The break-even age analysis considers whether Canadians expect to live long enough to make up for the payments they would forgo by delaying their pension. Experts say it’s too ambiguous to be relied on
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Bonnie-Jeanne MacDonald, director of financial security research for the National Institute on Ageing at Toronto Metropolitan University, says people like to use the break-even age analysis because it makes them feel like they’re getting value for their money. In this case, the money is the CPP contributions they made during their working lives.
She describes it as a “mental gamble” that can impact someone’s financial security in retirement negatively.She encourages advisors and investors to move away from talking about the break-even age and instead review the full financial implications around CPP timing and other retirement income.
Canadians who can wait for their CPP also need to consider the rising cost of living, which has had a huge impact on retirees in the past few years. “I’m not telling people not to spend their money; just don’t spend your CPP dollars first if you don’t have to,” he says. “That’s the problem; nobody wants to draw down their savings.
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