Why So Many Canadians Take CPP Early Even When They Shouldn’t
Every financial planner has been there.
You’re sitting across from a perfectly healthy 64-year-old who has more than enough saved, no debt, a paid-off home, a reasonable spending plan, and a strong likelihood of living well into their 80s or 90s. They have zero financial need to turn on CPP today.
And yet, as predictably as sunrise, they say, “I’m just going to start CPP at 65. Why wait?”
Or sometimes it’s the healthy 60-year-old who retired a bit early: “I can take CPP now, right? I’ve paid into it my whole life and I want to start getting something back.”
This is one of the most consistent behavioural puzzles in retirement. More than 90 percent of Canadians claim CPP at 65 or earlier, and fewer than 5 percent delay to age 70. All this despite the fact that delaying from 60 to 70 increases CPP benefits by 122 percent for life. Indexed, guaranteed, for as long as you live.
Bonnie-Jeanne MacDonald from the National Institute on Ageing has shown repeatedly that the average Canadian who claims CPP at 60 instead of 70 leaves more than $100,000 of secure, inflation-protected income on the table.
She calls delaying CPP the best retirement deal in Canada. And yet most people walk right past it.
Let’s unpack why.
The Boring but Important Math
CPP can start anytime between ages 60 and 70.
Start early and you get hit with a reduction of 0.6 percent per month before 65. That’s a permanent 36 percent cut at age 60.
Start late and you get a boost of 0.7 percent per month after 65. That’s a permanent 42 percent increase at age 70.
Those two adjustments together create the 122 percent difference between a pension taken at 60 and the same pension taken at 70.
All of this is indexed to inflation.
Add in the fact that a healthy 65-year-old in Canada today can expect roughly 20 more years of life, and delaying looks less like a gamble and more like prudent insurance. The real financial risk for most Canadians isn’t dying early. It’s living a long time without enough guaranteed income.
When Taking CPP Early Does Make Sense
There are absolutely cases where starting CPP early is rational.
- Serious health concerns
- Strong family history of dying young
- No savings and a need to cover essential spending
- High-interest debt that needs to be eliminated
- Complex survivor income situations
This article is not about those cases.
This is about the many Canadians who absolutely can delay CPP, with almost no trade-offs, but simply don’t.
The Maddening Middle: People Who Could Delay, But Won’t
These are the regular Canadians I see all the time. They are healthy, financially secure, carry no debt, and have more than enough invested to support their spending in their 60s. Their retirement plans work beautifully without CPP. They could delay to 70 with confidence.
And yet they do not.
Here are the five most common objections I hear, and the responses that actually move people.
- “I want my money back.”
This is the ownership instinct. They see CPP as a personal account they paid into, not as a pension.
What I say:
CPP is not a bank account. It is insurance against outliving your savings. Delaying CPP is equivalent to increasing the value of that insurance policy dramatically and permanently. If you are healthy, the value of delaying is far higher than the value of grabbing small cheques early. The math is not even close.
- “What if I die early”
This is always rooted in fear. Maybe a parent died young. Maybe someone close to them never saw retirement.
What I say:
If someone had a serious diagnosis or a genuine reason to expect a shortened life, I would encourage them to take CPP early. But for a healthy 60- or 65-year-old in Canada today, the statistics heavily favour living a long time. The true financial danger is not dying young. It is living into your 80s or 90s without enough guaranteed income.
There is no financial tragedy in dying at 72 with money left over. But living to 92 and running short is a real risk.
- “The government will probably change the rules”
This is one of the most common anxieties and one of the least grounded in reality.
What I say:
CPP is jointly governed by the federal government and the provinces. It cannot be changed on a whim. Every reform in the last 25 years has been gradual and aimed at strengthening the plan, not weakening it.
And if someone genuinely fears future cuts, that actually strengthens the argument for delaying. Governments want people to delay. Weakening that incentive would undermine the system.
- “I’ll take CPP at 60 and invest it myself”
This usually comes from confident DIY investors.
What I say:
Delaying CPP is equivalent to earning a guaranteed 8.4 percent return each year from 65 to 70, plus inflation. There is no way to match that in a real-world portfolio without taking on substantial risk (and for markets to cooperate). And those risks get magnified if markets decline early in retirement.
