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3 Reasons To Take CPP At Age 60

It’s generally not wise to voluntarily take up to a 36 percent reduction in income, especially if that income is paid for life. But that’s exactly what happens to retirees who elect to take CPP at age 60.

I’m a big proponent of delaying CPP up to age 70 to help protect against longevity risk and enhance your monthly pension benefit in retirement. Only a small percentage of retirees do so, however, as many prefer to take CPP as soon as they’re eligible.

Taking CPP early may not be the most optimal financial decision but there are a few cases where it can make sense. Here are three reasons to take CPP at age 60:

1). You Need to Eat and Pay the Bills

Maybe you were laid off in the latter stages of your career and struggled to return to the workforce, or you had to retire early due to poor physical health. Whatever the case, you’re about to turn 60 and need to build an income stream.

Simply put, without sufficient income or personal savings to carry you through your 60s you may have no choice but to take CPP as early as possible.

The earliest you can take your CPP benefits is one month after your 60th birthday. Doing so means a 36 percent permanent reduction in your monthly benefit, but that’s still money in your pocket today.

The maximum payment amount for taking CPP at age 65 is $13,855 per year. That amount would be reduced to $8,867 per year if you elect to take CPP at 60.

Taking that nearly $9,000 at age 60 could mean the difference between meeting your retirement income goals or not, and that needs to be weighed against having to wait five years for an extra $5,000 (or so) a year.

Finally, if you’re sure that you will be eligible for the Guaranteed Income Supplement (GIS) once you reach 65, it’s generally a good idea to take CPP at age 60.

2). You Have a Reduced Life Expectancy

The biggest mystery in retirement planning is that we don’t know how long our money needs to last because we don’t know when we’ll die.

By age 60 you may have some idea. Whether it’s genetics, poor health, or the results from your 23andMe test, if you have any reason to suspect a shortened life expectancy then taking CPP at 60 can make good financial sense.

Understand your breakeven point for taking CPP early. For instance, you’ll be ahead financially if you take CPP at age 60 and don’t live past age 69. If you make it to 85, then the optimal age to take CPP is 69.

For context, a 60-year-old Canadian, on average, can expect to live another 25 years. So if you’re playing the averages then it’s best to delay CPP.

Lastly, if you’re thinking about taking CPP early because of poor health, you should apply for a CPP disability pension instead. If approved, the CPP disability amount will always be higher than a retirement pension and it will convert to a full retirement pension at 65.

3.) You Have No Contributions from age 55 to 60

Did you retire at age 55? Or maybe leave your career as a salaried employee to start a business in your fifties? Business owners can choose to pay themselves dividends rather than a salary, and therefore would not have to make CPP contributions. How do those years of zero contributions affect your CPP retirement benefit?

When you take CPP at 60, your benefits are based on your best 35 years of earnings, rather than your best 39 years of earnings if you were to take it at 65. Depending on your earnings from age 18 to 54, your CPP payments might still be close to the maximum if you take it at age 60, but it will definitely be reduced if you wait until age 65.

Two reasons not to take CPP at age 60

Forget the notion of taking CPP early and investing. This idea, likely brought to you by your friendly neighbourhood financial sales person advisor, sounds compelling in theory but can be a disaster in practice.

Remember, the CPP is taxable income so you won’t be able to invest the full amount unless it’s in an RRSP. Then take investment fees into account and consider how much will you need to earn to beat the guaranteed 7.2 percent return that comes with delaying CPP by a year?

No, it’s better to defer and receive a larger pension that’s guaranteed and inflation protected for life.

Finally, if you’re concerned about whether CPP will be around when it’s time to collect, or whether the government of the day will raid the fund to pay its debts, let’s put that idea to rest.

The Canada Pension Plan Investment Board (CPPIB) is independent of the CPP and run at arms length of federal and provincial governments. The fund has been audited by an independent actuary and found to be sustainable for at least the next 75 years (using conservative projections).

CPP will be there for you in retirement. The question is when do you plan to collect your benefits?

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45 Comments

  1. Dale Roberts on June 7, 2019 at 4:42 am

    Great post Robb. I am right in the target age decision zone, and my personal scenario crosses the situations you outline. Some good food for thought and insights in this post.

