Consider Your Personal Circumstances
There are many factors you should consider when deciding when to start receiving your CPP retirement pension. These include your health, your financial situation, and your plans for retirement.
For example, if youre healthy, expect to live a long life, or have access to other sources of income, you may choose to start receiving your CPP retirement pension later. This will result in a larger monthly pension, which could help protect you from outliving your savings.
However, if youd prefer to work less, or you want the money now to pay off debts or to fund your retirement plans, you may choose to start receiving your pension before age 65. This will result in a smaller monthly payment which can help meet immediate needs, especially if you have little or no other income.
The Canadian Retirement Income Calculator can also help you better understand your future financial security.
How To Plan For Future Benefits
In 2000, the average age at which people retired was roughly 61 or 62. Two decades later, it’s around 66, according to government data, Warshawsky said.
“Just in 20 years, we’ve seen a substantial increase in the retirement age,” Warshawsky said. “People really, really are working longer.”
Anecdotally, Elsasser said he sees more people retiring earlier than they had anticipated as their work prospects change.
That highlights the importance of planning ahead, so you anticipate whatever your retirement years bring. Admittedly, that can be tricky, given that Social Security could be susceptible to change.
If you’re 60 and up, there is less reason to worry any prospective changes would affect your benefits, Elsasser said.
But if you’re 45 to 60 years old, it’s reasonable to plan for benefit reductions of about 5%, he said. For those who are even younger, a 10% to 15% cut is possible.
Moreover, people of all ages should also plan for worst-case scenarios in which the program does reach a point where it can only pay a portion of benefits, which may prompt as much as a 24% benefit cut for retirees.
“The real importance of planning is just making sure you have all your bases covered,” Elsasser said.
What Is Full Retirement Age
Full retirement is defined as the age at which eligible workers can receive 100% of their retirement benefits based on their work record.
A separate number, 62, is the age when workers are first eligible to collect retirement benefits. But by claiming early, they will receive reduced monthly checks for life.
Full retirement age was traditionally age 65. However, that changed with the 1983 legislation signed by Reagan, which gradually pushed the full retirement age up to 67, depending on an individual’s birth year.
Additionally, individuals who delay claiming benefits past their full retirement age stand to receive up to 8% more per year up to age 70.
As it currently stands, only 80% of promised benefits will be payable by 2035 if nothing is done to shore up Social Security.
To fix that, politicians face the difficult choice of either raising taxes or reducing benefits.
“When Congress is considering, ‘How are we going to make Social Security balance in the end?’ it’s probably going to be a combination of revenue increases and some benefit cuts,” said Richard Johnson, director of the program on retirement policy at the Urban Institute, a non-profit research organization.
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Increase In State Pension Age From 66 To 67 Under The Pensions Act 2014
The Pensions Act 2014 brought the increase in the State Pension age from 66 to 67 forward by 8 years. The State Pension age for men and women will now increase to 67 between 2026 and 2028. The government also changed the way in which the increase in State Pension age is phased so that rather than reaching State Pension age on a specific date, people born between 6 April 1960 and 5 March 1961 will reach their State Pension age at 66 years and the specified number of months.
Increase In State Pension Age From 67 To 68 Under The Pensions Act 2007
Under the Pensions Act 2007 the State Pension age for men and women will increase from 67 to 68 between 2044 and 2046.
The Pensions Act 2014 provides for a regular review of the State Pension age, at least once every 5 years. The review will be based around the idea that people should be able to spend a certain proportion of their adult life drawing a State Pension. The first review must by completed by May 2017. As well as life expectancy, it will take into account a range of factors relevant to setting the pension age. After the review has reported, the government may then choose to bring forward changes to the State Pension age. Any proposals to do so would, like now, have to go through Parliament before becoming law.
The government is not planning to revise the existing timetables for the equalisation of State Pension age to 65 or the rise in the State Pension age to 66 or 67. However the timetable for the increase in the State Pension age from 67 to 68 could change as a result of the review.
In the Autumn Statement on 5 December 2013, the Chancellor announced that this government believes that future generations should spend up to a third of their adult life in retirement. This principle implies that State Pension age should rise to 68 by the mid-2030s, and 69 by the late 2040s.
However, the government is not currently legislating for this change these dates are indicative only, showing a general direction of travel for future State Pension age changes.
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Choosing When To Retire
Retirement age is when an employee chooses to retire. Most businesses dont set an age that their employees must retire at. If an employee chooses to work longer they cant be discriminated against. However, some employers can set an age that employees must retire at if they can clearly justify it.
