# Taking CPP early: The new breakeven points

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By far, the most popular question I get on CPP is whether it makes sense to take CPP early.  Let’s start by reviewing the rules.

Although the normal age of benefit for CPP is 65, you can take CPP as early as age 60 but if you take it early, you will receive a reduced amount.

## A change in reduction amounts

Prior to 2012, the reduction was 0.5% for every month prior to your 65th birthday.  Taking CPP at age 60 meant a 30% reduction in benefit (60 months times 0.5% = 30%).  Under the new rules, the reduction rate will increase to 0.6% over the next 5 years:

• In 2012, the reduction is 0.52% for every month prior to your 65th birthday.
• In 2013, the reduction is 0.54% for every month prior to your 65th birthday.
• In 2014, the reduction is 0.56% for every month prior to your 65th birthday.
• In 2015, the reduction is 0.58% for every month prior to your 65th birthday.
• In 2016, the reduction is 0.60% for every month prior to your 65th birthday.

Those turning 60 in the next 5 years, need to pay attention because they have a big decision to make.  They can apply to collect CPP even if they are still working.  Many people can use the money in the short term and even it they don’t need it, they can invest it for the future.

If they choose not to take CPP income early, every year they delay up to age 65 will mean a bigger reduction because the rate of reduction is increasing accordingly.

## Should you take CPP early?

For me, the starting point to answering the question is looking at the mathematical breakeven point.  Here’s the chart for 2012

AS you can see from the data, taking income at age 60 this year (assuming you qualify for the maximum CPP at age 65) would give you \$676.83 per month.  By the time you turn 65, you will have collected \$40,729.74 of income over the 5 years.

Alternatively, if you waited until 65 to collect a higher amount, you are foregoing the \$40,729.74 to get more money in the future.  It takes until age 76 to make up the \$40,729.74 that you left on the table.

In other words, the mathematical breakeven point is age 76 this year.  If you live past age 76, the one could argue the math says take CPP later.  If you don’t live to 76, then you should have taken the money early.  Unfortunately, no one knows when they are going to die.

Here’s the charts for 2013, 2014, 2015 and 2016 as CPP phases in a bigger reduction.

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### Written by Jim Yih

Jim Yih is a Fee Only Advisor, Best Selling Author, and Financial Speaker on wealth, retirement and personal finance. Currently, Jim specializes in putting Financial Education programs into the workplace. For more information you can follow him on Twitter @JimYih or visit his other websites Group Benefits Online and Advisor Think Box.

### 131 Responses to Taking CPP early: The new breakeven points

1. Jim says:

Jim,
thanks for preparing these calculations for your readers. It is a good visual for those of us contemplating what we should do now that the rules have changed.

2. I would take CPP as early as possible, as you never know when you will die. If you can afford it, then it would be a good idea. You don’t want to have too much money left over, unless you are planning to give it to loved ones or donate it to a worthy charity.

• Jason says:

I totally agree plus at 60 I’m going to start taking it right away that way I won’t be giving Trudeau’s liberals a break, what goes around comes around…

3. John A. Mangone says:

Jim,

Thanks so much for the CPP Breakeven Point charts. This is important information to have in hand, if you are considering taking CPP early and before age 65.

Three Questions:

1) Does it make sense to take early CPP and continue working from a tax prospective?

2) How does taking early CPP impact on a person choosing to continue working if they are in a low, medium or high income job?

3) Based on the Canadian/USA actual life expectancy figures, who is better off taking early CPP – men or women?

4. Mike says:

Jim:
Great charts. Can you prepare one showing the breakeven points for someone who chooses to take CPP late (ie ages 66-70)?
Thanks.

• Doug says:

Why would you take it late? You can take it at age 65 without a reduction and if you choose to keep working you can still contribute and increase your CPP entitlement. You will never have a breakeven point by taking after age 65 because there is no reduction to make up.

• Doug

Delaying your CPP after age 65 increases your CPP retirement by a minimum of 0.7% per month (8.4% per year) if you’re not working and possibly by more than that if you are working. Of course there’s a breakeven point to that decision! If you pass up receiving 100% of any amount for one year in order to receive 108.4% of that same amount starting one year later, it will take you 11.9 years to break even for that delay.

5. It would also be interesting to factor in the time value of money – a dollar today is worth more than a dollar tomorrow.

• Dick says:

I have factored in my calculations both the present vlaue of CPP Payments and the fact that CPP increases over time. Under the old rules it would be difficult to convieve of a situation where one would not be better off taking CPP as early as you could. I suspect this is true under the new scenarios also however one greatly increased cost is the fact that if you keep working and draw a salary you and your employer continue to be responsible for CPP – and while this augments your payments it is a losing proposition on any time value basis.

• Jim Yih says:

The new rules bring the breakeven point earlier but also gives more people access to early CPP because you no longer have to stop working to get CPP

• Don says:

That’s a joke I was penalized I had to take a month off work then forced to pay into the p.r.p.
In am now retired. 65 forced to pay into p.r.p 3 years my contribution and company share about \$15,000.00 dollars I get a pension of \$26.00 a month another government scam. Under old seystem I already lost \$8000.00 In a
Wages plus I lost contribution of \$800.00 to my defined pension.

• Don

Who forced you to take your CPP early, and why on earth would you have done so when you were earning a salary of \$96,000 per year?

It depends a little on what years you’re talking about, but 3 years of maximum contributions after starting your CPP should generate PRBs of at least \$60 per month, not \$26 per month.

