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The standard age to retire is 65 in Canada, but if you’re in good health and expecting to live a long life, you may want to consider deferring Canada Pension Plan, says a financial planner.
You can start CPP as early as age 60 or as late as 70, but the longer you wait, the higher your monthly benefit will be since they will cover fewer years, says Jason Heath, managing director of Objective Financial Partners Inc.
“Generally speaking, if you live well into your 80s, you can come out ahead by deferring your CPP to age 70. The problem? Nobody does it,” Heath said.
Heath, a fee-only, advice-only certified financial planner and Financial Post columnist, recently spoke with FP’s Larysa Harapyn about alternative strategies for retirement.
Despite the benefits, only five per cent of CPP applicants waited until the age of 70 in 2022, he said.
The most successful retirees Heath has seen are those who have transitioned to retirement through part-time, consulting or volunteer work, avoiding the extreme change from a 40 to 50-hour work week.
“The earlier you start to plan retirement, not only from a financial perspective, but from a lifestyle perspective, can be really rewarding and improve the transition,” Heath said. “In a perfect world, it’s planned, it’s slow, it’s steady.”
Heath acknowledged that some people don’t have a choice, whether that’s because of severance packages in the corporate world or health issues that lead to a sudden retirement. “Death and retirement are not meant to go together … but real life tends to work a little differently,” he said.
Expat destinations for retirement are an option for Canadians trying to save money on the cost of living. Heath said there’s opportunity in countries such as Panama, Ecuador, Costa Rica and Mexico which are trying to attract retirees from other countries. Some of the benefits include lower real estate prices, food costs and easier travel to exotic locations.
For those who prefer to stay closer to home, tapping into your home equity by downsizing or borrowing against your home are options in the right circumstances, particularly for those who live in big cities where home prices are higher.
“If it buys somebody five more years in their home, for example, borrowing against that value before they sell it, I don’t think it’s a bad thing,” said Heath.
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