Its an employees responsibility to discuss when and how to retire with their employer. This could include phasing retirement by working flexibly. Members of occupational pension schemes need to discuss with their pension scheme managers what impact a change in working hours or income might have on the pension, whether the scheme supports phased retirement or working beyond the schemes normal pension age.
Employers may or may not be able to agree requests. If an employee is unhappy with their employers decision, they can challenge this at an employment tribunal.
Retirement is a form of resignation – employers and employees must follow the right procedures for this.
Consequences Of The Increase In Social Security Full Retirement Age
The significance of the increase in full retirement age from 66, to 66-and-2-months instead, is that now trying to take benefits at 66 is actually an early benefits election, resulting in a 1.1% reduction for starting payments 2 months before full retirement age.
For those who want to start as early as possible at age 62 doing so is no longer a decision to take benefits 4 years early. Instead, its 4 years and 2 months early, which means the age-62 benefits reduction is now 25.83% . Similarly, delaying to the maximum age 70 would not earn 4 years worth of Delayed Retirement Credits, but instead only 3 years and 10 months of DRCs, for a total increase of 30.67% .
The end result: benefits can never quite be as high as they were before at the maximum, and at any given age, Social Security benefits take a slight haircut.
Notably, the impact of a rising full retirement age will continue from here for several more years as well. As noted earlier, the full retirement age is scheduled to go all the way to age 67 over the next 5 years, such that those born in 1960 or later who start turning 62 in 2022 will find when making their Social Security decisions that an age-62 starting date is a full 30% reduction, while delaying to age 70 is only a 24% increase.
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Increasing The State Pension Age
2.6 million WASPI women are affected by the changes to the state pension age.
Our verdict
Correct. 2.6 million women are affected by the changes made in 2011. Other women are affected by earlier changes.
What was claimed
The government committed over £1 billion to reduce the impact of changes and limit them to 18 months.
Our verdict
Correct. The government limited the increase in the state pension age from the new 2011 timetable so that no-one would face an increase of more than 18 months. That reduced the savings it would otherwise have made by £1.1 billion. Overall, changes since 1995 mean some women will retire three to six years later planned.
Chris Elmore MP, 1 February 2017
We did commit over £1 billion to lessen the impact on those worst affected so no-one will see their pension age change by more than 18 months. But there is a wider point here, we do have to be realistic in looking at pension ages about the fact that people are living longer…
Theresa May, 1 February 2017
The move to make the state pension age equal for men and women, and increase it to 66 by 2020, means women born in the 1950s onwards are retiring later than they expected.
A law in 2011 brought forward the year when the state pension would increase to 66, from 2026 to 2020. Women Against State Pension Inequality are a group campaigning for a bridging pension for women born in the 1950s affected by the changes and the 2011 timetable.
Why Is The Oas Changing
There are several critical reasons for changes being made to the OAS program.
- Canada’s Aging Population: Demographics are changing. Life expectancy is increasing, and the age group of baby boomers is huge. The government predicts the number of Canadian seniors will nearly double from 2011 to 2030, from 5 million to 9.4 million. That puts a huge pressure on funding the OAS program, especially when the number of working-age Canadians per senior is expected to drop from four to two over a similar time frame.
- Cost: Budget 2012 estimates that the cost of the OAS program without changes would grow from $38 billion in 2011 to $108 billion in 2030. That means the 13 cents of every federal tax dollar being spent on OAS benefits today would become 21 cents for every tax dollar being needed for the program in 2030-31.
- Flexibility: Allowing seniors to choose to defer taking their OAS pension will provide them with more choice to make decisions appropriate to their own circumstances.
- Efficiency: The phased-in proactive enrolment of many seniors in the OAS and GIS programs will not only reduce an unnecessary burden on seniors, it is also a long-overdue administrative change that should save government program costs.
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How It Could Trigger Other Changes
Many individuals can’t hold out to claim Social Security at their full retirement age, either because of no employment or poor health, and consequently claim as early as they can at age 62.
However, if the full retirement age is raised and the earliest age to claim stays the same, individuals will receive even less in benefits at 62, Johnson said.
Some advocate bumping the initial retirement age to 64 or 65 from 62 to eliminate that problem. That doesn’t address what would happen to people who cannot work at age 63 or 64 until they become eligible for benefits.
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Retirement Age By Country And Region
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| Life expectancy vs. Retirement age for men in European countries on a map |
Many of the countries listed in the table below are in the process of reforming the ages . The ages in the table show when an individual retires if they retire/have retired in the year given in the table the trend in some countries is that in the future the age will increase gradually , therefore one’s year of birth determines when one has the age of retirement .