6. Greg says:

Shouldn’t the breakeven age increase for taking CPP early as you go through the charts for 2013 to 2016? Since the reductions are higher each year it seems that it would take more time to make up the difference.

7. Peter says:

These calculations don’t take into consideration the tax consequences. Not taking the CPP and drawing down RRSP at a lower tax rate prior to taking the CPP and possibly bumping your tax bracket is worth calculating.

• Jim Yih says:

Hi Peter, you are correct. It is important for people to take this information and make it personal. Everyone must apply the math using their personal situtation.

The math I present is universal information. No matter what your CPP benefit is, the breakeven point will be the same for everyone. Tax rates are different for everyone. Some people retire to a higher tax bracket. Most to a lower bracket and some to the same bracket.

Jim

8. Peter says:

How does the pension picture change if a person is at the 40% marginal tax bracket from age 60 to 65, but will be at the lowest tax bracket after age 65?

9. Mairi says:

This is timely for me. I have started to receive CPP-D (disability) (age 54) due to MS complications thus having to access CPP earlier than I would have planned. Do these charts still apply? The only thing that I was told was that at age 65 this would roll over into a regular CPP payment. Is CPP-D handled somewhat differently?

• Holly says:

Hi Mairi
I took had to take CPP-D early for Lupus. Did you ever get an answer to your question about at age 65 if the CPP-D would be rolled over into a reg CPP? I’d be interested to know as well.

• ALEX says:

While on the topic of CPP-D. You also need to be aware of one fact, if you take your retirement early say age 60 and a year and a half later some drastic changes occur in your health you will not be able to get approved for CPP-D. They have a rule that if you are in pay for retirement for 15 months they cannot change that retirement to a disability. So everyone should also keep that in mind when they make a decision to take retirement early.

• Alex

You raise a very important issue, but you have your facts a little off.

You can’t qualify for CPP disability even if you become disabled the day after receiving your first CPP retirement payment.

The 15-month limit applies to submitting an application for CPP disability, but it applies only if you were disabled prior to receiving your first CPP retirement pension.

• Alex says:

If a person applies within 15 months of receiving their first retirement payment and the medical adjudicators find them actually to be disabled the month prior to their retirement start date then they will withdraw the retirement in favour of the disability benefit. Of course if this is what the client still wants to do. But if a person has received those retirement payments for 15 months there is no chance for it to be converted to dsb and will be a denial. Also if a client does wish to cancel retirement for dsb the money they received for retirement will have to be paid back.

• Alex

I agree with you 100%, but that’s not what you implied on your first comment.

You implied that you might be able to change from a retirement pension to a disability pension as long as the disability occurred within 15 months, and I wanted to make sure that’s not what anyone should believe.

• Karen says:

CPP-D ends at age 65 at which time your CPP retirement pension will automatically begin. This amount will be lower than the CPP-D because CPP-D is an enhanced benefit rate. These charts cannot be applied to your circumstances.

10. Rick says:

In regards to collecting CPP early (age 60) and continuing to work. You would not be drawing down your RRSP in this case as you are still working and bringing in income.

A better option would be to take the early CPP payment and put it into your RRSP. This compounds the benefit of taking CPP early.

11. sandy says:

How do you think the numbers would change if someone decided to take early CPP at age 60 and instead of spending the money reinvested it. If it was in a vehicle yielding 4-5% then the advanced income figure raises considerably and I think the break even age also. Just wondering as we will be retiring soon and debating options. Thanks for a very informative column.

• Don E says:

When I do the calculations of investing the benefit at age 60 with a 5% return the age of breakeven pushes out to between 79-80 years old. To show some interest rate sensitivity if your investment earns 6% annually the breakeven moves to between 81 and 82, 7% between 84 and 85. 8% is over 90 years of age.

12. philip says:

If you take the CPP early and continue working what effect does continuing to contribute to the CPP have? For example, say you take it 9 months before you reach 65 and you work 9 months after you reach 65 ( and contribute) do things even out?

Thanks,

philip

13. len says:

philip, I have the same question, if you take the CPP early and continue working, under the new rules you still continue to contribute. Because you continue to contribute to CPP, this should affect the CPP amount you are receiving annually-I would be interested in knowing what this might be.

14. LLoyd says:

If I take my CPP at 60 (2013)& continue contributing how do incresed benefits kick in & is thier a chart to outline any changes?

15. Dave says:

I have a pension that is bridged till 65 where they will take off \$489 they said when I retired based on the CP calculations at time I retired.

Does that bridging change as I further contribute to CP unrelated to my post retired from position.
Now I have still worked off and on and contributed to my CP . Right now based on my contributions to CP @ 65 I would get anywhere from 80 – 82 percent of the max based on the years I put in and amount levels contributed.

From what I see is that taking CP early would even out or slightly ahead the deduction of the bridge at 65 but would be be ahead in \$ gained till 74.

16. El says:

Taking the CPP at age 65 entitles you to an increase each year by the increase in COLA (Cost of Living Adjustment). There is no decrease to your CPP if COLA falls.

Taking the CPP BEFORE age 65 disallows for life any COLA (Cost of Living Adjustment)to your CPP. Hmm…

Food for thought? Worth factoring in?

• Anne says:

Correction – cost of living adjustments are calculated for CPP regardless if taken early, at 65 or later. I have checked with several trained professionals and a later post also confirms cost of living is always given with CPP.

