The standard age to start your retirement pension is 65; however, you can start receiving it as early as 60 or as late as 70. If you start taking your CPP earlier, your monthly benefit will be smaller each month but for a longer period. If you start later, then you’ll receive a larger monthly amount but for a shorter period.
There is really no benefit to waiting until you are 70 to start withdrawing from your pension, as the maximum monthly amount you can receive is reached when you turn 70.
With that said, what’s right for you is dependent on a host of factors, such as your health, your financial situation, and your retirement goals.
Let’s look at why someone may benefit from receiving their retirement pension at ages 60, 65 or even 70.
CPP at age 60 vs. 65
If you take CPP early, your monthly benefit will be reduced by 0.6 percent each month (or by 7.2% per year), up to a maximum reduction of 36% if you start at age 60.
Why might someone benefit from receiving their retirement pension early?
– If they need the income. For example, if someone is forced into retirement early for whatever reason may be, or if they are not earning an income that allows them to live comfortably in their 60s, then receiving their retirement pension earlier may serve them best.
– If they don’t expect to live well into their 80s or 90s. Thinking about our own mortality is never easy, and it can be overwhelming and anxiety provoking. And, while none of us can predict how long we will live, it is worth taking the time to consider your family history and personal health in deciding when to start receiving your retirement pension.
If you start at age 65, the monthly payments will not be discounted. Your breakeven age is 75 – therefore, someone who started at age 60 versus age 65 will have earned the same amount at that point.
In layman’s terms, if you expect to live past age 75, then you will earn more in the long term if you wait to start receiving your retirement pension until age 65.
CPP at age 70
The primary reason for starting your retirement pension at age 70 is if you work beyond age 65. Bear in mind that CPP retirement benefits count as taxable income; therefore, you will pay tax on your earned income and your CPP monthly benefit. And, depending on which tax bracket you fall into, this tax responsibility, as well as any clawback of your Old Age Security (OAS) payments, could outweigh the benefit of receiving a larger retirement pension.
For every year you delay past age 65, your payments increase by 8.4 percent to a maximum of 42 percent by age 70.
Not sure when to start your retirement pension? Call our office to speak with one of our CPAs. We would love to help you make a well-informed decision based on your unique situation.