Thinking of taking your CPP early? You are not alone.
“The standard age for Canadians to take their Canada Pension Plan (CPP) or Quebec Pension Plan (QPP) retirement benefits is 65; at least, that’s what the federal government says. In reality, about one-third of Canadians start taking their CPP benefits when they turn 60, the earliest age possible.” – The human trait that causes Canadians to take their CPP benefits early – Written by Brenda Bouw
For some people, taking their pension sooner is the obvious choice; especially if they need it to pay bills or have serious health issues that could shorten their lifespan. But for those who can afford to wait, why don’t they? This common phenomenon has a name in behavioral science: present bias. It’s defined as the tendency to focus more on the present than the future when making decisions. Scientific studies show that most people prefer to receive money sooner, even if we know that we could get more if we wait.
Impatience is a common trait for most people, this is also true when it comes to our finances. For many people, it is hard to connect to their future-self when saving for their retirement. A perfect example would be the 20-year-old trying to connect with their 60-year-old self, when considering saving for their future vs. going out on the town. Most people would rather save as little as possible so that they can enjoy their life today. The reason for this is a concept called psychological distance. Even though someone in their 20s knows that putting away $100 a month will grow and create a much larger nest egg to spend in retirement, they choose to spend it today.
Another reason why people choose to take their CPP benefits early is because they’re unsure of how long they’ll live and don’t want to miss out. If you feel this way, maybe you should start thinking about the other end of the spectrum. The fact that we don’t know how long we’re going to live should encourage you to start saving more. In general, people are living much longer these days, and the cost of living is rising. “For many people, it’s less of a problem to die with extra money in the bank than it is to run out of money before you die.” – The human trait that causes Canadians to take their CPP benefits early – Written by Brenda Bouw
Collectively, we need to be a little more mindful that each dollar we spend today equates to many dollars that we won’t be spending in our retirement.
If you have any questions or would like to get started with your own retirement plan, please don’t hesitate to contact us.
Happy Spring!
Tracey & Paige
Photo by Charlie Foster on Unsplash
Products or services related to investments, investment recommendations, financial planning, retirement planning, and investment reviews are provided through our mutual fund dealer Security Financial Services and Investment Corp. 4665 Yonge Street, Suite 309, Toronto, ON M2N 0B4 t 416.964.0440