Taking CPP Early?

Should I take CPP Early or Late? Canada Pension Plan payments

Are you thinking about taking your CPP, Canada Pension Plan, early or deferring it past 65?

There is a large difference between taking the pension at 60 versus 70. Many of our clients say that they may not live that long and would rather take the money today rather than possibly forgo something that they paid into for most of their lives.

The average life expectancy in Canada in 2018 was approximately 82 years old. In 1960 it was 71.

Given the amazing advances in medicine and technology, we are saving many people from diseases that used to be life threatening and we are giving them more time with their loved ones. 

We prefer to make decisions based on facts rather than emotions. If you're 60, let's say you live until age 80. What is the cost and benefit of either taking the income at 60 versus 70.

Let's take and average payment from March 2021 which was 619.44.

The payments will be adjusted for inflation however in this example we've kept inflation at zero for the ease of calculations and comparison.

If you take the funds at 60 years old then you will reduce your payment by 0.6% for each month taken early, up to 7.2% per year or a maximum reduction of 36%. This means that you'll receive $394.44 per month or between the ages of 60 and 80, a 20 year period, you'll receive approximately $94,665.60. This has not factored in potential inflation adjustments.

Now let's compare the amount of money that you could receive over a 10 year period between the ages of 70 and 80. By deferring you can increase your payment by 0.7% for each month that you defer. That's 8.4% per year to a maximum of 42%. This means that adjusting the March 2021 average payment, that you'll receive 879.60 per month for 10 years. This is a total of $105,552.00

Therefore if live until age 80 then you'll receive $105,552.00 over a 10 year period if you defer while taking it early will give you $94,665.60 over a 20 year period.

That's a $10,886.40 difference by the time you reach the age of 80. The further you live past the age of 80, the greater this number will be.

You should consider other income sources, taxes and assets to see if you should use other resources to fund your cash flow between the ages of 60 and 70 to see if you should take CPP early or defer.

Please reach out if you would like us to help you evaluate your retirement cash flow projections.

Please note that everyone's financial circumstances are different and decisions should be made based on your personal finances. Please consult a professional prior to making any decisions.

For more information from the government website and to ensure accurate numbers you can view the source information here:

Please note that everyone's financial circumstances are different and decisions should be made based on your personal finances. This is not to be construed as financial, tax or legal advice and is for educational purposes only. You are advised to seek consult of a qualified professional prior to making any decisions.

*This article was last updated 2021-09-29
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