• don says:

It’s true that the cost of living is factored in, but it is not the same factor. CPP cost of living increases are calculated based on the average industrial wage but once you retire the COL is based on CPI. They are not the same thing with the industrial wage increasing faster than CPI each year. Consequently after 5 years someone retiring and receiving the max payout will get more than someone who retired 5 years earlier but was indexed using CPI.

17. Chris white says:

The time value of money is an important factor here. Also the marginal tax bracket that you are in at 60 and the tax bracket you will likely be in at 65. Another factor is whether you will actually be retiring at 60 or whether you intend to keep working.
I believe that the right answer for a particular person is very fact specific. For instance if you have a non-employed spouse and you can split the CPP with them then waiting might be better because they will have a higher split amount and they may live longer than you will. It is important to think about all of the factors that are specific to your situation before making a decision. I think if you are in the top tax bracket now and will continue working until 65 when you will be in the low bracket (due to pension splitting withe your spouse) and you are don’t have a good track record with investing then you may want to wait. Another bit of information that might be relevant is life expectancy. This is dependant on how old you are now.

18. Marilyn says:

Shouldn’t the ADVANCE INCOME AMOUNTS in the chart, be the full pension LESS the reduction NOT THE FULL PENSION AMOUNTS X 5 years.

19. Anne says:

By 2016, a newly retired 65 year old will be receiving more than \$986.67 (~2%/yr CPI over 5 years = \$100 if my math is correct). Plus, as EI states above, by taking CPP early one disallows future CPI increases for life! Now do the math for twins who both live to 90 years old, one who takes CPP early and the other at 65, with a predicted CPI of 2%/yr (keeping in mind inflation is predicted to increase after 2008/9 fiasco).

Taking CPP early allows a retiree who dies early to pass more on through their will – assuming one has an estate remaining!

To decide whether 60,65,70+ is the best start date, ‘personalize’ your situation weighing CPI predictions, your tax rates over years to come, your need, your life expectancy and inheritance plans.

20. Carol Luxton says:

I qualify for my magic 80 at 57yr plus service. I don not pklan on working once I retire. Want to take my CPP at 60 what % of loss am I looking at. What would my monthly CPP be.

21. Martin says:

I am wondering if some one could clarify that if you take your CPP at age 60 you will not get any yearly cost of living adjustments, I am looking at EI’S comment I have looked on the official web site and can’t find this anywhere?

• Jim Yih says:

You still get cost of living adjustments from the reduced amount at 60.
Jim

22. Martin says:

Thanks Jim,

This is one of the best things I have ever signed up for it is very informative.

Cheers Martin

23. Bill says:

I’m confused how this works. You take your CPP early at age 60 and continue working… but you must still contribute to CPP ?

24. wez says:

I agree with above comments. Thank you, Jim, for this practical info. I obtained my est, monthly CPP benefits (@ 60, 65, 70) from Service Canada. Since my post-55/pre-60 retirement in 2010, my income has dropped dramatically. For example, my 2011 earnings were classified as “B”. As self-employed in 2012, I expect this will become “S”. Basically, my CPP contributions since my retirement 3 years ago would be much lower than the previous decades. How does this affect the calculation of my CPP benefit? Will my benefit be reduced due to some averaging, factoring my low years? If so I defer receiving CPP benefits, will my payout be reduced due to low CPP contributions in my retirement years? Or is my CPP benefit fixed? Or is my CPP benefit based on the average of my hightest 5 years of contributions? Thank you.

• wez

My apology for not replying sooner. I must have missed your question when you first posted it, and I just noticed it now after seeing Andy’s comment below.

You get to “drop out” the lowest earnings for 17% of your contributory period. Your CPP is then based on the best 83% of your earnings years, which works out to approximately 35 years if you start your CPP at age 60, or your best 39 years if you start your CPP at age 65.

25. Debbie says:

Hi Jim
I have just had a leave of absence from work for 3 months. I am planning on buying back that time to my municipal pension plan. can I buy back CPP time as well?

• Karen says:

There is no such thing as buying back ‘CPP time’. Your contributions to the Plan are calculated solely on your income for the year. Your employer should ensure adequate deductions are made. If not, Schedule 8 of your Income Tax Return will calculate what is owing.

26. Mike Young says:

Why does the break even age increase in your charts, yet the advanced income by year decreases?

Hi Jim,
simply great article as usual. I was wondering how did you calculate breakeven months and age?

Thanks

28. Sharon Robb says:

Jim, question….if you start taking your CPP at age 60 in December 2013, do you use the 2013 breakeven chart or the 2014?

29. Dan says:

Hi, I’m 50 years old and I’m wondering if the early retirement is still going to be available to me, when I turn 60, if not when is the cut off for early retirement ?

30. clay kondo says:

I am looking at these charts does the breakeven take into account the money drawn out early could be invested , and if your rate of return on say, stock is 6% the breakeven point would increase in all instances

31. Charles says:

Hi Jim
Thanks very much for making it so simple for us to understand. This certainly makes sense.

32. Jason says:

What bothers me about this approach is that it only looks at gross pension income – it ignores the fact that CPP is taxable. To consider whether one should draw the CPP early, or at age 65, or even defer it, we should be looking at how much cash in hand we would after tax.

