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December 4, 2018 | Take it

A best-selling Canadian author of 14 books on economic trends, real estate, the financial crisis, personal finance strategies, taxation and politics. Nationally-known speaker and lecturer on macroeconomics, the housing market and investment techniques. He is a licensed Investment Advisor with a fee-based, no-commission Toronto-based practice serving clients across Canada.


And now, let’s deal with some First World Problems. You know, like only getting a 3G connection. Having to pay 5 cents a grocery bag for the salmon and $8 strawberries. Forgetting your Netflix password. A papercut on your texting thumb. No avocado toast. Watching your greedy parents spend your inheritance. Forgetting the cleaning lady’s name.

Plus this: should rich retirees stick their hands out and collect government OPP (Old Persons’ Pogey) when they turn 60? Or wait, and scoop more where they’re five years closer to expiry?

Just got this note from the steerage section:

Well, I just arrived home from a month long retreat in Arizona to a massive pile of mail (mostly junk). As I sat down to sift through it, I noticed two drab beige Government of Canada envelopes which I assumed were CRA reassessments. Upon reluctantly opening them, I was surprised to see that they were notices that we were soon eligible to start collecting Canada pension.

My first thought was: “Wait..what?! How old are we?” Upon the sober realization that we are both actually 59 (we still act and behave like children), I scanned the information provided, then thought about what the best option for us will be as far as when to start taking the money is concerned.

I wondered if this might be a topic that you would perhaps address in an upcoming post.

In our case, I recently retired and my wife works part time (self employed).  Our combined income consists of about $150,000.00 (investment income in the form of mostly dividends, and some interest) plus about $50,000.00 from my wife’s self employment income. So approximately $200,000.00 annually. The investment income comes from approximately $3m in non-registered investments. There is about another $1m in RRSP investments that are growing over time, but I have not included this in the income calculation. TFSAs are maxed.

We have a long paid off GTA house (we’ve been in it for 30 years), worth about $1.5. It costs around $20K a year to stay in it (property tax, insurance, utilities, internet, maintenance, etc.).

Kids are all moved out. The CPP available to us at age 60 (in 11 months from now) is $725/month (me) and $600/month (wife). At age 65 it would be $1130 and $900 respectively.

So, the question is, do we take it at 60 or 65? We don’t really need the cash from it right now to live on. If we took it, we would save and invest it.

Please insert the following mandatory suck-up at the beginning of this email, if so desired:
“Dear Garth, I have been reading your blog since 2012, and appreciate all the advice that you humorously and informatively impart on the subject of real estate and financial investments. I don’t know where I would be without you. Probably eating out of dumpsters and living in a tent by the railway tracks on the edge of town. Thank you for everything you do. Keep up the good work!”

Kindest regards, Bum.

Well, B, we’ve visited this topic a few times, but it keeps resurfacing. So bookmark this entry. It will be the last.

First, the moral and ethical question: Should a couple with almost six million assets, most of them liquid and churning out a big, tax-efficient income, take money from a government that’s sinking into deficit and can’t even pay for necessities like giving $50 million in a tweet to Trevor Noah, some US television comedian dude?

Ah, hell yes.

Okay, now the question is whether to take it at age 60 or later. The rules are in place to encourage people to wait until later life (ie – closer to death) to collect their stipend. This is so Ottawa will ultimately pay you less. Why else would there be an incentive to delay?

So Bum can take his $725 a month now, which will equal $43,500 over five years, or $53,000 if stuck in a TFSA each month and earning 6.5%. If he waits five years and receives 36% more (which is $980, not $1,130) he will have to collect for almost five years more (to age 70) just to make up for what he didn’t pocket earlier. And given the fact he doesn’t need the money, the $53,0000 in CPP gained by age 65 would grow to almost $80,000 if left in the TFSA (even without new contributions).

So, if the government’s going to give you money, and a tax-free place to put it, why would you not take it? Clearly you’re gambling you’ll live long enough to receive a modest additional amount. But, of course, you could croak. Happens. For most people the age at which you start to pull ahead financially by waiting is 74. But guys usually die by 81. A dollar when you’re healthy is worth more than buck when you’re on meds, watching Oprah and trying to breathe. So is it worth not having the satisfaction of getting some taxes returned to you for two decades prior?

Besides, CPP for guys like Bum is play money. A few hundred a month to go and enjoy – which is a helluva lot easier when you’re 62 than 80. Additionally, given the fact T2 has grown permanent deficits and the national debt’s exploding, it’s not beyond the realm of possibility that CPP benefits (like OAS) will be corralled in the future. Why incur any political risk?

Finally, if (unlike B) you need the cash flow at age 60, then take it. No debate there. If your family history sucks and relatives have routinely fallen over in the sixties, take it.

Overall, you must have a powerful reason, and confidence your life will be long and healthy, not to grab the cash early. Of course if you feel you’ve paid too little in taxes, and are guilty about it, delay your CPP.

Yeah, thought so.

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December 4th, 2018

Posted In: The Greater Fool

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