The Canadian Money Roadmap
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The Canadian Money Roadmap
I want to answer your questions! Here's the first one...
In this episode, I introduce my new Fan Mail feature where you can text me your questions. Depending on the questions I receive, I might be able to feature it in a future episode!
Click on the link above the description to send me a text question.
To clarify a few questions about this service: I cannot reply to the text, I don't receive your full phone number, you will not receive any spam from me, and it doesn't give you my personal cell number either.
At the end of the episode, I try to answer the first question I received about CPP timing for single people.
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Hello and welcome back to the Canadian Money Roadmap podcast. I'm your host, evan Neufeld, on today's episode. It's short and sweet, but it's an announcement. It's a request and an answer to a listener's question about the Canada Pension Plan. And an answer to a listener's question about the Canada Pension Plan. I'll get right into it here. The announcement today is pretty simple. It's maybe not that exciting to you, but it's kind of exciting to me. It's a new feature available for my podcast for you to be able to get a hold of me.
Speaker 1:Sometimes emailing is a little bit annoying and my email domain is my name, which Evan Neufeld maybe people don't know how to spell Neufeld and you might forget how to do it and it's like few steps away from actually being able to complete an email and send it off and all those kinds of things. And wouldn't it be nice if you could just send a text message with your message or your question or whatever? And now you actually can. So in this episode and hopefully every other episode, if everything works well, you can go down to the description and at the top of the page it should say send Evan a text message. And when you click on that it will open a text message, believe it or not, and in there there'll be a little message that's pre-filled in there for you with a number, and it says don't remove, or something to that effect. Don't remove it, because that's the only way that my podcast host will be able to send that message to me directly. The reason it's done this way is that it is now anonymous, so I don't know who is sending it, unless you put your name, contact info in the text message itself. And this is not some way for you to get on a spam email list, because I don't even get your full phone number. The only thing that I see on my end is the last four digits of your phone number and your approximate location. I think that just comes from your area code, but I can't respond by text and you're not on some email list.
Speaker 1:This is just a cool way for you to send in questions, or the future is called fan mail. So if you just want to send something nice or something that you've appreciated about the show, I always like hearing those. But it's a great way for you to send in things that you're wondering about so that I can answer them on the podcast If you send in a little bit of a nicety or a review or something like that. I'd love to share a few of them on the podcast from time to time as well. So if you're looking for a shout out, that would be the place to do it.
Speaker 1:So for this episode and all episodes going forward, if you have questions or anything, send them via the text message feature in the description of this episode. So that's the announcement, and my request is that, if you do have questions, please send them in, because I want to do a full length episode about your questions from all sorts of different topics. Some of those episodes are the most popular because if someone else is thinking about it, chances are many other people are thinking about it too. So if you have questions or something that's kind of top of mind, submit it via the text message feature and perhaps I will include it in a future question and answer episode. Now, the last part of this episode is just that someone discovered my fan mail text message feature already before I had a chance to actually announce it, and so I thought what better time to loop this into your regularly scheduled programming here on the Canadian Money Roadmap?
Speaker 1:So this question comes from someone in Edmonton and they say hey, evan, it would be great to hear about some guidance for single persons, meaning CPP not advisable, as on death, there's not transfer to loved ones, only to a spouse. So if I could interpret the question here. First of all, thank you for sending in the question. I assume that this question is about CPP timing for single persons and related to the death benefit provisions for the Canada pension plan. So maybe I'll start there.
Speaker 1:First thing to understand is what happens to CPP when you die. This is complicated so I'll give kind of a back of the napkin answer. So, generally speaking, if you have a spouse and one of you passes away, the theory is that the surviving spouse would take over 60% of the deceased spouse CPP payments. Now the wrinkle that really matters here is that you can take over 60% of it up to your own personal maximum amount, and so if you are the surviving spouse and you are already collecting the maximum CPP, you won't get any more if your spouse passes away. Okay, we could get into a lot of different things there, I'm sure, but that's just kind of the high level view of what happens to CPP when you pass away. Now, if you are a single person and you are collecting CPP and you pass away, you cannot pass it on to a child, to a sibling, to a parent, nothing. It can only go to a spouse.