CPP is taxable so will be taxed at your highest rate when you take it. For a person who is still working and may make around \$100,000 before the pension, then the CPP will be taxed at roughly 40%. If a person in this tax bracket took the CPP early at age 60 it would first cost the 30% penalty for taking it 5 years early, and then the person would be taxed at 40% on that 70% balance (=28%). Assuming a CPP pension might be \$600 at age 65, then a person on a 40% tax bracket who takes the pension at age 60 would get a taxable pension of \$420 (\$600 -30%) and then pay tax of \$168, and be left with only \$252 cash in hand. In this case, if the person would retire at age 65 with no other income, it seems their smart move would be not to take the CPP until they actually retire. And in the case of a person who might work after 65 or have some other income past then, there would be a good argument for delaying the CPP beyond 65 and letting it grow bigger by .7% a month.

• TC says:

Jason
That is exactly what you have to think ,every person is different so a financial advisor may
Or may not be the answer . But I just list the pros and cons then make a decision.

33. Marion says:

When calculating the 17% of years to drop out, what base # of years is used … 18 to 65? or 18 to when you start collecting CPP? That makes a significant difference i.e. if you start collecting later, a smaller portion of your 0/low income years can be dropped out if the latter is true.

• Andy says:

I have the same question as Marion and Wez. As I understand it, CPP calculations consider the average of the best 39 years of contributions, out of a possible 45 years. The 8 lowest years are discarded in the averaging. However if some of those low years occur in your years since retirement when you are contributing nothing into the plan, that might be another good argument for taking CPP early as the average will continually decrease.

• Andy

I have now answered the questions from Marion and Wez that you referred to, but I also wanted to say that I agree with your comment about your average earnings possibly decreasing if you aren’t working and you delay the start of your CPP from age 60 to 65.

I refer to this situation as waiting to receive a larger slice of a smaller pie. You will almost always get more pie by waiting, but not as much more as you would if your pie stayed the same size.

Of course, if you already have 39 years of maximum (or near-maximum) years by the time that you reach age 60, you can wait until age 65 to start your CPP with little or no decrease in your average earnings, and thus enjoy a larger slice of the same-size pie.

• Marion

My apology for not replying sooner. I must have missed your question when you first posted it, and I just noticed it now after seeing Andy’s comment.

The base period for the 17% dropout is from age 18 until whenever you start collecting your CPP. So if you start collecting your CPP at age 60 it’s 17% of 42 years = 86 months, whereas if you start collecting at age 65 it’s 17% of 47 years = 96 months.

34. TC says:

There are always questions as to which is best for you
1. There is always tax on money , all depends on your income when you take it
2. We don ‘t know what the government is going to do in the next 5 years
3. Income splitting is done with CPP that May or may not help
4. Will I die in the next few years, don’t know but if I do I have the money, but if I don ‘t take it and die they will not give my estate pay for all the years I contributed except \$2500 to bury me.

35. Lazaro Tamondong says:

Early retirement as early as 60 is a personal choice. You will know it by heart when you are ready. If you still owe a considerable amount of mortgage in the bank you would procrastinate retiring. Otherwise it is best to retire as early as you can as our life is unpredictable. You gamble by working until age 65 or 70. Plus getting a larger pension means more tax burden especially when you start withdrawing your RRSPs. The earlier you retire the longer you will live as stress we get from working will kill us. If you don’t have a debt then it is time to retire earlier than 65 years old. The percentage increase in CPP working until 70 years old is not worth the calmness and laidback lifestyle you will experience when you retire earlier. Enjoy your pension the earliest you can afford to retire…the younger you are the better it leads to a longer life, Retire while healthy!!!

• Theo says:

If you work after 60 does the amount you get increase at 60’or 65 after taxes in the pocket money.

• Danimart says:

A refreshing perspective!

36. uwe says:

I turn 60 next year and all the information was very well laid out

• Ronaldo Teles says:

This is very informative subject however, in my case I am currently under medications and the doctor advice me not to go to work full time and given only 3 hours to work to due to my medical conditions. I am only 58 years old and completed my ten years contributions on my CPP. Can I apply for early retirement of 59 due to medical conditions? Do you think this will be approved since I was medically unfit to work for a year and now just started to work for 3 hours only under doctor advice. Appreciate your reply if I can apply now for early retirement.?

Looking forward to hear from you?

Kind regards,

Ronny

37. joe says:

I noticed that the break even point does not take the present and future value of money in to account…have you thought of this?…. not being critical just curious…
thanks for the information… saved me a lot of time….

38. marg says:

Once you turn 65and take the reduction does your pension go back to original amount when all is paid back and how long does it take

39. Sharon & Brian says:

I am 61 in December and plan to continue working for another three years. My husband is on LTD and no longer works. If I take my CPP at age 61 I would get \$747 but if I wait to 65 I would get \$1033 – almost the maximum. I make a six figure salary and am in the 26% tax bracket and the increased CPP payment would not push me into a higher tax bracket according to the marginal 2014 tax table. Should I take my CPP early if I can? My plan would be to invest it.

• Buy an Rrsp borrow the money at the low rate, and claim the interest as a tax deduction on the loan. And pay it off using the CPP EVERY MONTH.

• Richard says:

I am fairly certain that interest on a loan taken to invest in an RRSP is NOT tax deductible.

40. Jason says:

Sharon, the marginal tax table you looked at is only the federal tax – the provinces and territories charge income tax too. You will find the combined rates at http://www.cra-arc.gc.ca/tx/ndvdls/fq/txrts-eng.html but roughly speaking your marginal rate in the 6 figure taxable income is around 40%.