    “Semi-retired” at 56, turning 57 soon. Thing is I have no idea what my life at age 60 will look like. I would imagine though that I will still be in a lower to modest income stage, and I’ll likely take early CPP.

    Also there’s that value of money (and the experiences it will bring) with respect to age. I’d like those experiences with family and friends while I am still hopefully healthy.

    Thanks again for the additional input.

  2. Sandy Fry on June 7, 2019 at 5:21 am

    Hi! In my case, I receive a survivors pension. My pension plus his would place me at the maxium by the age of 62 as they combine both only up to the max. So if someone has lost their spouse they should look into when this amount will be reached.

    • Alexander on June 25, 2019 at 5:58 pm

      I need more info about reductions to Cpp because of not contributing after age 55.

    • Christine Williston - Money Coach on June 26, 2019 at 12:37 am

      Hi Sandy,

      CPP with a survivors pension can be very complex. I’d recommend that you get some very good advice before you elect to take your own pension.

      Be warned that you are unlikely to get that good advice from Service Canada. I have seen the information that they have sent people and it is definitely not enough to give them guidance on when they should take their pension.

      The maximum combined CPP and Survivors Pension is based on when you take your own pension. Currently the maximum that a person can receive at 65 is $1154.58. This is also the maximum a person could receive as a combined CPP and Survivor rate. If the same person decided to take their CPP at 60 the maximum they could receive combined would be $738.93 but if they waited till age 70 they would receive $1,639.50.

      While most people who wait until 70 to take CPP receive nothing until that point, people receiving a Survivors Pension will get that smaller pension (which will increase at the survivors age 65) right up to age 70 and then they can start to receive the maximum benefit available.

      If you are thinking of taking your own CPP at 62, I would definitely revisit your decision.

      • David D on September 13, 2019 at 11:06 am

        Christine Williston, In most cases the recalculation of Survivor Benefit (while not taking your own CPP) results in a DECREASE at age 65, but if the deceased was nearly a maximum contributor, there can be a small increase.
        Nevertheless, your advice to get a proper calculation is very wise.
        Doug Runchey is a kind and generous blogger who will, for a small fee, do your scenario calculations for you.
        https://retirehappy.ca/how-to-calculate-your-cpp-retirement-pension/

        • Christine Williston on September 13, 2019 at 7:00 pm

          Thanks David D – good to know.

          In the limited number of cases I’ve dealt with I’ve only seen it increase – but this may reflect the types of client I tend to work with.

          When I come across people with survivors pensions who are wondering about collecting their own CPP, I send them to Doug.

          Having DR Pensions give you an actual answer to a very complex question could very well be the BEST MONEY YOU EVER SPENT!

  3. Michael James on June 7, 2019 at 6:24 am

    I think your point #3 is the same no matter when you had years of zero contribution. However, when I’ve worked out the numbers, it’s usually still better to delay CPP if you’ve had several zero-contribution years, even if it means somewhat of a reduction in benefits. In some cases, what tips the scale is that before you take CPP, it rises with the average industrial wage, which is usually a little faster than inflation. So, taking CPP early leads to a more than 36% reduction.

  4. John on June 7, 2019 at 6:28 am

    Is there a risk calculation for a couple where both have contributed near 40 years to CPP? One a few years more, and one a few years less. That can’t be too uncommon anymore. We’re approaching the 65 mark, haven’t taken CPP, but when one dies (no chronic illness at this time) those forced savings default to the GoC. There is no survivor benefit for those that draw a single full CPP. Otherwise, we are financially secure, where we had hoped to be at this time.

    • John on June 7, 2019 at 6:31 am

      Michael James. Your insight into the rate of increase for CPP is news to me. Thank you.

  5. Cheryl on June 7, 2019 at 9:29 am

    I’m single and will be 60 next year. For the past 10 years I’ve been looking unsuccessfully for a full time job but it’s really hard for older people to find work. I have to take whatever comes along for some income, which is usually maternity leave coverage or other shorter term contracts. I had a really good job for a year’s contract. They asked me to stay another 6 months, and I would have stayed forever if they’d asked me, but unfortunately their restructuring was complete and the work was drying up. Again I’m on EI while looking for work. My CPP benefits at age 60 will be $375/month but that could be the difference between eating and rent. If I happen to find a job I could see delaying it, and if I wait till 65 CPP will be $200/month more. I’m pretty sure I will qualify for GIS. Every little bit helps! I do have savings and monthly dividend income which I’m not sure will push me out of the GIS qualification.

