# The Math is Straightforward

I am often the odd duck in the room.  I regularly find myself surrounded by advisors debating the answer to any given problem and invariably there is an argument of opinions.  But I’m a math guy in a financial world, so opinions are not productive and mostly irritating.

In our CFP class last week we were looking at a question about the Canada Pension Plan (CPP) benefit.  The question was… at what age should Mary start receiving her CPP benefit: 60, 65 or 70?

The class started offering their answers and were somewhat evenly split between the 3 options.

My answer is always the same:

###### You don’t have to guess, do the math.  The numbers are the numbers are the numbers.

So I did a spreadsheet.  It took 5 minutes.

There are some variables so we build them in as variables.  In this scenario we had to determine an interest rate that represents what you would earn on the payments that were received early (called the time value of money) and that number could be inputted as anything from 0% to 10%.  I used 3%.

The other variable is age at death.

So the spreadsheet says… If you die age 75 or earlier, start your CPP payments at age 60.

If you die between age 76 and 85, start your CPP payments at age 65.

If you die after age 86, your best option is to defer your payments so they start at age 70.

Now you can make a decision armed with the math.  It’s a better way to make financial decisions.  Is it perfect?  No, but it sure beats the opinion of someone who doesn’t know the math.

 3% CPP Start Age 60 65 70 Accumulated Values 60 768 791 61 768 1,606 62 768 2,445 63 768 3,309 64 768 4,200 65 768 1,200 5,117 1,236 66 768 1,200 6,061 2,509 67 768 1,200 7,034 3,820 68 768 1,200 8,036 5,171 69 768 1,200 9,068 6,562 70 768 1,200 1,704 10,131 7,995 1,755 71 768 1,200 1,704 11,226 9,471 3,563 72 768 1,200 1,704 12,354 10,991 5,425 73 768 1,200 1,704 13,516 12,557 7,343 74 768 1,200 1,704 14,712 14,169 9,318 75 768 1,200 1,704 15,945 15,830 11,353 76 768 1,200 1,704 17,214 17,541 13,449 77 768 1,200 1,704 18,522 19,304 15,607 78 768 1,200 1,704 19,868 21,119 17,830 79 768 1,200 1,704 21,256 22,988 20,120 80 768 1,200 1,704 22,684 24,914 22,479 81 768 1,200 1,704 24,156 26,897 24,909 82 768 1,200 1,704 25,672 28,940 27,411 83 768 1,200 1,704 27,233 31,044 29,989 84 768 1,200 1,704 28,841 33,212 32,643 85 768 1,200 1,704 30,497 35,444 35,378 86 768 1,200 1,704 32,203 37,743 38,194 87 768 1,200 1,704 33,960 40,112 41,095 88 768 1,200 1,704 35,770 42,551 44,083 89 768 1,200 1,704 37,634 45,064 47,161 90 768 1,200 1,704 39,554 47,652 50,331 91 768 1,200 1,704 41,532 50,317 53,596 92 768 1,200 1,704 43,569 53,063 56,959 93 768 1,200 1,704 45,667 55,890 60,423 94 768 1,200 1,704 47,828 58,803 63,990 95 768 1,200 1,704 50,054 61,803 67,665 96 768 1,200 1,704 52,346 64,893 71,450 97 768 1,200 1,704 54,708 68,076 75,349 98 768 1,200 1,704 57,140 71,354 79,365 99 768 1,200 1,704 59,645 74,731 83,501 100 768 1,200 1,704 62,226 78,209 87,761