Should You Take Your CPP Early? - Before You Do, Read This!

Retirement Income Planning, Calgary

It's a question we get asked often: Should I take my CPP at age 60?

The short answer is NO, the long answer is YES. Consider the following in making your decision.

1.) If you are still working, will the additional income bump you into the next tax bracket? If it does, you may end up losing most of the extra cash. In this case you may want to wait. How much longer do you intend to work? How much money do you currently have in other savings? If you do not have a lot of other savings, it may be a good strategy to take the CPP early and invest it in your RRSP, get a tax deduction now and create additional retirement savings in the process. This way, your CPP is creating all kinds of additional potential income for you that you can use when you eventually retire.

2.) Is longevity in your family? If it isn't, take the money now. Start enjoying the benefit as soon as possible because you just don't know how long you will be around to enjoy it. If you don't need the money to live on, invest and grow it so that when you do need it there's more in the pot and more to leave to your heirs. If there's room in your TFSA - sock it away in there. 

3.) Understand the math. For every month you take your CPP before age 65 you will lose .6% of your CPP benefit. So, if you take it at age 60 that means your cheque will be 36% less than if you wait until age 65. If you delay taking it past age 65 you will earn an additional .7% for each month you delay receiving it. It seems like a good idea to wait, but before you make a decision consider this: If you compare 3 brothers who are triplets, where Alvin takes the CPP at age 60 and Steve takes it at age 65 and Mark at age 70. The break-even point where Alvin and Steve will both have received the same amount of money is age 74. Mark on the other hand, will not catch up until age 76.4. At this point, Mark will begin to outpace his brothers significantly. But keep in mind, he has to have good health and longevity to actually use and enjoy the money. 

Here's an interesting TABLE that will help you see the differences. (2016 numbers)


4.) Post Retirement Benefits. You can only get these PRB's if you are collecting CPP and still working. I believe they are significant enough to sway a person to take CPP early. If you have already contributed the maximum to CPP by age 60, (35 years at max. contributions) there's really not a lot of good reasons to delay taking it, especially if you are still working.

Deciding when to take your CPP is an important part of retirement planning. There isn't a cookie-cutter approach. It brings up many other questions like can I collect CPP while still working past age 65? If I go back to work can I still pay into CPP and increase my benefit? How does divorce affect my CPP benefit? How is CPP calculated? To get clarity around these questions book a 1-hour session and we can discuss your situation. ($149.00)

Want to retire in the next few years? Find out why a Retirement Income Plan is necessary.




Related Article: Collecting CPP But Still Working? Understand Your Post Retirement Benefits


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Willis & Nancy Langford

Fee-based planners, Willis and Nancy are Calgary's leading providers of quality Retirement Income Planning workshops, helping retirees and soon to be retirees navigate the complicated world of government benefits, so that they will pay less tax and have more money to enjoy their retirement lifestyle.

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