    • Don on June 26, 2019 at 1:21 pm

      My layman’s 2 cents: Take it at 60. At 65 you will qualify, including CPP + OAS, for a monthly payment of approx. $ 1600 per month. Make sure your savings and possibly the source of dividends are in Tax Free savings accounts, that way they don’t count in the GIC calculation. Mind you the dividends may reduce your payment. I think $1 for every $ 2 earned/dividend.

  6. Frank Castelano on June 7, 2019 at 12:18 pm

    I just took my C.P.P. last month which is $855.24 per month. My wife and I retired as she is 2 years younger than me and can’t get early C.P.P. yet.

    We were taught at a young age to have good work ethic and save, keep saving. This helped over the years as we have spousal and regular RRSP’s balance of $800,000. The interest rates are not bad 3.2% to 3.65% for 7 and 10 years at our credit unions.

    We have other laddered GIC’s from non-registered accounts in $10,000 amounts 1-6 years as well. All this brings in $38,000 a year but we easily live off of $20,000 a year. This extra $18,000 a year will tie us over and increase our savings until my wife gets her early C.P.P. which is $767.34 a month in 2 years.

    The biggest factor I would say that help us besides saving and compound interest, tax refunds from RRSP’s is us being debt free since 1999. Avoiding the temptation buying now and paying later with paying interest for the rest of your lives is a huge impact why Canadians have much less to not much savings. This is a good article about early C.P.P. which many Canadians may not even know exists.

  7. Bob Lin on June 7, 2019 at 9:51 pm

    For me and my wife, our CPP is icing on the cake. We’ll be taking it at age 60 to help fund our extensive travel plans, instead of using savings/investments of the same amount. Using conservative estimates our crossover point is around age 84. Meaning that in every year between age 60 and 84 we expect to be better off starting CCP at 60 vs any time later. That’s up to 24 years better off vs probably no more than 5 to 10 years better off if we start CPP it at age 65.

    • Steve Bridge on June 26, 2019 at 7:32 am

      Bob Lin, I would seriously reconsider your decision.

      The crossover point is much lower than 84 (not sure who told you that, but it depends on the individual and your lifetime contributions).

      Very likely, the best financial outcome for your situation would be for you both to delay CPP until 70 and draw down your taxable accounts in the meantime (RRSPs/LIRAs/etc.). This is something that most commission-based advisors (i.e. salespeople) will not recommend you do, but it allows you to withdraw these monies at a lower tax rate (because you don’t have CPP or OAS adding to taxable income).

      Delaying also helps with estate tax planning (less in taxable accounts).

      If you have health issues and a reduced life expectancy, as Robb pointed out, that is a different matter, but otherwise, do the research, run all the numbers (or get advice from a non-commissioned/no sales/advice-only/fee-only/fiduciary financial advisor.

      Good luck.

      Steve

      • Mike Abraham on June 26, 2019 at 9:12 am

        the crossover point should be age 74. Using the numbers provided, one is getting $5000 less (taking CPP at 60) but for 5 more years. That’s $45000. If taking at 65 you get $5000 more per year but will then take 9 years to make up that $45000. This has been the simple calculation I’ve observed (unless I am making some error) since I was in my 20’s. I plan to retire from my FT job at 52, collect $40 k in company pension and take CPP at 60. I will have many years of non-contribution to CPP hence much better to have the accrual based on the lower contributory period. Plus CPP and company pension CPI increases are stabl and secure and MUCH better than actual wage increase. Retire early and live life, stop saving money for your funeral !!

        • Bob Lin on June 30, 2019 at 10:27 am

          @Mike Abraham:
          “the crossover point should be age 74”

          Regardless of when you intend starting your CPP, I think it would be worth looking at the crossover point again. If you will have to draw from investments between age 60 and when you commence CPP, then you should include in your calculations the lost gains on your investments (even if that’s just 3% on GICs), and don’t forget that the gains or income from those investments will continue even after you start your CPP. You will find that the crossover point moves further into the future as your expected returns increase. This more comprehensive analysis MAY have some bearing on the decision you ultimately make.

