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Should start your CPP pension at age 60 or 70?

The Motley Fool logo The Motley Fool 2019-12-02 Adam Othman
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Editor’s note: The opinions in this article are the author’s, as published by our content partner, and do not necessarily represent the views of Microsoft News or Microsoft. Always check with your advisor or other experts before making investment and other financial changes.

Canadians have plenty to put their faith in, so they can take care of themselves when they retire. One of the first things your mind might wander off to as you think about retirement is your Registered Retirement Savings Plan (RRSP). The Canadian government also has a role to play in supporting you through your best years.

The government has designed public pensions like the Canada Pension Plan (CPP) for Canadian citizens who are no longer working. People do, however, tend to forget that the CPP is there to bolster the retirement nest egg every Canadian wants to have for their retirement.

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If you’re approaching your 60s, are you thinking about starting to collect money from your CPP as soon as you retire? I would suggest waiting for a little while longer before you start your CPP. Let’s take a look at why you might want to delay your CPP and a possible way to improve your nest egg through a dividend-paying stock like Suncor Energy (TSX:SU)(NYSE:SU).

The case for delaying your CPP

To put it plainly, the longer you wait after you are 60, the more you can get from the government through your CPP by the time you hit the golden number of 65 years old. You are eligible to start collecting your CPP when you hit 60, and plenty of retirees jump on the opportunity.

If you decide to start collecting your CPP before your 65th birthday, for every month, you get 0.6% fewer dollars than you would if you waited to start receiving your CPP at 65 years old. If you start collecting your CPP at your 60th birthday, you stand to see your CPP amount reduced by a drastic 36%.

On the opposite end, delaying your CPP collection makes you eligible to get 0.6% more for every month. If you can put off collecting your CPP until your 70th birthday, you stand to earn a 36% boost in total.

Being able to delay your CPP

Understanding the benefits of delaying your CPP collection is one thing. Being able to suspend it without the need to start collecting your CPP is a different matter. If you are wondering how you can make yourself capable of delaying the CPP without having to live under your means, there is a solution: dividend stocks.

Investing in shares of reliable dividend-paying companies like Suncor can present you with a viable solution. The CPP, after all, makes up a part of your retirement nest egg. The pension plan does not have to be the only thing to rely on. Buying stocks like Suncor and storing them in your Tax-Free Savings Account (TFSA) gives you the boost you might need.

Over the years, Suncor’s management has cut down operating costs, invested in new technology to boost efficiency, and maximized the profit the company earns. A company that consistently performs better is better equipped to offer shareholders a stable flow of dividend payments.

At writing, Suncor is trading at $42.21 per share with a juicy dividend yield of 3.98%. An investment of $120,000 in the company’s shares can allow you to earn $4,775 in dividends alone.

Foolish takeaway

Between the increased Canada Pension Plan payments, if you delay collecting them, capital gains from a reliable company’s stocks, and the dividends you can get from it by holding the stock in your TFSA, you can have more than a substantial amount for your retirement nest egg.

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Fool contributor Adam Othman has no position in any of the stocks mentioned.

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