At what age should I take CPP?

When we are working with our clients in developing their retirement plan, a common question we receive is “should I take my CPP at age 60 or age 65?”  For those that plan on working to age 65 or beyond the answer is clear – wait until you retire.  Many Canadians are retiring before age 65, and some even before age 60.  The answer to this question is a combination of quantitative and qualitative factors.

In 2012 the Government of Canada revamped the CPP program to help increase the sustainability of the program well into the future.  One of the changes was to increase the “grind” for early receipt of CCP.  Historically, the CPP benefit was reduced by 0.5% for every month prior to your 65^thbirthday.  This was increased to 0.6%/month effective in 2016 after being phased in over a 5-year period.  The maximum reduction went from 30% to 36%.  Alternatively, if you wait beyond age 65 to take CPP, the benefit is increased 0.7% per month for a maximum pension increase of 42% at age 70.

The quantitative side of the argument of whether to take CPP before age 65, has to do with the age at which the CPP benefit at age 60 vs age 65 cross over.   Under the new system it is age 73 (under the old system it was 76).  If a Canadian were to take CPP at age 60, the total benefit amount would equal the amount if CPP began at age 65.

The qualitative side of the argument has to do with need, health situation and life expectancy.  If you have the need for income (already retired), have poor health or poor family health history, or short life expectancy, than you should take CPP early. If you plan to continue working with a good income, have above average health, and longer life expectancy than you should delay taking CPP.  The decision whether to take CPP early or not should be made with a professional financial planner in the context of a personal retirement plan.

Be well advised.

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