Take Early, Late or On-Time?
You can receive your full CPP/QPP retirement benefits when you're 65. However, you may want to consider taking payments as early as age 60 or as late as age 70, depending on your lifestyle and income needs in retirement. Keep in mind that once you start receiving the benefit, you can’t change it—so it’s important to make an informed choice.
Taking CPP/QPP Before Age 65
While full CPP/QPP benefits are paid once you turn 65, you can take a reduced payment as early as age 60.
Here’s how your payments will be reduced if you take them before age 65:
- CPP benefits will be reduced by 0.6% for each month up to and including the month you turn 65.
- The maximum CPP reduction is 36%, which applies if you take the benefit the month after your 60th birthday.
Reasons you may want to consider taking CPP/QPP early:
- You’d like to work fewer hours or leave your job but need income to maintain your lifestyle.
- Your current health or family health history suggest you may have a shortened life expectancy.
If I take my CPP early will I lose money?
Maybe. Maybe not - it really depends on how long you live. To get a sense of whether you should take it at one age or another, you need to review the "CPP breakeven" math. Retirehappy.ca has a simple calculator that shows how long you would need to live to justify taking it later at various ages. The rough math is:
If you take CPP at age 60, you may lose out on benefits if you live past 73.9 years.
At 61, 74.9 years
62, 75.9 years
63, 76.9 years
64, 77.9 years
* So if you foresee yourself living past the age of 78 (which is a reasonable assumption for most healthy, CPP-eligible individuals), generally you should aim to take your CPP at 65 or later.
Here is a CPP break even calculator from the website retirehappy.ca.
*Keep in mind this is general advice and you should review your specific situation with a qualified investment professional / financial planner.
Taking CPP/QPP After Age 65
If you hold off on taking CPP/QPP, you will receive a larger payment. You can wait as late as age 70 to start taking it.
Your benefit will increase by 0.7% for each month you delay receiving your CPP/QPP retirement pension, starting from the month after your 65th birthday.
This means if you begin receiving CPP/QPP in the month after your 70th birthday, your monthly benefit will be 42% higher (the maximum possible increase) than it would have been if you began it at age 65. The average Canadian who takes CPP at age 70 could receive a benefit that’s $483.16/month1 higher than if they took it at age 60.
Reasons you may want to delay taking CPP/QPP:
- You want to increase your monthly payment.
- You have other sources of income—like a business, rental income, a company pension or investments—that can help you maintain your lifestyle until you start receiving payments.
- You want to continue working at a job that provides sufficient income.
- You are in a higher tax bracket and want to wait until you stop working and move into a lower tax bracket so that you can keep more of your benefit.
- You are healthy and have a longer life expectancy.
Taking CPP/QPP at 65
If you need the money, there's no penalty to start CPP/QPP payments when you turn 65. Your payments can't be reduced based on your income level, and you may even share CPP/QPP income with your spouse or common-law partner to help reduce your family's tax bill. Remember that your CPP benefits are sheltered from inflation and are guaranteed for the rest of your life.
Not sure what you're retirement income will look like - contact us for a financial plan!
Here is the original RBC article