Earning 8 to 10 percent per year after fees and taxes, for five straight years, without volatility or sequence risk, is extremely difficult even for skilled investors. CPP is offering a risk-free version of that.
- “I like having all my income taps turned on”
This is more common than you’d think. People like the psychological comfort of multiple income streams flowing in at once.
What I say:
Think of CPP as your late-life raise. Your own portfolio can easily cover your early retirement years while you leave CPP in the oven to bake a while longer.
At age 70, a much larger, inflation-protected benefit kicks in at exactly the stage of life when cognitive ability starts to decline and you crave simplicity and automation. A larger, guaranteed, paid-for-life CPP payment landing in your chequing account every month sounds like a win.
And if psychological comfort is the goal, we can always carve out a cash wedge to support spending in your 60s while CPP keeps growing.
A Simple Rule of Thumb
If you are in decent health, have enough savings to support your 60s, and your retirement plan works with a starting withdrawal rate of around 4 to 5 percent while you wait, delaying CPP to 70 is usually the better option.
This is not about winning a break-even spreadsheet comparison. It is about giving your future self a larger, safer, inflation-indexed pension at the very time of life when guaranteed income matters most.
Delaying CPP remains the simplest, highest-value, least risky way to strengthen a Canadian’s retirement income.
And it still amazes me how few people take advantage of it.
Fantastic article as it describes me perfectly. I just turned 60 and solid financially, I am in the ‘What if I die early’ category. Concern I have is that CPP money is gone when I die. It cannot be given to a survivor so take it while you can. Healthy today can quickly change.
When 90% of people are claiming it early it is time to change the age. Obviously there is an underlying issue with the program.
There was a G&M article recently that suggested paying out benefits to anyone who died early, as if they had started at 60, to remove the fear of dying early. Precisely because I am someone with a lower life expectancy, that would have worked for me. But other factors still intrude, like retiring early (56) with a lot of empty contribution months due to schooling & contract work (dividends rather than salary). And survivor benefit, since neither of us is close to the CPP max.
This article ignores the lost CPP benefit amount for 5-10 years. A simple calculation sheet assuming a 5% return on your investments and 3% inflation rate shows a breakeven age of 84. If you are single there is no survivor benefit either.
This is an excellent point. Does this “break even” change direction if you make it to age 90? But what percent of people make it to over 85? And what about wanting to spend more money in the early “go go” retirement years.
I think it’s simplistic to think everyone will live over 80 and will spend the same on lifestyle if they do
I did the math as well and I’d have to live into my 80s to break even with delaying to 70. You’re not guaranteed anything, so I say take it when you can and invest it if you don’t need it!
From Fred Vettese: “In the case of a couple who are both aged 65, the husband has a 40-per-cent chance of living until 90, while his wife has a 50-per-cent chance of doing the same. The chances that at least one of them will live until 90 is higher again, at 70 per cent.”
Also, no one is saying to delay living your best life until 70. Just get the money from somewhere else if you can, like your RRSP. It’s more tax efficient over your lifetime and leads to more lifetime income.
If you take at 60, you give up getting 122% more you could get at 70, for life. As in more than double the age 60 monthly amount. What people fail to grasp is the following:
1) increase from 60-70 is actually a ~10% guaranteed return annually (ntoe CPP grows at typically higher wage inflation before you start it, CPI after). If you plan to invest it, this blows away what you are likely to get, and it is completely risk-free.
2) provided you have the funds to bridge it, that higher amount mathematically allows you to spend more *from day 1*, ie. age 60, since you will much more guaranteed inflation-protected income from age 70 on.
3) needing much less of your own money from 70 on also means lower withdrawals of your own money from that point forward, which means higher growth of your invested funds, and from a net-worth/net-estate perspective, you are ahead within a few years by mid-70s.
If you have the money to cover your years up to 70, and plan to live to 75 or later, you are far better off delaying.
Now try with -5% annual return on your investment. Also possible.
I am not a fan of this type of calculation. Its comparing apples and oranges. Stock returns are not guaranteed. Buy a bond, account for tax and your real return is in the red.