  8. tonyperry on June 8, 2019 at 6:33 am

    I have been told that my GIS will arrive automatically. i find that hard to believe. Where and when do I apply for that. Any help would be appreciated. Thanks

    • Mike Abraham on June 26, 2019 at 9:15 am

      oops, I had a typo in my comment. |It would be $9000 for the first 5 years at age 60, then $5000 more per year at 65. The $45000 differential is correct still and crossover should be age 74.

    • Don on June 26, 2019 at 1:31 pm

      Hi Tony, You apply for GIC on the same form that you submit when you apply for OAS.
      There is a question ” do you want to apply for GIC’ ? You will have to sign that you agree that they check your income tax each year with Rev. Canada.
      Note: You also have to file income tax each year.

  9. Norm Robidoux on June 8, 2019 at 12:00 pm

    Hi Robb.
    Your sarcasm about the sales person (crossed out, followed by advisor misses the point. Why confuse the issue.
    An advisor would confirm the very points you make through a thoughtful conversation.
    Sounds kind of seld-righteous and paints all advisors with a brush which is all too common I’m the media today. Toi can do better here.
    For the raft, you do bring some very good points.
    As an advisor, I take great pains to get to know my clients and to help them better understand their situation and options.
    A sales person pushes a biased opinion. A financial advisor confirms the situations and desires goals , the educated and makes a recommendation with the possible outcomes clearly stated.
    All the best!

  10. Alice on June 8, 2019 at 1:58 pm

    Didn’t know that when you take CPP at age 60 it is based on your best 35 years of earnings rather than 39.
    What if you take CPP between 60 & 65, such as at 61 or 62?

    • Mike Abraham on June 26, 2019 at 9:25 am

      yup – that is key….reducing your contributory amortization period. For those of us who stop contributing to CPP at age 55 or earlier, it is often better to take the benefit at 60 due to the reduced contribution period used in the benefit calculation. Same applies to any age between 60-65…just interpolate the values.

  11. Earl Kanokeve on June 10, 2019 at 12:45 pm

    People that at 60 or over that can be eligible for C.P.P. benefits should be voluntarily given a choice of taking the pension or getting it’s lump sum value.

    For example, my cousin is a CA and he has been contributing for 45 years at top, maximum pay. He figured out that his C.P.P. is worth about $213,644.26. If this is actually true, early C.P.P. maximum is only $738 a month. Yes, there is an actual annual increase of 1.6%, 2% etc. but even in conservative GIC’s such as 3.3% 10 year at Westoba interest is $7,050 or $588 a month. For only a loss of $150 a month, Canadian government/CPP gets to keep $213,644.26.

    If a C.P.P. eligible benefit person does not need that money to live on having more than enough other financial resources and can actually compound that for 10 years and take it out at 70 years old, it would be worth $295,593.20 and at 3.3% annual interest get $9,754.57 or $812.88 a month and keep the almost $296,000 capital or principal.

    If C.P.P. were to give a 2.0% annual increase for 10 years, it would be $917.41 per month which is only $104.53 compared to $812.88 per month more but have no capital of almost $296,000 at the same age of 70. I just want to emphasize this should be voluntary and people should make their own choice. I think people should know that this all or nothing choice by C.P.P. may not be the best choice for all Canadians. I have a feeling that many people did not think about this with C.P.P.

  12. Doug Patrizeau on June 10, 2019 at 6:02 pm

    This is a great article to inform people that C.P.P. has to be very carefully considering of when it makes sense to take it. We are much better off than most Canadians as we have $1.32 million RRIF that will last us decades. We are in our mid 60’s.

    The income from our RRIF pays all our expenses, taxes, cost of living and we still are able to save $2,500 a month to put towards our TFSA’s and non-registered ETF’s, index funds, GIC’s, REIT’s etc.

    We will for sure take our C.P.P at age 70 unless something drastic happens in our lives.