Speaker 1:So this listener's question is about CPP and what should you do with it if you are a single person? So a few things that I think about here. The first one is about your estate goals. So what do you actually want to do with your money when you pass away, regardless of your CPP? So just because someone doesn't have a spouse doesn't mean they don't have loved ones that they want to leave some money to, or charities or anything like that. And so when you're retired, you've got to live off something, and if that something is just your own money, eventually you'll just spend it down until there's nothing left, and then when you pass away, there's nothing to pass along to anybody. Again, this is kind of an extreme example there, of course, but that's kind of the theory of how that could work.
Speaker 1:But once you start looping in the Canada Pension Plan, the later you take the payments or the later you apply for CPP, the greater your payment will be in that year and also for the rest of your life, because you get a guaranteed increase the longer you put off your CPP payments, and those higher amounts increase with inflation as well. So if you are a single person looking to maximize your lifestyle, in many cases deferring CPP as long as possible actually makes the most sense Because by transferring your longevity risk meaning the idea that you'll probably live longer than you expect you transfer that over to CPP because the CPP will pay you for as long as you're alive, and only you. If you're a single person, for as long as you're alive, and the longer you put it off, the higher the payment will be, and statistically speaking, that's how you get the most money out of your CPP. And then, once you have those higher payments that are guaranteed showing up later on in life age 70 is the latest that you can defer it. You have to live on something before that, and so if you're spending your own money in advance of that, you'll actually have the capacity to spend more money in those early years because your higher guaranteed amounts show up later on in life.
Speaker 1:So from my perspective, if you're a single person, I think the case to defer your CPP as long as possible probably makes the most sense, because I've never really subscribed to the idea of CPP timing being based on how much you can get out of it and hedge against an early death, like a lot of the comments you see online are like well, you know, I know somebody that died at 61. And so I'm going to take it at that 60 to make sure I can get the most out of it. Well, do you want to get the most out of it by using actual, like evidence or are you just trying to take it early for the sake of taking it early? So, using evidence and the actual chances of you living into your 90s, you will both hedge your longevity risk, maximize your spending and get the most out of it by deferring CPP. So the same is true for a single person as well as a married person. But when it's a single person, you don't have a spouse relying on you and your income from your savings, oas, cpp or whatever to maintain their lifestyle. If you were to pass away, it's just you and you won't care what you missed out on if you're gone. So, again, by deferring CPP, you'll be able to transfer some of your longevity risk to the CPP, meaning you'll be able to maximize your annual payments received from the program and then, if you happen to live longer than expected, your guaranteed income will be that much higher. So, broadly speaking, those are some of the concepts that you should keep in mind for yourself when figuring out what to do with CPP.
Speaker 1:So what is your ultimate goal? Is it to spend as much as possible? Is it to leave the most possible behind? Is it to hedge against potential risks? All these decisions are highly individual to you, and so hopefully a few little tidbits here can help you make those decisions for yourself.
Speaker 1:If you haven't had the chance to work with a professional on your personal situation because, again, this person that sent in the text, I don't know anything about them. But, broadly speaking, those are a few things that you can think about. But, as a rule of thumb, even though everybody knows somebody who died young and those memories are powerful drivers of behavior for people, if you're going to make an evidence-based decision on CPP, for most people, deferring your CPP is a better option, but there are always situations where that is not true, and so you should always evaluate CPP timing in the context of your own personal circumstances, not general rules of thumb, not podcasts, not posts on Reddit or anyone else's experience about someone whose spouse died on the way home from their retirement party or whatever the case is. So, anyways, this is a quick look at a question that was coming through from the text message fan mail option in my podcast description. If you want to give that a try, I would love to see what kind of comes in here and if we get a decent number of questions that I can answer appropriately on the podcast, I'll put together a listener Q&A episode. I really like doing that.
Speaker 1:So again, take a look at the description below, click on the link, shoot me a message and I'll add your question into the mix. Again, I cannot reply via text. You will not get access to my personal cell phone. I do not know your cell phone. This is just a message forwarding service that kind of keeps things streamlined for me and easy for you. So that's it for this week. Thanks so much for listening and we will catch you next week on another episode, take care. Thanks for listening to this episode of the Canadian Money Roadmap Podcast. Any rates of return or investments discussed are historical or hypothetical and are intended to be used for educational purposes only. You should always consult with your financial, legal and tax advisors before making changes to your financial plan. Evan Neufeld is a certified financial planner and registered investment fund advisor. Mutual funds and ETFs are provided by Sterling Mutuals Inc.
