When Should You Start Taking Your CPP Benefits? A Guide to Timing Your Pension
The Canada Pension Plan (CPP) is a key social insurance program that provides Canadians with income during retirement, as well as in cases of disability or death. Funded through mandatory contributions from employees and employers, it replaces a portion of pre-retirement income to ensure financial support after individuals stop working. For many Canadians, the CPP is a crucial source of income, especially when other savings or pensions fall short. The CPP plays a vital role in enhancing financial stability in retirement and reducing poverty among seniors.
As you approach retirement, one of the most important decisions you’ll face is when to begin collecting your CPP benefits. While it may seem straightforward—start your CPP when you retire—the reality is that the timing can significantly impact your overall retirement income. Whether you should take it early, start at age 65, or wait to delay it all depends on a number of personal and financial factors. Let’s dive into the pros and cons of each option, and break down the numbers behind this important decision.
Taking Your CPP Early (Age 60)
You are eligible to begin receiving your CPP benefits as early as age 60, but it comes with a catch: your monthly benefit will be reduced. For each month you start early, your benefit is reduced by 0.6%, up to a maximum reduction of 36% if you start at 60. While this may seem like a sizable cut, taking CPP early can be beneficial for some, particularly if you need the income sooner or if you’re dealing with health concerns that may impact your longevity.
If you need the funds right away, starting early allows you to access your benefits and gives you more years of payments. For individuals with a shorter life expectancy or those in poor health, taking CPP early may make more sense. However, it’s important to remember that the reduction in monthly payments could result in a lower total amount received over your lifetime, especially if you live into your 80s or beyond.
Starting CPP at Age 65
Age 65 has long been the traditional age to start collecting CPP benefits, and it’s the age at which you can receive the full, unreduced amount of your pension. If you choose to start your CPP at 65, you’ll receive a higher monthly benefit compared to taking it early, and this is a good middle-ground option for many retirees.
For most people, starting at 65 is a good balance between accessing funds without the penalties of early withdrawal, while still receiving a solid monthly payout. If you plan to continue working past 60 or 65 and don’t need immediate access to CPP funds, waiting until 65 could make the most sense.
Delaying CPP Up to 70
One of the more interesting strategies is to delay your CPP until age 70. For each year you delay taking your CPP after age 65, your monthly payments will increase by 8.4% (i.e. increase of 0.7% for every month delayed after age 65), which can add up to a 42% increase by age 70. This strategy is ideal for those in good health who expect to live longer into retirement and who can afford to wait for the increased benefits.
Delaying CPP allows you to maximize your monthly payments, and in many cases, this could be the most beneficial option for individuals who want to ensure a higher income in their later years when other sources of income may be depleted. If you have substantial retirement savings or other income streams, delaying could be a smart move.
The Numbers: What Makes the Most Mathematical Sense?
While individual preferences, health, and lifestyle factors play a significant role, looking at the numbers can provide clarity on what might make the most financial sense.
If you start CPP at 60, you'll receive a lower monthly benefit but for a longer period, whereas waiting until 70 means you’ll receive a higher monthly benefit for a shorter period (but potentially higher total lifetime payouts if you live into your 80s or beyond). Mathematically speaking, the “break-even” point - where the total amount received in one scenario is more than the other - will depend on when you start taking the income.
Here’s a simplified breakdown:
**Note: As of 2025, the maximum monthly CPP benefit for an individual is $1433
In the above example, Manny will equalize and overtake Bill at age 74, 9 years after starting his CPP. From that point on, Manny will always be better off than Bill because Manny is receiving 100% of regular pension income per year, whereas Bill is only receiving 64%. Charles, who started his CPP 5 years after Manny, will need to wait to age 78 to catch up to Bill, and age 81 to surpass Manny. From that point on, Charles will be better off then both of them.
For those who expect to live into their 80s or 90s, delaying CPP could result in a higher total payout over your lifetime, despite the delay in starting the benefits. For individuals who may not live as long or have other income sources, taking CPP early might provide more immediate financial relief, even if it means receiving less in total.
Factors to Consider When Deciding When to Take CPP
There is no one-size-fits-all answer to the question of when to start taking your CPP. Several factors should influence your decision:
Health and Life Expectancy: Your personal health and family history can give you an idea of how long you might expect to live in retirement. If you're in poor health or have a shorter life expectancy, starting early may help you maximize the number of years you’ll receive payments. If you’re in good health, delaying could provide larger monthly benefits down the line.
Current Financial Situation: If you need income right away or don’t have other significant retirement savings, taking your CPP early might be a good option. On the other hand, if you have a sufficient nest egg or other sources of income, delaying CPP could allow you to increase your overall retirement income.
Investing the Income: Whether you invest the CPP income or not, and the return that you expect to get on that investment, can also play a key role in the decision you make. Even though, on the base, a regular CPP start at age 65 will overtake the early CPP withdrawal by age 75, if you were to invest the CPP income, you would have an extra 10 years of potential growth. This could then make an early CPP start more favourable, mathematically.
Retirement Age and Employment Status: If you’re continuing to work after 60, delaying your CPP benefits could allow you to increase your monthly payout. Additionally, if your employer provides a pension or other retirement benefits, that may affect when it makes sense to take CPP.
Other Sources of Income: If you have other income sources such as a pension, investments, or real estate, you may be able to delay CPP without compromising your financial security. Delaying CPP in this case can increase your overall retirement income later on.
Spouse’s Benefits: Consider your partner’s retirement plans as well. If your spouse is younger and you are the primary income earner, delaying your CPP might ensure that they have a higher survivor benefit in case of your passing.
Timing Your CPP for the Best Retirement Outcome
Choosing when to take your CPP benefits is a significant decision that depends on your financial situation, health, and retirement plans. Whether you take it early, at 65, or delay until 70, each option has its pros and cons. The key is to weigh the numbers against your personal circumstances, and if needed, seek advice from a financial advisor to make the best choice for you.
At the end of the day, the best strategy is the one that aligns with your goals, health, and financial picture. By carefully evaluating these factors, you can make an informed decision that helps secure your financial future in retirement.
If you’re approaching retirement and want to see what option would be best for you, we can help! Reach out to us and one of our Financial Professionals will help you through the process!