Should you take CPP early with new changes coming?

On December 15, 2009, several changes to the Canadian Pension Plan (CPP) became law with the passing of Bill C-51. These new changes will be gradually phased in over five years starting in 2012.

The changes will have no impact on you if you are already receiving a CPP retirement pension, disability benefit, survivor benefit or combined benefits, or if you will begin to receive these benefits in 2010. If you collect CPP prior to 2011, your CPP will be grandfathered under the current rules.

Back when the rule changes were first proposed, I wrote an article on the proposed changes to CPP. It's worth reading again.

Now that the changes have formally been accepted, If you are between the ages of 60 and 65 and plan to take-up your Canada Pension early, you should consider how the new changes to CPP may influence your decision. There is a short window of opportunity to determine the best course of action for you.

Related article:  The 4 Most Common Questions About CPP

Taking CPP early

Under the current rules, you can take CPP before 65 but at a reduced rate of 0.5% for every month prior to your 65th birthday. That equates to 6% drop in CPP each year prior to 65. Taking CPP at 60 would mean a 30% reduction.

Under the new proposed rules, the percentage to reduce your CPP will increase from 0.5% to 0.6%. Simply put, that means they are going to hit you harder for taking CPP early. To give you incentive to take CPP later, they are increasing the enhancement rate post 65 to 0.7%. The message is simply CPP want to discourage you from taking CPP early and encourage you to leave it longer.

For those of you that are between 60 and 65 and have the opportunity to collect CPP early before these new changes come into effect, you should take a hard look because waiting could mean less money for those taking CPP before 65.

A window of opportunity

I can't stress enough the importance for those age 60 to 65 who are contemplating retirement and collecting CPP in the next year. There is a window of opportunity to be grandfathered under existing rules. You should take the time to see if it is better to be under the current rules or the new proposed rules for 2012.  (SEE COMMENTS BELOW)

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 and Clearpoint Benefit Solutions.

55 Responses to Should you take CPP early with new changes coming?

  1. Your blog stated the changes will have no impact on you if you are already receiving a CPP retirement pension, disability
    This is not what is listed on Service Canada website, it states in 2012, cpp contributions mandatory for employees age 60 to 65 who work while receiving CPP retirement pension?

    • Janice. You are correct. The part that is grandfathered is the amount you will collect. If you are taking CPP early prior to the implementation of the new rules, you will continue to get the same income (indexed adjusted) but if you go back to work (because you had to stop working to collect in the first place), then you will have to pay into it again. But the new contributions will also increase your future benefit.

      The point I was trying to make is the reduction by taking it early is only 0.5% per month as opposed to 0.6%. When I re-read my article, I was not clear on this point so thank you for raising the issue. Also know that CPP is phasing in the reduction as opposed to going right to the 0.6% immediately (which was not clear when I first write the article). That means rushing to take CPP early before the changes are implemented in 2012 is not urgent anymore.

      Thanks again for your comment.

    • Denise
      Yes, that is one of the changes effective Jan 2012. As of that date, you can apply for a CPP retirement pension without the need to “wholly or substantially retire”. Another change however is that if you do continue working is that you MUST continue contributing to CPP if you’re under age 65, and you MAY contiue contributing if you are between 65 and 70.

    • Gerald
      You can only receive CPP at age 53 if you have a “severe and prolonged” disability. Severe is defined as being “incapable regularly of pursuing any substantially gainful occupation” and prolonged is defined as being “indefinite and long continued, or likely to result in death”.

  2. I am a single 60 year old woman with a full time job is it worth it to take early cpp and invest it. I am not sure when i will retire or I may lose my job due to downsizing

  3. If I claim my CPP at 60 and I must continue to contribute until I am 65, can I write that off on my Income Tax.

    • Barry
      You can always deduct your CPP contributions from your taxable income, so YES, you can deduct contributions that you continue to make after starting your CPP retirement at age 60. These extra contributions will also create additional “post-retirement benefits” or PRBs, in addition to whatever retirement benefit you start receiving at age 60.

