The Canada Pension Plan (CPP) is a key source of retirement income for Canadians who have contributed to the program throughout their working years. But when should you start collecting your CPP benefits—at 60 or 65? This decision can significantly impact your retirement income, lifestyle, and long-term financial security.
In this blog, we’ll explain:
✅ What CPP is and how it works
✅ The implications of taking CPP at 60 vs. 65
✅ Why you might choose to take CPP early
✅ Why you might want to delay CPP for a higher payout
What Is CPP?
The Canada Pension Plan (CPP) is a government-managed retirement pension that provides monthly payments to eligible Canadians who have made contributions through employment or self-employment earnings. The amount you receive is based on:
- Your earnings history
- How much you contributed to CPP during your working years
- The age at which you start collecting benefits
Most Canadians become eligible to start receiving CPP at age 60, but the standard retirement age is 65. You can also delay benefits until age 70 to receive a higher monthly payment.
Should You Take CPP at 60 or 65?
The decision to take CPP at 60 vs. 65 depends on your financial situation, health, and lifestyle goals. Here’s how your choice impacts your monthly payments:
- Taking CPP Early (at 60) → Your benefit is reduced by 0.6% for each month before age 65 (a total reduction of 36% if you take it at 60).
- Waiting Until 65 → You receive the full pension amount based on your contribution history.
- Delaying Beyond 65 → Your benefit increases by 0.7% per month (an extra 42% if you wait until 70).
Let’s explore why you may want to take it early—or wait for a larger payout.
Why You Might Want to Take CPP at 60
Choosing to take CPP early can make sense in certain situations, such as:
✅ You Need the Income
If you’re retiring early or facing financial difficulties, taking CPP at 60 provides immediate cash flow.
✅ You Have Health Concerns
If you have a shorter life expectancy due to health issues, taking CPP early ensures you benefit from your contributions.
✅ You Want More Flexibility in Retirement
If you plan to travel, start a business, or enjoy an active lifestyle in your 60s, getting CPP earlier can help fund your goals.
✅ You Expect a Lower Lifetime CPP Contribution
If you had lower earnings or gaps in your work history, the reduction for taking CPP early may not be as significant as it seems.
Why You Might Want to Wait Until 65 (or Later)
While taking CPP early has benefits, delaying can lead to significantly higher payments. Here’s why you might wait:
📈 Higher Monthly Payments
By waiting until 65, you avoid the 36% reduction applied when taking it at 60. If you delay to 70, your payments are 42% higher than at 65!
📊 Tax Efficiency
If you have other income sources (e.g., employment, investments, or RRSP withdrawals), delaying CPP could help reduce your total taxable income in your early retirement years.
🔒 Longevity Protection
If you expect to live a long life, delaying CPP ensures a larger lifetime payout. This is especially beneficial if you don’t have other guaranteed income sources, such as a workplace pension.
💼 Still Working?
If you’re still working past 60, taking CPP may not make sense because your income could push you into a higher tax bracket, and you may have to continue making CPP contributions.
Final Thoughts: When Should You Take CPP?
There is no one-size-fits-all answer. Taking CPP early (at 60) gives you immediate cash flow but reduces your lifetime payout. Waiting until 65 (or later) results in higher monthly payments, benefiting those with longer life expectancies or additional retirement income sources.
The right choice depends on your personal financial situation, health, and retirement goals. If you need help deciding when to take CPP, consider speaking with a financial planner to create a strategy that maximizes your retirement income.
Get Expert Guidance for Your Retirement Plan
Deciding when to take CPP is just one part of a comprehensive retirement strategy. If you want expert guidance tailored to your financial situation, book an appointment with me today. Let’s build a plan that ensures you get the most out of your retirement income.
📖 Want a deeper dive into retirement planning?
Check out The Art of Retirement—your guide to creating a fulfilling, financially secure retirement.
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