When to start collecting your CPP
Canadians are entitled to receive government benefits once they reach a certain age, usually around the time they retire. These benefits include Canada Pension Plan (CPP) and Old Age Security (OAS). They are designed to give you extra financial security as you move into your older years.
The CPP retirement pension is a monthly, taxable benefit that replaces part of your income when you retire. If you qualify, you’ll receive the CPP retirement pension for the rest of your life. To qualify, you must be at least 60 years old and you must have made at least one valid contribution to the CPP.
Calculate your CPP amount
Choosing when to start taking your CPP benefits can be confusing. Sometimes it’s personal but most of the time it’s about the math. What you could earn by investing CPP dollars taken early and how your personal tax rate changes over time are factors in comparing if taken early at age 60, on time at age 65 or later at age 70.
CAPCORP has created a calculator to show you what your estimated monthly amount will be and how the amounts can differ depending on when you begin taking the benefit.
Receive benefits earlier or later: Your choice
You can decide to receive your benefits earlier or later, depending on your current and future financial situation. Essentially: if you start collecting sooner, you collect less every month over a longer period. If you start later, you collect more over a shorter period.
When to begin receiving your benefits is a significant factor in your financial planning but knowing when isn’t always easy.
CAPCORP can help you understand your options.
Start collecting before you turn 65
One reason to collect CPP/QPP benefits before age 65 is that you’ve retired and need the money to maintain your lifestyle. Another reason is that you have a medical condition that gives you a shorter than average life expectancy. If your health is a factor, it is best to take advantage of benefits sooner rather than later.
Some people choose to collect CPP benefits right away even if they have considerable sources of retirement income. Outlasting their savings is not an issue, so they start government benefits now, preserving more funds to pass on to their heirs.
Canadians who collect benefits at age 60 receive 36% less per month than if they start at 65.
Chart 1 illustrates the amounts you’d receive if you started collecting at various points in your life. We’ve made these calculations assuming that you’d receive $1,000 if you started collecting at age 65. (How much you’d actually receive at 65 depends on how much and for how long you contribute to CPP and your average earnings throughout your working life. In 2021, the maximum a person could receive was $1,203.75 per month. The average amount for new beneficiaries was $689.17.)
|Average Monthly CPP/QPP benefits||$640||$712||$784||$856||$928||$1,000|
|Chart 1: Monthly CPP/QPP benefits when you start before age 65|
Start collecting when you turn 65
Some people decide to start collecting at 65. You may decide this is the right option for you if you need the extra income to support your retirement lifestyle. Even if you have the resources to defer collecting, you may still decide to start CPP benefits at 65 because you feel uncomfortable turning down years of benefits.
Other strategies include:
- Having one spouse start collecting at age 65 and the other defer payments until later.
- Starting to draw the equivalent of CPP/QPP and OAS income from your RRSPs, which allows your government benefits to grow at 7.2% per year, plus inflation.
Wait to collect until you’re older than 65
A clear situation where you may choose to defer is when you’re still working full-time at 65. You may not need the extra income and your CPP/QPP benefits are taxable. If you collect them when you’re still working, you could end up with a larger tax bite.
Canadians who start collecting benefits at age 70 receive 42% more than if they start at 65.
You may also decide to defer if you believe you will live an average life span or longer. For example, if you start your benefits at age 70 and live into your 80s, you will accumulate more benefits in total than if you had started at 65.
|Average Monthly CPP/QPP benefits||$1,000||$1,084||$1,168||$1,252||$1,336||$1,420|
|Chart 2: Monthly CPP/QPP benefits when you defer collecting|
CAPCORP will help you decide.
Choosing when to take CPP is far from a simple decision. We’re here to help you make the right choice. A CAPCORP advisor can assess your retirement readiness and recommend strategies to help you get more out the Canada Pension Plan – and the next chapter of your life.
Start your journey to Better Retirement Benefits.
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