  4. Hi let me just say that this government is just screwing the small person every chance they get. No wonder no one wants to vote anymore why vote they will all screw you the same.

    • Randy – The answer to this question depends mostly on when you reached age 65. Prior to 2012, once you started receiving your CPP retirement pension, you no longer contributed to CPP and your pension therefore wouldn’t ever increase (except for the annual cost of livng increase). Since 2012, contributions are mandatory to age 65 and optional between age 65 and age 70, regardless whether you’re receiving a CPP retirement pension.
      So, when did you reach age 65?

  5. Please tell me what is the maximum CPP one can receive ?
    If a person is 65yrs and still working and contributing to CPP, is there any benefit. (PRB)
    What is the reason for not contributing at age 65-70.

  6. I am born in July 1955. When should I start collecting CPP I am thinking of collecting cpp at age 60 in 2015. what is your opinion.

    • Chandrakant

      From the perspective of a total CPP payout, you’re generally better of taking it at age 60 if you die before 80, and you’re generally better off waiting until age 70 to take it if you live beyond age 90.

      In between those two extremes, it will vary somewhat depending on your lifetime CPP earnings history and when you actually retire.

      If you want detailed calculations to help you make that decision, email me at [email protected]. I do charge a fee for this service.

  7. Greetings Doug,
    I am writing to get some information for my uncle who is a Canadian and has been living in the United States since 1971. My uncle is now 80 and has never applied to receive CPP or OAS. He worked for 4.5 years in Montreal and 7 years for Chrysler’s in Windsor before getting married and leaving for the states in 1971. I understand that the CPP commenced in 1966, therefore, he payed into it for 5 years. He is wondering what exactly is he entitled to and how much will be his monthly payments and lastly will he receive backpayments from his 70th birthday. Lastly, I don’t know if this helps, but he was self employed in the United States and paid into a pension there until his retirement. Your assistance would be much appreciate.

    • Leo
      I’d need to know your uncle’s earnings for those 5 years to give you an actual CPP amount, but if his earnings were at maximum, each year of contributions would normally be worth approx. $25 per month towards an age-65 pension. Since your uncle is over 70, that amount is increased by 42% to approx. $35.50.
      That means that for his 5 years of max CPP contributions he could be eligible for as much as $177.50 monthly. Unfortunately, the maximum retroactivity is 12 months, and here’s the weblink for info on how to apply:
      For OAS, he would normally need to have 20 years of residence in Canada after age 18, and it sounds like he may be very close to having that. If not, he still might qualify under the Canada/USA social security agreement, so it’s still worth applying, and here’s a weblink:
      If he has near the 20 years of residence in Canada, his OAS would be approx. $275 monthly, and again there’s up to one year’s retroactivity.

  8. CRA msca show at age 61 monthly CPP would be $630 and at age 65 $870 (approx).
    when to start taking CPP ? before age 65 or at age 65 ?
    the monthly income is less if start CPP at age 63 instead of starting at age 61 ?
    so take it early, don’t wait till age 64 – otherwise better wait till age 65
    is my understanding correct ?

    • Yee – I’m not 100% sure that I understand what your understanding is, but you’re definitely wrong that the monthly amount at age 63 is less than at age 61. At least, that is not possible under any situation that I can think of.

      Whether it’s better to take it before age 65, at age 65 or after age 65 depends mainly on:
      – your current lifetime average earnings pattern;
      – your current and planned future earnings;
      – your life expectancy

      In very general terms, you’re better off taking it at age 60 if you don’t expect to live past 75ish and you’re better off taking it at age 70 if you expect to live past 85ish. Everything in between varies a bit, but age 65 is often never the best age to start your CPP regardless what your life expectancy is.

  9. Hi Doug,

    If I wait to start my CPP until age 70, and then suddenly die, what would be the effect on my spouses pension. Does the age 65 max combined retirement and death benefit pension rule still apply to her or is it adjusted, in anyway to reflect my having waited to age 70 to start it? (Assume no additional contributions by me between 65 & 70).