  13. Cindy Taylor on June 12, 2019 at 2:40 pm

    I am going to have to take my C.P.P. at 60 or just after 60. The reason is I could never own a house because I could never afford it.

    I could not save alot but I tired my best every week from 1980 when I got my first job at $8.35 an hour 39 years ago. The good news I have $400,000 in RRSP’s and $75,000 in TFSA’s and reach 60 in 4 months. The bad news I will be moving to a cheaper place to save rent paying $500 less a month in Nova Scotia.

    The early C.P.P. of $702.44 a month will help me alot as a single gal.

  14. Fred on June 17, 2019 at 2:55 pm

    I will not be delaying my CPP to 70 as my wife and will be receiving Max CPP at age 65. There has been a lot of talk about deferring to 70. How would you feel about depleting your Rifs, then the day after you take CPP your wife dies, That inflated Cpp for delaying is gone and so is OAS. That $2000 a month you were counting on. No one knows your end date . CPP main focus is to keep the plan sustainable not necessarily keep you happy in retirement.

    • Steve Bridge on June 26, 2019 at 7:38 am

      Fred, you’ve minimized tax and made the best decision based on the information at hand (i.e. expecting to live until a normal age).

      What if your wife doesn’t die the day after she turns 70? Then you’ve made a decision that impacts your income (and gives you less money) the rest of your life.

      Make your decision based on the most likely scenario (and also based on your individual situation. If you meet Robb’s points of #1 and #2 above then that is a different situation).

      Good luck.

      Steve

      • Fred on June 26, 2019 at 8:55 am

        Hi Steve
        Your decision when to take CPP is not so simple to simply to say that most people should delay CPP to age 70 when half the population will not reach the age 80. I do not like those odds. Depending at what tax bracket you are in could dictate how much to remove from my RIF annually to keep in the lowest tax bracket.

        • Mike Abraham on June 26, 2019 at 9:22 am

          Plus the reality is that for the few extra $$$ you get later in life, you could be enjoying $$ right now. Why some people ant to die with a million $ in the bank is beyond me !!

  15. Robert on June 21, 2019 at 10:42 am

    I am 66 but started my CPP at 62. I have a long life expectancy.
    My only regret is not taking it at 60. If you do a lot of number crunching it is hard not to go this route. Any lesser income later on is easily made up by the increase in your investments early on. At best, waiting is a wash.
    What tips the scales in favour of early withdrawal is the fact that you are going to burn money with your retirement goals in your 60s. Get the extra income when you actually need it.

  16. Nancy on June 25, 2019 at 5:39 pm

    there is one other scenario for taking CPP early – and that’s for the many of us Americans up here. If you are eligible for Social Security, they will deduct half your CPP benefit from your SS payment. They call it the “Windfall Elimination Provision”, though where the windfall is to be found, after working a full career on both sides of the border, beats me. So if your CPP is as small as possible, and you delay SS payments until 70 so they are as large as possible, the clawback is minimized and overall payments maximized.

    Yes, this is a bit obscure, but there are a lot of people in this situation that don’t know about the WEP.

  17. James on June 25, 2019 at 6:16 pm

    I have never met anyone who regrets taking CPP at age 60. It is a no brainer, its cash in hand for the present, when you are fit enough to actually enjoy spending it, travel, hobbies, etc. They don’t break down retirement into Go Go, Slow Go and No Go years for nothing. The only people who want you to delay is the government and financial advisors so they can either save money off you or make money off you. If you do happen to have a long healthy life and pass our break even point, who cares, you are living, the alternative is to have not reached that point because you are dead. Take the money and enjoy! OAS will kick in at 65 and if you think you have health problems in your future that will require more money in your 70s and 80s then delay OAS until 70. Again I would still take OAS at 65 because the younger you are the more you will enjoy the money.

    • Steve Bridge on June 26, 2019 at 7:54 am

      James, they may not have regretted it, but they may not have done the math, either. Delaying CPP and OAS saves you a LOT in taxes, and gives you a LOT more money over the course of your lifetime. It also helps immensely with estate planning, because if you’ve left a lot in your RRSP/RRIF and die early, as you suggest might happen, when the last spouse passess ALL of this money is taxable as income. This is likely a greater cost to you and your estate than losing out on OAS and survivor CPP.