The average of statutory retirement age in the 34 countries of the Organisation for Economic Co-operation and Development in 2014 was males 65 years and females 63.5 years, but the tendency all over the world is to increase the retirement age. This is also reflected by the findings that just over half the Asian investors surveyed region-wide said they agreed with raising the retirement age, with a quarter disagreeing and the remainder undecided.
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Why You Should Save Less For Retirement And Spend Your Money Now
While the move back to eligibility at age 65 was welcomed by advocates for the poor and the elderly, it does make Canada the odd one out when it comes to global state pensions.
The U.K. is changing the qualification age for the British State Pension beginning in 2018 and is set to reach age 68 by 2046 Ireland is also boosting its retirement age to 68 as of 2028. The U.S. will move the age for Social Security eligibility to 67 by 2027. Age 67 is also the new benchmark for retirement in the Netherlands, Denmark, Belgium, France, Germany and Spain. Australia is lifting its state pension age from 65 today to 67 by 2023. All of these countries are phasing in the new ages over time, as was Canada.
Taking Social Security: How To Benefit By Waiting
For those who are able to do so, it may make sense to wait even longer, because youll receive a larger monthly benefit even more than your full benefit. Every month past your full retirement that you delay, Social Security will increase your check by about 0.7 percent per month.
If your full retirement age is 66, then heres how much your check would increase:
| Retirement age | New benefit | A $1,000 check becomes |
|---|---|---|
| $1,320 |
So if your full retirement age is 66, then if you can wait two more years and claim benefits at age 68, youll increase your monthly check by 16 percent. In this case, if your full benefit were $1,000 a month, your new benefit would become $1,160 per month. And youll still receive cost of living adjustments on top of this amount, typically raising your payout a little each year.
Workers have other ways to grow their Social Security benefits, too, but its important to start early.
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Reaching Age 65 Retired Members
The public service pension plan is coordinated with the Canada Pension Plan or the Quebec Pension Plan . Coordination means that the public service pension plan takes into account the contributions and benefits that a plan member will pay into and receive from CPP or QPP. As a result of this coordination, the public service pension plan provides for the payment of a lifetime pension payable until your death and a temporary bridge benefit payable until age 65 or until you start receiving disability benefits at any age. The following information is intended to help you understand your lifetime pension and bridge benefit and the coordination of the public service pension plan contributions and benefits with those available from the CPP or QPP.
Why Raising The Retirement Age Is Controversial
Some Republicans, including Romney, have discussed raising the retirement age as part of Social Security reform. The bipartisan Simpson-Bowles plan, more formally known as the National Commission on Fiscal Responsibility and Reform, included a proposal to raise the Social Security retirement age to 69 by 2075, among other changes, in order to help cut the national debt.
“When Social Security first started, the average life expectancy was 17 years lower than it is today,” said Rachel Greszler, research fellow at the Heritage Foundation, a conservative think tank. “And yet, the retirement age has only increased by two years.”
While Greszler said it could make sense to raise the retirement age, not everyone agrees that such a shift would work.
Alicia Munnell, director of the Center for Retirement Research at Boston College, said she doubts that increasing the retirement age would make sense the way it did in 1983.
That’s because a lot of people are going into retirement unprepared. Take our current 401 program, for example. It hasn’t produced a lot of retirement savings, she said. A typical 60-year-old had less than $100,000 saved in their 401 in 2016, according to the Center for Retirement Research. Meanwhile, half of workers don’t have access to a workplace retirement plan at all, Munnell noted.
“When you look at the retirement system as a whole, there’s not a lot of other sources of money for people other than Social Security,” Munnell said.
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Raising The Social Security Retirement Age: A Cut In Benefits For Future Retirees
According to the 2021 report of the Social Security Trustees, the Social Security Trust Fund will be able to pay full benefits until 2034, and incoming payroll taxes will be sufficient to pay 78 percent of scheduled benefits thereafter. Some are using this modest gap in long-term funding as a pretext to justify proposals for large cuts in Social Security benefits designed to reduce the federal deficit and increase Social Securitys solvency. One frequently discussed change to Social Security is to increase the age at which a retiree receives full benefits. For all retirees, increasing the full retirement age will result in a cut in benefits. It is therefore not surprising that this proposal is very unpopular with the American public. Not only is it unpopular its also bad policy and one that the National Committee to Preserve Social Security and Medicare strongly opposes.
Retirement Age Has Already Been Increased
The retirement age for full Social Security benefits has already been increased from 65 to 67 for anyone born in 1960 or later. This increase was enacted in 1983 as part of comprehensive legislation to strengthen Social Securitys financing at a time when the program faced an imminent financial crisis. The increase in the full retirement age has been phased in slowly based on a persons year of birth.
Impact of Raising the Retirement Age Beyond Age 67