    • Dave
      If/when you start your CPP has no impact on the amount of survivor’s pension that your spouse will receive, either as a standalone benefit if your spouse had no contributions of her own, or when it gets combined with her own retirement pension.
      Sorry if that’s not what you hoped to hear!

        • Webster

          The answer depends on whether the other years are all zero contributions and at what age you take your CPP. Here’s a link to an article that I wrote on this subject:

          If the other years are all zero, that means you’d receive 25/39ths of a maximum pension (25/39ths x $1,065 = $682.69) at age 65.

          If the other years aren’t all zero, total the max equivalents of your next best 14 years. For example, if your next best 14 years were all half-max, that would be equivalent to 7 more years of max, making your total 32 years of max equivalents and your CPP would be 32/39ths or $873.85 at age 65.

  10. if I take my cpp early, say 61 will it change when I’m 65 to the amount it should be, or is this reduced amount what I am to receive forever?

      • I am 63 years of age now and will turn 64 on Dec 14, 2015.
        I was forced out of my job 2 months ago.
        I have just recently (one week ago) applied for unemployment insurance benefits.
        Should I be applying for CPP now, or try to wait at least until I have reached age 65.

        • Dan

          If you don’t really need the extra money now, I would suggest waiting at least until your EI runs out.

          For each month you wait up until age 65, your CPP will increase by approx. 0.58%-0.60%.

  11. hi, I will be 62 yrs old. I receive retro, still working and would really want to know the amount that I would be receiving. Thinking of retiring New Year’s Eve . At least an amount that could quite me. Thanks

    • Patricia – I’m not sure that I fully understand your question, but if you’re asking how much CPP you’ll receive at age 62, it would be approx. 82% of what you would receive at age 65. Your best source for an amount is to call Service Canada at 1-800-277-9914.

  12. I am 59 and just retired. If I choose to wait until age 65 to collect my CPP instead collecting it early at the age of 60, would I then be eligible to receive the maximum CPP pension, even though I stopped working at 59 and not working or contributing up to 65 ?

    • Alex

      If you start your CPP at age 65, the general (17%) dropout allow you to not count your lowest 8 years of earnings (or no earnings). That means that you can drop out those last 6 years of zero earnings from age 59 to 65, plus two more years.

      The only way that you’ll get the maximum CPP at age 65 though is if you have at least 39 full years of maximum earnings/contributions from age 18 until age 59.

  13. I almost got an answer in the above comments but not quite.

    I applied to take early retirement on my 60th birthday with the plan to actually retire on my 63rd.
    As far as I understand if my CPP goes up as long as I am working then although the first year my CPP will be reduced 36% (2nd yr. 28.8%, 3rd yr. 21.6%) the year I actually retire it will be reduced 14.4% for the rest of my life and I will have gained by collecting (and Saving) for the past three years.
    A colleague (both same age) of mine plans to keep working until he is 63 then take his Pension thinking his CPP will be at a higher percentage than mine.
    Other factors; His Superann. is $2700pm and mine will be about $1200 at 63.

    • Martin

      Either you misunderstand the way CPP works, or I misunderstand what you’re saying.

      If you apply for your CPP retirement pension at age 60, it will be reduced by 36% for life, even if you’re still working and contributing.

      Any contributions that you make after you start receiving your regular CPP retirement pension will generate one or more post-retirement benefits (PRBs), but your regular retirement pension will stay at the same reduced amount for life (except for the yearly CPI increase).

  14. I’m looking for a answer to my question, I understand that the age where you can apply for early cpp has change from 60 to 62. But some people were able to be grandfather in at 60 can you tell me where the cut off is what year and month.

    Thank You

    • Allan

      There was no change to the eligibility age for CPP, but there was for OAS. The change starts for those born in 1958 or later, although the Liberals said that they would reverse that legislation.

  15. If I contributed CPP for four years from my job and I’m leaving Canada due to personal reasons. I am 37 now and want to claim CPP or withdrawal early. Kindly advice the possibilities.

    • Rasika – Your only option is to apply for a CPP retirement pension when you reach age 60 (at the earliest).

      • Thanks Doug. So the only option is I can check my balance in my account and can only claim when I will reach at the age of 60. If I don’t stay in Canada I understand still I am eligible to withdraw @ 60.