      As far as financial advisors go, you need to look behind the curtain a little bit and learn the differences between different advice models in Canada. Usually, commission-based advisors will agree with you and want you to take CPP at 60. Why is that? Because they collect commissions from you for longer. Do you know why an advice-only/fee-only planner would run the numbers (taking into consideration tax brackets, pensions, RRSP/RRIF/TFSA/Non-registered investment account balances, life expectancy/health concerns) and in the end probably advise you take it at 70? Because that’s what would be better for that person’s situation.

      Not all advisors are created equal or work under a sales/commission model.

      Steve

      • Mike Abraham on June 26, 2019 at 9:32 am

        But Steve, not all of life is math, and yes while the math may say (in a given context) that one will get more overall with a delay…there are too many intangibles that MUST be factored (and cannot) into your tangible math equation. Plus there is NO IMPACT to “you” when you are dead…you are dead. Estate?? Why do people want to kill themselves (figuratively) to leave money behind to those that did not earn it? Don’t we already have enough bratty people in this generation who feel entitled to something they did not earn since the dawn of getting trophies for “showing up”?!

      • James on June 26, 2019 at 10:18 am

        Agree to a point. I am using my RRSP up before I collect CPP and putting any savings into my TFSA which will not effect my CPP or More importantly OAS. I had great difficulty finding an advisor to help with that. They wanted me to get an Annuity!

        • Steve Bridge on June 26, 2019 at 12:42 pm

          That sounds like a pretty solid plan, James. Delaying CPP/OAS and drawing down all of your registered investments can help avoid OAS clawback as well. Depending on the couple, they could collect $50-60k guaranteed per year from CPP and OAS the rest of their lives. They could have literally $0 in the bank and live a pretty nice life (Pensions, potential inheritances, TFSAs and non-registered on top of that would help as well).

          And yes, I can understand your frustration with finding an advisor to give you the best advice. Advice-only/fee-only planners are less than 1% of all advisors in Canada and we don’t always have the marketing or exposure of the others.

          Best of luck.

    • Mike Abraham on June 26, 2019 at 9:27 am

      James, my thinking exactly and has been so for my whole career. Plan to retire early and live !

  18. Claire on June 26, 2019 at 8:48 am

    I took CPP at 60 and put it all in an RRSP every month. I am still working and paying CPP and the last 2 years they have increased the amount I get, I guess as a thank you of sorts. I worked for 40 years but had several out of the work force raising kids and then never made a great deal of money until my last 5 or 6 years. I use the RRSP tax deduction to get a large refund of my federal/provincial tax back and reinvest that as well. I have a large contribution room and plan to retire early in the next 18 months with a defined pension plan I’ve paid into for the past 20 years plus savings and investments from an inheritance. I’m making it all work to further fund my retirement after years of inability to save so I think I made a good move in taking mine early?

  19. John on June 26, 2019 at 6:32 pm

    Great site, and I agree to wait as long as possible, I am 55 and will retire at 56. I now have 39 years of contribution all at the max or handy to it, I will burn my registered and non registered accounts to receive 50 k to age 60 and take a DB pension at age 60 supplementing it with RRSP and TFSA until I take CPP. Question I have is if a CPP pension is taken at 60 they look at the best 35 years but does it still require 39 years for maximum. One piece not mentioned is if you take CPP and continue to work (as so many do) it is being taxed at the maximum rate.

  20. JR on July 28, 2019 at 8:03 am

    Those with defined benefit pension plans need to do their math very carefully. Many with defined benefit pension plans have very little RRSP contribution room and have to do much of their retirement saving in a combination of TFSA accounts (which did not exist when I was saving for retirement) and taxable investment accounts. Note that every penny of dividend income in a taxable account gets “grossed up” (i.e., multiplied by 1.38) and it is the grossed up amount that is included as taxable income.
    By the time you reach the point of taking Old Age Security, between your “grossed up” retirement income from taxable accounts, your “enhanced” CPP income (from waiting to take CPP), and your defined benefit pension plan, it is very easy to exceed the OAS clawback/recovery tax level, and you end up losing much of the “enhanced” CPP/OAS amounts to the OAS recovery/clawback tax.