In my earlier post I made the case that in any consideration of the timing of CPP pension income that among other things we should consider the after tax cash in hand not the pre-tax amount. You didn’t mention in your post if you will have a other pension income when you finish work – or if you have substantial RSPs that need to be withdrawn – all these will have an impact on your decision.

There are other variables too that can influence your decision. One is if you need the money right now which it sounds like you don’t. Another is your state of health and expected life span – if there is a likelihood you might die relatively young you would be inclined to take the CPP as soon as possible. Also Lazaro above gives examples of important quality of life factors that may influence your decision – these tend to be more of a personal nature and while very important are not easy to quantify.

If your question is purely one of economics, i.e. which will net you the most money over your lifetime then post some more information and people will be able to give better informed answers. Others may jump in here, but I’d suggest:

2. Amount of other pension income on retirement
3. Amount of RSP income that has to be withdrawn
4. What province or territory you are in.
5. What rate of interest you can get if you invest the CPP income

These should enable people to do a present day cash flow analysis to calculate which is best for you.

Having said that, Lazaro’s points about quality of life are really valid. You mention your husband is on LTD – Lazaro would make the case that if taking the CPP now would enable you and Brian to take a holiday or to do something that you might not otherwise be able to do, that you should do that. This is a quality of life benefit not an economic one, and can’t be measured – only you and Brian would know its value to you.

The common theme through all the answers is that our circumstances are often different, and there is no automatic right answer. In my own case I have some rental property (but no pensions) so my income will not cease at a certain age but hopefully will carry on. I have no need of the CPP at present but no one knows what the future holds so I will only claim it before 71 if there is a problem with my rental property or if mortgage interest rates spike. For me then, the CPP is a form of insurance – a safety net I can call on if I need it, and until then I’ll let it grow. I just mention this to show we are all different.

41. Paul says:

Hi Jim, I will be 65 in Feb 2015. I started collecting my CPP early at 60 and did not pay into my CPP for 2 years. In 2012, it became mandatory to start paying CPP as I am still employed. From what I understand, when I turn 65 I do not have to continue paying into my CPP. I want to know if I am better to stop paying CPP or continue paying as I will receive a PRB. Thanks.

42. Jenny says:

I am currently getting CPP Disability and investing what little I can into the RDSP until I am 49. My questions are: at what age does the CPPD run out and am I eligible to collect CPP after? My taxable income is around \$8000 a year. If it’s worse after, I reach 60 or 65′ seeing as it’s only me I think I would end up homeless.

• Karen says:

CPP D ends at age 65, at which time CPP retirement pension automatically begins. You may also get OAS which can help offset the difference between the higher benefit of CPP D and the lower CPP.

43. Wayne Storms says:

I believe this changes if you are putting your CPP into RRSP’s if you are still working.

44. David says:

Every situation is different and personal but I believe it’s still better to collect early at 60 as opposed to 65 – particularly if your income at 60 is not stable. Regardless of when you collect, you WILL receive the Cost of Living increase and to state otherwise is incorrect. If you collect at 60 and continue to work and pay premiums,you will receive the Post Retirement Benefit in the immediate following yr. The PBR adjustment occurs every Apr 1st.

45. marilyn says:

I am getting wcb here in n.s. till I reach the age of 65. I am 60 now My question is am I allowed to draw CPP and WCB?

46. Greg says:

I am in good health, approaching 60 and have made a salary that maxed my CPP contributions for most of my working years.
For me the monthly CPP payment amount at age 60 vs age 65 is \$640 vs \$1065. A big difference. A bigger decision to make. I put these amounts into a simple spread sheet, and using a CPI amount of 1.5%, I calculated that my break even point by taking CPP at age 65 vs age 60 is at age 72. Assuming I live to age 85, I would have been paid \$318,360 in CPP over 20 years, vs \$230,885 over 25 years had I taken CPP at age 60.
At the break-even year that I turn 72, I would be making \$15,054 in CPP per year vs \$9,046 per year if taken early.
Further my CPI increase amount over the previous year is \$222.48, vs \$133.69 had I taken CPP at age 60.

So given my good health today, and my desire to have as substantial a gov’t benefit as I can while I’m alive, I’m convinced that taking CPP at age 65 is the right decision for me. I am willing to share my spread sheet to any interested parties… send e-mail greg_chauvin at Hotmail dot com.
perhaps someone can poke some holes in my logic / numbers.

• don says:

If you get run over by a car before you retire at 65, you will get \$2500 instead of \$318k….a vast difference. The probability of a male living til 85 from 60 is just 35%. In other words, you are betting on a loser 65% of the time.

• Andy says:

the probability of living until 80 from 60 however is 60% – and 80 still makes sense to defer until you are 65, so I would say you are betting on a winner

• marpy says:

Finally someone that has worked out the fine details of how the CPI impacts the decision. I am of the thinking that unless you need it, your best bet is to leave collecting CPP till at least age 65. Quite simply, as you get older, if you need more money, you will be less able to earn it and deferring your collecting CPP is one way of ensuring you have some more money when you are older. As for possibly leaving some money on the table; well dead people don’t need money and so who cares?? Its a different story if you are still alive and are a few hundred dollars short to what you need to keep your house or stay in a nursing home you would like to be in rather than some other.
One could also argue that you could collect early and put it into an account and invest it but the math tells me that the extra guaranteed 5 – 6 thousand that gets adjusted for inflation every year would be very difficult to beat by any investment scheme. People will have different reasons for doing what they do but to me, unless you need it, you are better off waiting to collect.