        • Rasika – Yes, you can receive your CPP at age 60 wherever you are living at that time. For 4 years of maximum contributions, your CPP at age 60 will be approx. $71.68 per month (in 2016 dollars).

  16. Hi Doug
    Thank you for this nice forum and for sharing your wealth of knowledge and kindness.

    I am 57 and will apply at 60 for CPP. Been contributing for 35 years and have 20 years of those 35 years at max contributions.

    Would you be able to tell me approximate CPP monthly ?

    • Lori – It’s impossible to estimate what your CPP will be without know what your earnings were for the 15 non-max years. I suggest that you contact Service Canada at 1-800-277-9914 and they can give you a good estimate.

  17. Hi Doug appreciate your input i will be 60 born Feb 1957 but still healthy plan on working until at least 64 but it is probably better to leave the CCP as close to 65 as possible to take maximum benefit. Losing 36% if you don’t need the money but the other option is to invest and i think over 5 years or 10 it will be worthwhile only as an investment to try to rec over some of that 36%. What would your advice be?

    • Terry – My only advice is to know what your CPP choices really are, and to do what makes sense to you considering your other retirement savings and income streams.

  18. Hi,
    My husband is 62 years old and he started taking his CPP when he turned 61. He is working still and plans on doing so until he reaches 66 or 67 years of age simply because he likes his job and provides him with lots of enjoyment and social exposure. The reason why we took his CPP early is because we wanted to benefit from having money into our TFSAs for later retirement. For us it made sense. While he receives his CPP, he still pays into his contributions until he reaches the age of 65. And to note, he also gets an increase in what he gets every month in relation to what he pays every year. We realize this is not for everyone but for us, it works as we make this extra income work for us for future use and not wait until he reaches 65 to use it. Even if you receive a reduced rate of your original contribution, make wise decisions on where you will put it into may benefit you and your spouse in the long run. Thanks.

    Remember, not only did you and I contribute to CPP but your employer
    Did, too. It totalled 15% of your income before taxes. If you
    Averaged only $30K over your working life, that’s close to $220,500. Read
    that again!
    Did you see where the Government paid in one single penny?
    We are talking about the money you and your employer put in a
    Government bank to insure you and I, that we would have a retirement
    Cheque from the money WE put In, not the Government. Now they are calling
    the money we put in an
    Entitlement when we reach the age to take it back.

    If you calculate the future invested value of $4,500 per year (yours &
    Your employer’s contribution) at a simple 5% interest (less than what
    The govt. Pays on the Money that it borrows), after 49 years of working
    you’d have

    If you took out only 3% per year, you’d receive $26,787.60 per year
    And it would last better than 30 years (until you’re 95 if you retire at
    Age 65) and that’s with no interest paid on that final amount on Deposit!

    If you bought an annuity and it paid 4% per year, you’d have a lifetime
    Income of $2,976.40 per month.

    Also why does the government place a cap on collecting survivor benefit and your CPP amount? My wife took early CPP after returning and finding ou she had cancer. She passed away within a year and now I collect the survivor pension but once I apply for early CPP I can only receive my maximum which also takes into account the survivor pension. So in reality we are getting screwed because what we and our employer contributed isn’t what in the end we receive.

  20. Hi Doug: I plan to retire in 2018 at age 60+ and my spouse will be 65+. If I continue working after applying for CPP, would I be considered for a higher rate than the 60 year rate because I don’t take the benefit until later than my 60 year date Thanks

  21. Hi Doug
    I’m 59 years old and thinking about collecting early retirement at 60 .I’ve maxed out the past 30 years. My thoughts were that I would use that money to pay down my line of credit while I still work till I’m 65, I have other debt issues as well but I do know that if I were to do this that would make me debt free in the next 6 years. What are your thoughts, Thank you.

  22. so if someone take early CPP at age 60, they get hit with a reduction rate. What happens when they retired at 65 after they’ve been collection early CPP since they were 60? That reduction rate will not apply to them anymore and they will collection their CPP at a normal rate?

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