CPP Pension: Should You Take Your CPP at Age 60, 65, or 70?

Are you about to retire? One of the most important things to figure out is when you will start receiving Canada Pension Plan (CPP) payments.

You will be able to start receiving the payments between age 60-70, which is a wide range that confuses a lot of Canadians. CPP payment dates occur monthly, you can find the full schedule here.

If you’re stressing out about what age to take your CPP pension, read on for a detailed breakdown.

1.    Comparison of CPP payout money you receive at 60, 65, and 70

Below is a year-by-year comparison of how much CPP you will receive at 60, 65, and 70. For simplicity’s sake, I assumed a $1,000/month CPP payout at age 65.

The amount you receive could be more, but more likely will be less. The average CPP payout for 2019 was only $679.16/month, but the CPP max 2019 amount was $1,154/month.

Highlights

• If you live past age 74: You will earn more money if you start CPP payout at age 65 then at age 60.
• If you live past age 81: You will earn more money if you start CPP payout at age 70 then at age 65.
• If you start taking CPP at age 60: You will receive 0.6% less per month or 36% less if you start taking your CPP at age 60 vs. age 65.
• If you start taking CPP at age 70: You will receive 0.7% more per month or 42% more than if you start taking your CPP at age 70 vs. age 65.

	Start CPP Age 60	Start CPP  Age 65	Start CPP Age 70
CPP Received/month	$           640	$        1,000	$      1,420
CPP Received/Year	$        7,680	$      12,000	$    17,040
Total CPP Received	Start CPP Age 60	Start CPP  Age 65	Start CPP Age 70
Age 60	$        7,680	$             –	$           –
Age 61	$      15,360	$             –	$           –
Age 62	$      23,040	$             –	$           –
Age 63	$      30,720	$             –	$           –
Age 64	$      38,400	$             –	$           –
Age 65	$      46,080	$      12,000	$           –
Age 66	$      53,760	$      24,000	$           –
Age 67	$      61,440	$      36,000	$           –
Age 68	$      69,120	$      48,000	$           –
Age 69	$      76,800	$      60,000	$           –
Age 70	$      84,480	$      72,000	$    17,040
Age 71	$      92,160	$      84,000	$    34,080
Age 72	$      99,840	$      96,000	$    51,120
Age 73	$    107,520	$    108,000	$    68,160
Age 74	$    115,200	$    120,000	$    85,200
Age 75	$    122,880	$    132,000	$  102,240
Age 76	$    130,560	$    144,000	$  119,280
Age 77	$    138,240	$    156,000	$  136,320
Age 78	$    145,920	$    168,000	$  153,360
Age 79	$    153,600	$    180,000	$  170,400
Age 80	$    161,280	$    192,000	$  187,440
Age 81	$    168,960	$    204,000	$  204,480
Age 82	$    176,640	$    216,000	$  221,520
Age 83	$    184,320	$    228,000	$  238,560
Age 84	$    192,000	$    240,000	$  255,600

The results of these calculations were surprising to me, but also very insightful:

Based purely on how much money you will receive:

• Since the average life expectancy of Canadians is around 80-82, it’s not wise to start taking your CPP payments at 70, since you have to live past 81 to make more money.
• Taking the CPP at age 60 also isn’t wise for the average Canadian, since if you live past the age of 74, you will make more money taking it at the typical age of 65.

2.    Can you afford to delay your CPP to 70?

This will take a little bit of work to figure out, but here are the general steps to take.

Step 1: Estimate your income without CPP for 60-85 years old

You will need to estimate your income from all sources, except your CPP, for the ages of when you are 60-85.  You will need to figure out how much your total investments and savings will be from all sources, and how much you will be drawing from it each year.

Step 2: Estimate your expenses for 60-85 years old

You will need to estimate what your expenses will be for every year, between 60-80. You can use the rule of thumb of 70%-100% of your last year’s income, but this will differ depending on your situation.

Step 3: Compare your income and expenses

If your income is less than your expenses or very close without CPP, you might need to start taking CPP early at age 60, even though in the long run, it’s probably not beneficial.

3.    Forecast your life expectancy

Guessing how long you will live is not a pleasant task, but it’s necessary to figure out when is a good time to start your CPP.

The best way is to look at your family history and examine your current health. Go for a medical checkup and consult your doctor, who can give you a full breakdown of how good your health is right now.

If you want to go by statistics, depending on when you were born, the average Canadian is expected to live to around 80-82.

If you’re in good health and think you will live well into your 80’s and 90’s, then delaying your CPP could be the right decision.

4.    OAS clawback

If you are close to the OAS clawback amount at age 65, consider delaying your CPP payments to a later age. You could start getting clawed back on your OAS, which works out to a 15% tax if your income is too high. Delaying your CPP could help to reduce this OAS tax.

Read about strategies on how to reduce your OAS clawback here.

5. If you stopped working by age 60

If you are retired by the time you are 60, consider taking your CPP earlier. The years you aren’t working from 60-65 could decrease your retirement pension.

Each year of having zero contributions to your CPP could decrease your CPP payout. This is a tricky calculation that you will have to work out as you are approaching 60 to see what is more beneficial.

If you already are receiving your CPP, you can check the dates that you receive your payments here.

Conclusion

Lots of people choose to start CPP payments at age 60 because nobody knows precisely when they will die.

However, if you’re an average Canadian in good health and don’t need the money right away, taking your CPP at age 65 is a good compromise. As long as you live past 74, you will earn more money in the long run.

It will take you until age 81 to earn more if you delay the CPP until age 70, which could be too long for most people. And maybe it’s better to have more money earlier in your retirement to spoil your grandchildren!