• Marpy says:

Good choice Greg! Those worried about getting run over by a car had better think twice about getting out of bed in the morning. 😉

47. Jodi Lynn says:

I plan on taking my pensions late in 2018 at 66 years of age. I’d like to see some calculations to compare receiving it later rather than the earliest possible date.

How much more per month (in dollars) would I get by waiting one year (until 66 years of age) to collect both CPP and Old age security based on a maximum payout ?

• Jodi Lynn

For CPP you would gain \$89.46 (8.4% of \$1,065.00) per month by waiting until age 66, and for OAS you would gain \$41.04 (7.2% of \$569.95) per month. These results are both based on maximum 2015 rates.

48. ron kitt says:

Hello; what interest rate are you using to get the breakeven years? Depending on the interest rate used, the number changes.
thank you
Ron Kitt

49. Patrick says:

Hi! I’m 58 with chronic high Blood pressure, arthritis; causing knee, back, shoulder and hand pain. I’ve been working hard since I was 16yrs old. I believe I’ve contributing all along. I’ve thought about CPP-d but found it a daunting task to apply. Any thoughts or advice would be helpful; especially convincing my wife we could afford it!

• Arthur says:

Hi Patrick; as you do not include any info on your financial situation, it would be very difficult for anyone to advise you. Me, I am fairly healthy but already fedup with busy airports, full cramped flights, etc. so did a budget that considers all my needs and wants as a senior and then balanced my income against the tough emotional questions (how long will I live? how healthy will I be at 80 for driving, living in a house or will I need assisted living?. These type of questions are alot tougher than putting your finances into a spreadsheet and arriving at pure analytical
numbers. A call/visit to a nearby Service Canada office may be helpful whenever you do choose to apply for assistance with the necessary forms.

50. Arthur says:

I really wish some of these articles included a paragraph or two on tax planning. For example, this shows one gets about 40K early if they start CPP at age 60 and a breakeven of 107 months (2016) chart. BUT it does not consider a possible reduction of your tax credit for age 65 and over, or does it tell you to consider OAS clawback. Getting that 40K before age 65 and putting it into a TFSA could save one plenty of income tax at age 65 and each year after. Alot depends on your annual taxable income, health and life wants/needs so just saying , consider all the possible combinations when deciding.

51. Trevor says:

Has anyone mentioned the indexing factor yet? If not, this is a big mistake.

If you include inflation in your calculations, 2%/annum for example, you will find that in 2016 the break-even point is 2 year earlier at age 72. The current maximum monthly benefit is \$1,092.50 which will be \$1,206.21 in five years if indexed for inflation. With this in mind, an individual would receive over \$120,000 more from the CPP if he/she were to defer CPP until 65 and live until 90 years of age, the figure grows by another \$100,000 at age 100. With the CAD down and inflation creeping up, this difference will be much greater.

52. Gus Amodeo says:

Assuming you would get close to maximum at 65. Does it make sense to take CPP at 60 if you are getting a widows’ CPP?

• Gus

That is a very good question!

From all the cases that I’ve examined, if you’re receiving a CPP survivor’s pension you’re usually better off applying for your own CPP retirement pension as early as possible or else wait until age 70.

If you want me to calculate your options for you (for a fee), email me at DRpensions@shaw.ca

53. Jim,

Interesting article. There are also many complicating factors that people might experience. For example:

1. If you include inflation, the breakeven point moves up to the early-to-mid 80s.
2. If you include that you can take CPP early and withdrawal that much less from your investments (with a decent return), then CPP early is almost always beneficial.
3. If you are still working and the CPP withdrawals are taxed on top of your other income, then you can save quite a bit of tax by delaying withdrawals until
4. If you take CPP early and then contribute the full amount to your RRSP (with a decent return), then taking CPP early is almost always beneficial.

Ed

54. Ian says:

I find the comments above are great BUT, the human factor needs to be considered, the extra money usage at 60 will most likely be different than 65. I have a nice little sports car and enjoy going on little tours, I might not be able to do that later in life. Hell I could get hit by a bus tomorrow! Plus the government can change the rules.

Ian
Moncton

55. Burt Densmore says:

At my age 60 the Provincial Disability social wrecker said I had to start up my CPP just so that Prov Disability wanted to collect every dollar I was to be in CPP to deduct it off my Prov Disability. BurtD

56. Ryan says:

With the average Canadian living to 81 but not in any shape to enjoy your life take the money early and have fun while you still can. Screw the kids let them earn money the hard way.

57. Victoria says:

But if I make, say, \$75K per year, isn’t it all clawed back? Thanks for answering!

• Victoria

CPP is taxable income, but it’s not “clawed back”. You’re thinking of OAS, but even for OAS the clawback begins around \$75K but it isn’t fully clawed back until somewhere above \$100K.

58. Levis says:

I am 55 will be retiring this November at 56 years old with 29 years service maxing out most years contributions to ccp. My pension estimates show me retiring with a 65k per year pension with next to no index. I have enough savings to top my monthly pension with 1k per month for 20 years what would you recommend.

• Levis says:

• Levis

If your 65k pension is enough to live on now, but it’s not fully indexed, I would lean towards delaying both your CPP and OAS until age 70.

• Levis says:

I think that is a great idea Doug Thank You. My pension would be somewhat indexed… in my eyes.

59. Burt DEnsmore says:

If on ODS or BC PWD at the age of 60 then you are forced to colllect your CPP so that every dollar you collect for CPP goes directly into the coffer of ODS or BC PWD. CPP or EI will be deducted off away from your Prov Benefit. But if you never paid into CPP and EI then you will collect nothing. And then the Prov ODS or BC PWD will pay you top dollar per monthly with no deductions to take away from you.

