Many people are wondering whether to start taking CPP at age 60 or wait until 65. Each situation will be different but below we hope to answer this tough question. To recap, Canada Pension Plan is a monthly retirement taxable benefit that replaces part of your income when you retire. It was created in 1965 by the Liberal government of Lester B. Pearson. Besides the province of Quebec, it’s mandatory that employers and employees must contribution to the pension plan. Quebec has its own version of the plan called the Quebec Pension Plan.
To qualify for CPP, an individual must be:
- be at least 60 years old
- have made at least one valid contribution to the CPP
Canada Pension Plan will pay monthly benefits to qualified contributors:
- in retirement,
- to disabled contributors and their children,
- to widows, widowers and orphaned children of deceased contributors
As well, a lump sum death benefit is payable to the estate of the deceased contributor.
When should I take CPP?
This is the million dollar question. The earliest you can take CPP is age 60 but what would happen if you waited until 65? What about 70?
For 2020, the maximum monthly amount a new pensioner could receive under CPP at age 65 which by many is considered the normal retirement age new 65 is $1,175.83.
For the examples below, we’ll be using the 2020 amount.
Taking CPP at age 60
If you start before age 65, payments will decrease by 0.6% each month or 7.2% per year, up to a maximum reduction of 36%, if you took it at 60. (7.2% per year x 5 years from 60-65 = 36%)
Example: Using the CPP amount for 2020, at age 65, your total yearly pension would be ($1,175.83 x 12), $14,109. If you were to start taking CPP at age 60, this amount would be reduced by 36% to ($14,109 x (1-0.36) = $9,029.76 per year. This is a difference of $5,079.24.
The bottom line is that taking CPP at age 60 instead of 65 would lower your monthly CPP pension by 0.6% each month.
Taking CPP at age 70
If you start receiving your pension after age 65, payments will increase by 0.7% each month or 8.4% per year, up to a maximum increase of 42%, if you took it age 70. (8.4% per year x 5 years from 65-70 = 42%)
Example: Using the CPP amount for 2020, at age 65, your total yearly pension would be ($1,175.83 x 12), $14,109. If you were to take CPP at age 70, this amount would be increased by 42% to ($14,109 x 1.42) = 20,034.78. This is a difference of $5,925.78.
Applying for CPP
- Online – you’ll need a My Service Canada Account (MSCA). If you don’t have an account, then you’ll have to register for one. Upon registering, you’ll receive an access code in the mail to complete your registration.
- Paper Application – to submit a paper application, note that it will take approximately 120 days to hear back. If any information is missing on the application, this will further delay your benefits.