest them. Globe Advisor spoke with three Canadians about why they took their CPP benefits at 60. For many Canadians, the decision of when to start taking their CPP retirement benefits is a difficult one. Some rely on advice from an advisor who runs the number
CPP QPP Retirement Planning Personal Finance Behavioral Economics
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