60. Wayne moss says:

CPP is a scam. You and your employer contribute to YOUR pension all your working life and if you die early you collect nothing or very little of a large pile of money if invested privately over a 40 to 50 year working career. This is not fair or just. Your family should be able to avail of that money in your will since it was your money in the beginning. It should be changed but won’t be because Canadians are too passive and are willing to take whatever they get.

• Wayne

With all due respect, the CPP is not a scam. It was always intended to be a group plan for all workers in Canada, rather than an individual plan. It’s certainly true that some people will collect less from CPP than they (and their employers) contribute, but it’s equally true that some people collect much more they contribute. That makes it a group social insurance plan, not a scam.

61. Dave says:

I am about 62 1/2 and have been tracking my estimated CPP for the past 24 months (my calcs following Doug’s instructions versus the amount stated on my Service Canada online CPP estimate) My figures have agreed perfectly with those stated by CPP each month until Feb and now again for March. My normal age 65 amount decreases slightly each month as I will have less than 39M years. (36.8505) The normal age 65 amount was the same 1078.87 for Jan and Feb according to SC – CPP, but this cannot be as I will not be adding zeros until Nov of this year.

Has anyone else noted this? I’ve checked my calcs many times of course and now believe that the SC – CPP computer producing the online estimate is in error.

Any thoughts, Doug?

• Dave

The estimate (and the actual calculation) can sometimes remain exactly the same from one month to the next, due to the way that the 17% dropout works.

For example, if you were born in May 1953 and you did the calculation effective Jan 2016, your contributory period would be 535 months and you would drop out 91 months, leaving your earnings averaged over 444 months. If you did the calculation effective Feb 2016, your contributory period would be increased to 536 months but the dropout would also be increased to 92 months, leaving the same earnings averaged over the same net total of 444 months.

• Dave says:

Thanks Doug,….I was born in May 53.

Following your answer and more looking I think I found the issue. Although I had calculated the correct # of dropout months to get the 444 result for both Jan & Feb I had added 445 months of contributions to the February calculation and used 445 rather than 444 to divide the result.
Thanks again.

62. Dianne Arsenault says:

My husband is a seasonal worker and collects EI part of the year. I’m told CPP has to be declared as income, thus lowering his monthly EI payments. Is he better off delaying taking his CPP if he plans doing this beyond age 60 which he will be in June 2016.

• Dianne

That is certainly an important factor to consider, and I think that I would delay my CPP in this situation.

63. Arthur says:

I think one should also consider inflation. I noticed the annual max went up 2.58%(2016-2015/2015 while a payment only went up 1.2%. So when you look back and show a chart as 2016 data, and show the same max as in the 2012 chart, I wonder how to really interprid the data and understand the best option for me.
2016 – \$1092.50 per month
2015 – \$1,065.00 per month
2014 – \$1,038.33 per month
2013 – \$1,012.50 per month
2012 – \$986.67 per month

I think that the chart showing 986.67 and the 2016 max of 1092.50 is just too big a number to ignore in doing this chart. (2016-2012) max /2012 works to a 105.83 dollar increase or 10.73%.

64. Ana says:

Hello,

I am 66 and plan to continue working till 70. I decided not to cash my CPP because due to my annual income (105K) I would have to return it completely. Instead, I let the CPP continues to grow, and I will cash it at 71…. Meanwhile, by age 70 (if I continue working) I will have paid off my mortgage. So I will enjoy no bank’s debts plus an increased CPP. I realize that 4 years more of work is kind of a sacrifice but seen that through brighter lenses made me understand that I am living in a peaceful country, with social security and the advantage of knowing which amount of money I will count with when I retire… Then, I am very careful in choosing to live everyday without stress and happy – knowing that this will increase my life expectancy so when I retire at 70 I will be sound and financially secure.

• Dave says:

Hi Ana,

You have a wonderful attitude!.

CPP does not get returned due to your income level but I agree with your delaying it. Start it at 70 not 71. There is no benefit to waiting the extra year.

OAS which you are eligible for at 65 does get “clawback” because of income at your 105 K level. I suggest you also delay starting it until age 70 also.

• Ana says:

Hello Dave,

Yes, I would definitely delay starting both (CPP and OAS) till 70.

Thank you,

Ana

65. Ana says:

Hello Dave,

You said that “CPP does not get clawed” (returned) due to my income level (105K ?… are you sure?

Because if it didn’t get “the claw” perhaps is better to cash it and directly deposit it to pay off earlier the mortgage…. Thay way working till 70 will allow me to save more money.

Ana

• Ana

Dave is correct that the CPP does not get “clawed back”, but it is taxable income.

If you do decide to start receiving your CPP now, you will have the choice to continue contributing the CPP and earning additional “post-retirement benefits” (PRBs) or you can elect to stop contributing which will save you about \$2,500 each year.

• Ana says:

Hello Doug,

As mentioned before, I will delay starting the CPP and OAS till 70.
That gives me the best financial reward, plus by working till 70 also allows me to fully pay off my mortgage.

My employer continues to do the CPP bi-monthly withdrawal (under the Employer Paid Benefit) and I continue to contribute the same amount (under the Employee Statutory Deductions)

Should I be concerned about anything?