CPP is also taxable so I excluded tax from the calculation. You can also invest the money in your TFSA account. When I enter 3.5% yield for bonds and 2.2% for inflation (current rates), the breakeven age is 82.
Still apples and oranges. To compare like with like, look at how much it would cost to buy inflation protected annuity with survivor benefits (you can’t).
True, there is no indexed annuity. However, there is the option of a guaranteed period. With CPP, if you are single and sometimes even if you have a spouse, the “annuity” dies with you. In both cases, it is the longevity risk you want to address. So yes, if you expect to live past the age of 83, you are better off delaying.
Yes Correct. Most people must start at 65.
I do not regret taking CPP early-ish (62.5). It helps a bit with the OAS clawback…
Also, our historical investment returns did pretty OK, making up much of what was given away from not waiting 7 years for CPP.
It all worked out and I would do it again (probably), but yes, you make excellent points, thanks.
My calculation is for delaying from 65 to 70.
As the article says…if you NEED it take it.
If you don’t, you’re an IDIOT not to wait.
It takes 7 yrs to recoup the difference if you wait.
Great article. I’ve delayed CPP until 70 because of reading articles like this. Looking forward to receiving the steady income in a few months.
“ Delaying CPP is equivalent to earning a guaranteed 8.4 percent return each year from 65 to 70, plus inflation. ”
Not really. Increase in annual payments is not how you define “return”. Actual return is going to be subject to longevity and isn’t guaranteed.
Comparing to buying an annuity would be accurate. And its a very good deal you can’t get on the market. Someone who has a large DB pension or a massive portfolio might not need it but many people do.
I started CPP at 63. I look at it as a very mild misstep, now that I am 73. But not really too much ;-).
I am one of the less than 5% who waited until 70. I also took advantage of Ed Rempel’s 8-year GIS strategy, although not for 8 years. With that strategy, one should normally delay CPP.
Every year of delay = purchase of an inflation-protected annuity with survivor benefits. These are not available in Canada and the cost is low when comparing to inferior annuities which are available. So, every year of delay is a good thing – unless you have strong reasons to suspect short life expectancy, already have lots of DB income or are desperate for cash today
What about somewhere in between? Does it make sense to delay until 67? Or is it only waiting until 70 that makes sense?
If found it helpful to model out the CPP receipts including indexing and inflation for different periods. Modeling it out to ages 75 and 80 identified a “sweet spot” at roughly age 66. From there the cumulative amount received start to decline to target end date. Modeling to age 85 showed a later date was appropriate. My model did not account for PV or expected earning rates net of tax. Models trump rule of thumb.
Let’s flip it for a second – you’re in your low 60s and have some illness that comes with a shortened life expectancy. You’re probably going to want to take CPP early. But if you also have a healthy spouse, could taking CPP early have a negative effect on them? Is there ever a case where a someone with a terminal diagnosis shouldn’t immediately apply for CPP (let’s say CPP-Disability was already applied for but not approved, so it’s off the table).
I delayed CPP after reading all three editions of Frederick Vettesse’s great book, Retirement Income for Life. It took me some convincing, but the real reason for me doing this is because CPP is guaranteed, unlike the returns on my RRIF. If there is some financial crisis, I’ll be getting a solid reliable income from CPP.
We have elected to delay cpp until 70 as we simply don’t need it now but speaking to a few people at our club and it was eye opening that a lot of them took it early simply because they believed that the Liberals will run the country into the ground and cpp will cease to exist.
Your friends accusing the Liberals of running the country into the ground and the implication that CPP will cease to exist…. should do their homework. The governance and investment strategy that are the compass directing the CPP is a shining example of our country’s leadership on every side of the political spectrum….
Canada’s CPP is one of the bright spots in our country.
Bang on…not enough people understand just how admired our Canadian pension systems are abroad. CPP has done a tremendous job to alleviate poverty in this country…imagine what it would be like without CPP!
That just shows how ignorant some folks are…can’t look beyond their own inherent biases. I too waited to collect at 70 for both CPP and OAS. It’s a pretty sweet chunk of change that drops into my accounts at the end of the month.
