Canada Pension Plan (CPP) – The Best Age to Start Receiving

Deciding when to start receiving the Canada Pension Plan (CPP) is one of the most important financial decisions you’ll make for your retirement. Your choice affects the amount you’ll get each month and how long your payments will last. Let’s break down the key factors to help you make the best decision for your situation.

Understanding the Canada Pension Plan (CPP)

The CPP is an essential part of Canada’s retirement system, designed to provide income security when you’re no longer working full-time. Whether you’re approaching retirement or planning ahead, understanding how it works can support informed decisions.

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What is CPP?

In a nutshell, the Canada Pension Plan is a government-managed program that pays you a pension based on your contributions while working. Every paycheck typically deducts your share of CPP contributions, employers match it, and the government ensures you’ll get a steady retirement income.

For more details on CPP’s framework, visit the Government of Canada’s official CPP page.

Eligibility for CPP Benefits

To qualify for CPP payments, you must have made at least one contribution to the program during your working years. Payments can start as early as age 60, but there are trade-offs. Additional factors like your contributions, work history, and when you begin can determine how much you’ll receive.

Check out this guide for deeper insights into eligibility and tips on when to apply.

When Can You Start Receiving CPP?

Your age when you decide to start collecting CPP significantly determines your payments. Let’s explore the scenarios for different starting ages.

Starting CPP at Age 60

At age 60, you can officially begin receiving monthly CPP payments. However, there’s one catch: your payments will be reduced by 0.6% for every month before your 65th birthday. This equals a 36% reduction in total.

Pros: Early access to extra income can help cover financial gaps, especially if you’re retiring early or facing health concerns.

Cons: Lower monthly payments mean you might lose out on thousands over time, especially if you live well into your 80s or 90s.

A deeper breakdown of early CPP benefits is available here.

Starting CPP at Age 65

Age 65 is considered the “standard” age to begin receiving full CPP benefits. You’ll receive the pension in its entirety, calculated based on your contributions throughout your working life.

Pros: There are no reductions or penalties. It’s a balanced choice between benefits and longevity expectancy.

Cons: Waiting until 65 means you’ll forgo payments for five years, which might not work if your retirement income sources are limited.

More information on CPP at 65 can be found on this Government of Canada page.

Delaying CPP Until Age 70

If you delay your CPP until the age of 70, your monthly pension amount increases by 0.7% for every month after your 65th birthday. That’s a total boost of 42% if you wait.

Pros: Higher monthly payments can be especially beneficial if you’re in good health and expect to live longer.

Cons: You won’t receive payments for an extra five years, which could be a challenge if cash flow is tight during your early retirement years.

Explore insights into delayed CPP benefits from this in-depth RBC guide.

Financial Implications of Different Starting Ages

Choosing when to start your CPP is not just about checking a box. It comes with long-term financial implications.

Impact on Monthly Payments

Starting early means smaller monthly checks, while deferring increases them significantly. For instance:

• Starting at 60: Up to 36% less in monthly benefits.
• Starting at 70: Up to 42% more in monthly benefits.

When deciding, use tools like the CPP estimator to visualize your payment options.

Longevity and CPP Payments

Life expectancy also plays a role. If you’re likely to live into your late 80s or 90s—and can afford to wait—deferring payments could maximize the total payout. On the other hand, starting early may be better if health concerns shorten your horizon.

Personal Considerations in Deciding When to Start CPP

Your ideal timing isn’t just about money. It’s also deeply personal, influenced by health, lifestyle choices, and other income sources.

Health Status and Retirement Plans

If you’re in poor health or retiring early, starting at 60 might outweigh the benefits of waiting. Conversely, a healthy lifestyle and active retirement may tip the scales towards waiting until 65 or 70.

Financial Needs and Other Income Sources

Take a close look at your savings, investments, and other income sources like workplace pensions or Old Age Security (OAS). If other income streams can cover your living expenses, delaying CPP might make sense.

For guidance on combining CPP with other benefits, this Edward Jones resource is helpful.

Conclusion

There’s no one-size-fits-all answer to the “best age” to start receiving CPP. The choice depends on your personal circumstances—health, financial needs, and retirement goals. Start early and live for the moment? Or wait and maximize the payout? It’s your call. Use tools and resources to evaluate your options and make an informed decision.

As with all financial decisions, consider consulting with a financial advisor to map out the best approach for your retirement.