Thank you,

Ana

• Ana says:

Hello Doug,

On June 2013, the CPP Office sent me a letter explaining that if I retired at that time I would have perceived 503.75; but if I continue to make CPP contributions till 2020 to the Max Pensionable Earnings Amount stipulated per year, then I could receive a retirement pension of 778.37 (applying at 70)… IS THIS AMOUNT OF 778.37 CORRECT?

Thank you,

Ana

• Hi Ana,

Delaying CPP until age 70 increases the pension by 8.4%/year, or 42% after 5 years. Adding 42% to \$503.75 would give you a pension of\$715.33.

In addition, this will rise because you continue to contribute. That calculation is more complex.

Does the letter say they whether they have assumed you continue to contribute or that they are estimating inflation?

There is no reason to doubt CPP, as long as you understand their assumption. Their figure sounds about right, assuming you continue to contribute.

Ed

• Ana says:

Hello Doug,

I think the CPP calculation given to me by the government is correct, maybe a little lower than what I would actually get because I continue to contribute.
If I feel the need I will definitely contact you for a more precise calculation.

Thank you,

Ana

66. Dave says:

I am 100% sure that CPP does not get clawed back, however OAS does.

I’ll leave it to you to decide on the mortgage issue. I think I would want to know what your expected post retirement income is before deciding.

67. Ana says:

Hello Dave,

It’s not worth to cash the CPP now because after the 36% bracket tax deduction it would represent a small monthly contribution to the mortgage. Better to leave the CPP to grow till 70.

On June 2013, the CPP Office sent me a letter explaining that if I retired at that time I would have perceived 503.75; but if I continue to make CPP contributions till 2020 to the Max Pensionable Earnings Amount stipulated per year, then I could receive a retirement pension of 778.37 (applying at 70)… IS THIS AMOUNT OF 778.37 CORRECT?

Plus with mortgage paid off by 2018, choosing to work two more years allows me to save almost the whole salary (as I have no other debts), while increasing my OTPP monthly amount.

Please let me know if the above CPP estimated amount is correct.

I welcome suggestions for a better financial retirement plan.

Thank y ou,

Ana

68. Dave says:

There’s insufficient information here to determine the answer. Doug is the expert and I would recommend you contact him.

69. Hi Ana,

With your income so high, it probably makes sense to delay your CPP until age 70 when you stop working. You are in a marginal tax bracket over 40%, so you will end up paying almost half in tax.

Do you still have RRSP contribution room? If so, I would suggest to max your RRSP even if you need to take CPP earlier to do it. It is easy to invest in your RRSP for a higher return than you get in the CPP.

Your one other option could be to request your employer stop deducting CPP and then use the extra cash to invest.

You clearly need a retirement plan, though? Are you sure you will have enough to retire the way you want? Your CPP should be only one piece of your retirement plan. With a proper retirement plan, the answer to these question may be more clear.

Do you really need to work until age 70 to retire the way you want?

Ed

70. Ana says:

Hello Ed,

thank you for your response and suggestions.

I will also have an OTPP (Ontario Teacher Pension Plan) which slightly grows with each working year.

By December 2015, my employer and myself have contributed each of us the amount of \$2480 to the CPP line. If I ask my employer to stop the CPP contributions then I will receive those \$2480 as part of my salary? … and what would happen with the current
Employer contributions?

Ana

• Ana says:

Hello Ed,

Are you a professional financial adviser? If so, how much you charge for a consultation?

Thank you,

Ana

71. Don E says:

I believe the charts should be provided with additional information on a basic time value of money consideration. I don’t disagree with the basic math but if I were to take CPP early at age 60 and deposit this money into an investment with a 5% rate of return the breakeven point pushes out to between 79 – 80 years of age rather than between 73 and 74 without time value of money.

The other point I would like to make is if I delay taking CPP past the age of 60 am retired and spending my own money I am spending my savings rather than spending the governments money.

• Don E says:

Sorry I would also like to say the governments money runs out when I die where as my money remains for my beneficiaries.

• Arthur says:

Don, yes, there are many pieces to financial planning for and in retirement, but your thought on perservation of money/assets is the one that ties it all together. This stream is on CPP, the next on TFSA or RRSP and a few even on tax planning. but if plan is to make your own money outlast you , you then realize that you must develop a plan that has all the pieces having the same end objective. How about start retirement by taking CPP, OAS, and GIS as your income, thus no income tax and for the extras, use withdrawls from your TFSA. If you live comfortable until you need to RRIF at age 71, stop and thank the government. Start rebuilding your TFSA with RRIF income. Heres where your beneficiarires will thank you.

72. Dominique Maison says:

I can say one thing and that is the tax system is too complicated. It’s all based on assumptions and guesses.

73. Greg says:

Hi again

I have also used and highly recommend the following calculator as a sanity check on any decision to take CPP early or to defer …. It automatically adjusts the CPP amount you will get depending on when you decide to start taking it, relative to your age, it accounts for your OAS, and any other pension income and it will tell you if / when you will run out of money based on the data you put in … you can run the calculator with one set of numbers , make adjustments and run them again … so lets you calculate and see a bunch of what-if scenarios by changing your data points including expected rate of return before or after retirement, as well as the rate of inflation.

http://www.dinkytown.net/java/CARetirementPlan.html

74. Dave says:

Another factor. If you expect to be in OAS clawback territory – 73500 to 117000 then taking CPP early might make sense. If you’re in clawback range any additional income is effectively taxed at an additional 15% so the extra CPP if you choose to wait till age 65 would be affected.