Will I win the long game? Who knows…but I think I have a reasonable chance. Being fit, a non-drinker, non smoker, and dedicated dog walker means I’m off to a good start. Oh, and my genetics should also serve me well…no cancer issues in the family and part of a lineage that lived into late 80’s and 90’s. Wish me luck..
Oh, and I also choose a dual life guarantee on my regular pension…a bit less money, but security for my spouse should I be needed upstairs.
My wife and I delayed our CPP enrollment until almost, though not quite to, age 70.
I “console” myself, with respect to the “what if we die early” argument, with the recognition that what we wouldn’t get (by dying early) will instead go to benefit those who might otherwise have less through living longer — in one sense we’d be “paying it forward”. Once we are dead and don’t need it, why shouldn’t someone else (or even the CPP Investment Board itself indirectly) actuarially benefit.
That applies even though both of us are at the point where, should one of us die early, little if any of the deceased’s CPP would go to improve the CPP payments of the survivor.
We took our CPP at 60. Both healthy then but my wife died at 68. There are no guarantees that you will survive long enough to enjoy the higher pay out.
You left out one example of when taking CPP at 65 might make sense: if you continue to work after 65, particularly if you are self employed. As long as you are working and not taking CPP you are required to continue contributing to CPP. Self employed workers contribute both the employee and employer portions – that adds up and changes the cost benefit calculation of waiting to take CPP.
Very good point. I’d be interested in how contributing 11.9 percent of your self employment earnings to CPP, changes the cost/benefit calculation of delaying vs taking CPP at 65 (since if you take CPP, you can elect to stop contributing to it)
My considerations for taking CPP at 60 were three-fold:
1. I had used up my maximum allowable lower income exemption years with schooling. Leaving employment at 58, with absolutely no interest in any additional work options, meant 7 more zero income years in the calculation.
2. Considering our overall household income – since an individual may only receive one maximum CPP amount, in the event of my wife’s death, her full amount would be lost if I delayed for the larger CPP payment.
3. I had no need for the elevated CPP at a late-stage of my life when my RRIF income would be sustantial and OAS claw-back, a likely event.
This, along with increased investment income returns remaining sheltered in my RRSPs, made the decision a reasonable one for our household.
So people are being advised to wait until age 70 to take CPP just because the monthly amount is higher? That doesn’t make sense for everyone. Life expectancy has dropped by about 10 years, and many people face mobility or health issues long before 70. Sure, you might get a bigger payment — but for fewer years and with less ability to enjoy it. No thanks. I took mine at 60 and I have zero regrets.
Ah but if you have a decent RRSP you will hamper your ability to reduce it prior to the mandatory withdrawals at 72 and , heaven forbid, you expire as a single person and your estate pays 53% income tax on RRSPs. These might not be issues for you.
If the CPP amount is the difference between enjoying life in your 60’s and not then it’s likely you don’t have much in the way of RRSPs to concern yourself with in any case.
The mindless “grab CPP when you can” as many 60 yr olds are prone to, is a headstrong approach that often goes hand in hand with extreme mistrust of gov’t and ignorance of mortality rates for presently healthy low risk individuals.
I’ve been taking 10% out of my RRSP annually for 8 years now and I’ve got 2 more years to 70 and CPP.
Charles
I was on the same financial path you describe — strong RRSPs, solid long-term planning, the whole strategy.
But life doesn’t always follow a theoretical model.
When unexpected events hit, I had to make real-world decisions for my family.
If I hadn’t used my RRSPs when I did, my family would have lost our home, and my daughter would not have graduated from university.
That choice wasn’t ‘mindless’ or ‘headstrong’ — it was strategic, responsible, and it changed our entire trajectory.
My daughter is now a six-figure professional because I chose to support her at the right moment, and I kept my family stable in the process.
And yes, I still manage to put money aside and keep everything intact.
So while delaying CPP may be ideal for people whose circumstances never shift, for others, taking CPP at 60 is the smartest, most practical, and most compassionate choice.
A tip of my tuque to you, Maria!
I’ve said here before that “everyone has an inner story” and you have shared a bit of yours.
Here’s another quote you’ve reminded me of:
“An action need not alter the course of human events in order to be heroic.”
Leo Beuerman
Well, your heroic actions altered the course of your family’s and particularly your daughter’s life.