    As time goes on, if you live a very long life, you can continue to shelter some income through judicious use of a TFSA, but you really need to do the math carefully to ensure that you know whether waiting to take CPP/OAS is, in fact, a good idea when you have a defined benefit pension plan.

  21. David D on September 9, 2019 at 11:25 am

    Guys, one of the best sites for understanding and calculating your CPP is https://retirehappy.ca/how-to-calculate-your-cpp-retirement-pension/
    Doug Runchey is a kind and generous blogger who will, for a small fee, also do your scenario calculations for you. This should be compulsory reading for all.

    John, regarding “Question I have is if a CPP pension is taken at 60 they look at the best 35 years but does it still require 39 years for maximum?”
    In standard cases, ones ‘contributory period’ starts the month after they turn 18 and runs to earlier of month they opt to take their CPP or month they turn 65 (assuming not working/contributing longer). If full 18-65, this is 564mo or 47y.
    The standard CPP calculation drops out the worst 17% of earnings months (other rules for child rearing and other cases). 17%*564=96mo or 8y. This is where the 47-8=39 best years comes from. If your best 39y all beat maximum CPP earnings, then you qualify for maximum CPP at 65, which for 2019 is $1154.50 monthly. http://www.drpensions.ca/cpp-rate-table.html

    If you take CPP earlier, then on top of the harmful 0.6% per month decrease from your 65 calculated pension (i.e. 36% if you take at 60), you have to consider the helpful 17% dropouts. So at 60, for example, the contributory period is 504mo or 42y. The dropout is 17%*504=86mo or a bit over 7 worst years. If your best 42-7=35y all beat maximum CPP earnings, then you get the most you can for 60.

    If you only contribute to say 60 (or earlier, or some point before 65), by opting to take CPP before 65, you can avoid having to drop extra zero-earning months/years. But no matter, there is NO scenario where taking CPP before 65 is as high as at 65 because of the 0.06% per month early reduction. And it is always 0.07% per month higher yet after 65 to 70.

    To quote Doug Runchey, whether or not you have too many low or $0 earning years between 18 and when you opt to take CPP, by waiting to 65 (or beyond), “you get a larger slice of a smaller pie”, but you do get more pie if you wait”.

  22. David D on September 14, 2019 at 12:15 am

    Apologies, I meant 0.6% and 0.7% per month (not 0.06, 0.07%).

    And for those who think they could do better than waiting by investing their early CPP (thus not spending it), you would have to earn better than 12*0.6%=7.2% guaranteed above inflation and fees between 60-65 and 8.4% between 65-70. Remember, CPP is indexed to CPI inflation and the last 5 year average YMPE.

    • Ed Middleton on November 1, 2019 at 7:03 pm

      David,

      Agree with your return #’s. When you say they are above that of inflation and YMPE are you saying that both are added on top? I noticed that the YMPE will increase each year (looks like based on inflation) which would increase the CPP amount. Are you also saying that CPP is also increased with an inflation amount on top of that?

      thx,

      Ed

      • David D on November 5, 2019 at 4:06 pm

        No, not really. CPP benefit payments are indexed to previous year inflation (as is max CPP amount). YMPE is a 5-year average calculation; each new year’s YMPE is indexed based on average wage increases in the Canadian industrial sector, which is often a bit above inflation. The latter is used in your CPP calculation; the former is applied once you are receiving benefit.
        Quote from Doug regarding someone born in November: “…starting your CPP retirement pension in January would result in a higher pension as a result of the higher average YMPE, but starting the pension in December gives you the full yearly CPI increase for the cost-of-living. It’s usually fairly close which gets you the higher net benefit, but there have been a few years when one alternative was clearly better than the other”.
        See also http://www.drpensions.ca/cpp-rate-table.html

  23. Susan R. on November 3, 2019 at 3:13 pm

    I marked a question wrong on my application and received a payment end of Oct. 2019..I was wanting to wait until 65 and should have gotten first payment end of Jan. 2020, so 4 months early…I plan to keep working and paying into CPP as long as possible. How will this mistake affect future payments? will they stay the same forever or will they increase over time?

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