CPP: Should You Take It Early, On Time, or Delay It?

Lloyd Litke |
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Best CPP timing
Cpp now or later
retirement income

"When should I start my Canada Pension Plan (CPP) benefits?" is one of the most common retirement questions asked by Canadians.

The answer isn't the same for everyone. While many people automatically begin CPP at age 65, you can start as early as age 60 or delay payments until age 70. The decision can have a significant impact on your retirement income for the rest of your life. 

Understanding Your Options

CPP is a government pension designed to provide retirement income based on how much you've contributed during your working years. The standard age to begin receiving CPP is 65, but you have flexibility. 

Taking CPP Early (Age 60-64)

You can begin receiving CPP as early as age 60. However, your monthly payment is permanently reduced for every month you start before age 65.

Someone who begins CPP at age 60 can receive up to 36% less than they would have received at age 65. 

Starting early may make sense if:

  • You need additional income sooner.
  • You're planning to work less or retire earlier.
  • Health concerns suggest a shorter retirement timeline.
  • You have limited retirement savings. 

Taking CPP at Age 65

Age 65 is considered the standard starting age and provides your full CPP entitlement based on your contribution history. 

For many Canadians, this offers a balance between receiving benefits sooner and maximizing monthly payments.

Delaying CPP (Age 66-70)

For every month you delay CPP after age 65, your pension increases by 0.7%.

If you wait until age 70, your CPP payment can be up to 42% higher than it would have been at age 65. There is no additional increase for waiting beyond age 70. 

Delaying CPP may be worth considering if:

  • You're in good health.
  • Longevity runs in your family.
  • You have other income sources available.
  • You want a larger guaranteed, inflation-adjusted income later in retirement. 

It's About More Than the Math

Factors to consider include:

  • Your health and life expectancy
  • Other retirement income sources
  • Investment assets and withdrawals
  • Tax considerations
  • Whether you have a spouse or common-law partner
  • Your overall retirement goals 

What works well for one retiree may be completely different for another.

CPP Is Changing for Future Retirees

Since 2019, CPP has been gradually enhanced. Today's workers are contributing more to the plan, which is expected to result in larger CPP benefits in the future.

The enhanced CPP will eventually replace approximately one-third of eligible employment earnings, compared to one-quarter under the original CPP system. Workers who contribute to the enhanced plan over many years may see significantly larger retirement benefits. 

For younger Canadians, CPP may become an even more important part of their retirement income strategy.

Final Thoughts

There is no universal "best age" to start CPP.

Taking it early provides income sooner but results in smaller monthly payments. Delaying can significantly increase your guaranteed lifetime income, but it requires using other resources in the meantime. 

The right decision depends on your financial situation, health, retirement goals, and overall plan. Before making a choice, it's worth reviewing how CPP fits into your broader retirement income strategy.

 

Sources: 

  1. https://www.canada.ca/en/services/benefits/publicpensions/cpp/when-start
  2. https://www.canada.ca/en/services/benefits/publicpensions/cpp/cpp-enhancement
  3. https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/payroll-deductions-contributions/canada-pension-plan-cpp/cpp-enhancement