Hi Tom
Thank you — that’s very kind, but I really don’t see myself as heroic. I’m more of a planner who simply dealt with the mess that was in front of me. When life forces you into a corner, you do what you must to keep your family afloat.
Some people move through life with everything lining up smoothly, and that often shapes a very narrow way of seeing things. Others of us have had to pivot, reinvent, and make hard choices — and yes, that does change your perspective.
I wasn’t able to keep my RRSPs, but they weren’t wasted. They kept a roof over our heads and allowed my daughter to stay in university. She’s now a professional earning a solid income, which means that sacrifice did exactly what it needed to do.
And I didn’t just shrug and walk away from retirement planning — I adjusted, reorganized, and built new tools to replace what was used. It was simply a matter of shifting resources earlier than intended because of circumstances I couldn’t control.
So thank you — I appreciate the sentiment — but I see it less as heroism and more as doing the responsible thing with what I had at the time.
Although I could live on my current investments I will take my CPP and OAS at 65. I will use the money for vacations, quality experiences, and top up my TFSA filled with Core stable CC ETF’s to up my monthly income each year in my own annuity like account. There has been a lot of more serious talk from our current government lately to play with the value and raise the age of our CPP/OAS back up to 67 which was the opposite view of what helped them get elected a while back. They are taking on too much debt and looking for ways to leverage it and have run out of options, so again looking at ways to lever our one sort of fenced off asset, the CPP as a “tool”.
I feel no guilt in entering a what really is a social contract to involuntarily take money from my labor, invest it for a lifetime, then try to change the rules and dates you planned on based on the “65” number later, Then justify this by nudging people to not take what is rightfully theirs while they misspend our collected taxes elsewhere inefficiently.
To start CPP at 70, I would have to spend down the savings that I want to give to my kids in the next few years. This situation is not often discussed in the CPP decision. It was a factor in my decision to start CPP before 70, and preserve the capital I had accumulated, in order to help my children with housing downpayments in the next few years.
The vigorous discussion in the comments has reminded me: 1) your situation may vary, and; 2) people are guided by reason AND emotion.
A theory for delaying is to shift the risk. Drawdown RRSP’s, (i retired early) and then at 70 turn on the CPP. The burden of investment risk is now in the hands of the safe and sound CPP . Not my idea but came from “Cut the Crap”.
Please add to your list of those that should take it early.
If you only paid into your CPP for less than ten years then please take it early. My dad , at 64 decided to take his CPP, but died a few months later. He only received two cheques. Because he only worked in Canada for almost nine years, ( as a young man he didn’t make enough to contribute and then he was a teacher and couldn’t find work in Canada, so had to go overseas to teach, he only managed to contribute for nine years. His cheque was small but still represented his contributions and helped pay some bills for my mom and him. Unfortunately he passed away shortly after getting his second cheque and my mom was denied any survivor benefits and she was also denied the 2,500 $ death benefit. I called for her and asked what would happen to his contributions that had been invested for 25 years with CPP and was told that money would not be going to my mother but instead would go back into the pot. He should have started collecting at 60.
Yes, with hindsight. But isn’t the key piece of information that he passed away at 64? Health concerns are listed as reason number 1 to take early.
And sometimes one is going to lose out because we don’t know the future. Same as when one pays for insurance.
He had had a check up ten months earlier, clean bill of health and looked 15 years younger than he was. No health concerns. Sudden heart attack.
What happens if I retire at 62 and stop contributing to CPP? Does this affect my CPP “averaging” if I stop contributing for the 3 years prior to collecting CPP at age 65?
This is my question too in a way. For the past 10 years I have been earning less and less. If I drop out my lowest 8 years, my average is going down with every year I work past 60. I’ve contacted CPP about this and they can explain it. Since I have Way more than 40 years working, why don’t they take our top 40 years instead of the average which includes part-time salaries. I’d love an answer to this.
Is the argument the same for delaying OAS?
I know a few who already have taken CPP at 65 and they are in good health. Really good health.
I understand the fear that one may die prematurely before 70.
However I will wait until am 71 to take it. I get CPP survivor’s since 63. Partner died suddenly just 1 month before 78. It makes no sense for me to forfeit survivor’s which will happen when I get my own CPP.