CPP - When Do I Collect?

A large number of baby boomers are now looking at retirement options. One of the biggest decisions to make is when to take eligible Canada Pension Plan (CPP) benefits.    Two major factors in making this decision are your health and current and future earnings. 

The standard age to start receiving these benefits is 65, however, you can begin to take CPP as early as 60 or defer it up to 70.  Below is a graph illustrating the reduction of CPP if it is taken early and the increased benefit if deferred.

Things to consider

Health

If you are in good health, expect to live a long life and will have lower income in the future, it may be beneficial to delay the start of your pension.  As shown above, delaying CPP till age 70 can increase the benefits by up to 42%.  If you are experiencing health problems or have a family history of health problems, you may want to consider taking CPP benefits as early as possible.  This would ensure that you take full advantage of the CPP benefits. As shown in the graph, however, the reduction in benefits can be as high as 36% if taken at age 60.

A general guideline in deciding when to apply for your CPP early or late is your life expectancy. If you expect to live past74 it is best to apply for your CPP early and if you expect to live past 82 delay your taking your CPP until after70.

However , if you are your own employer these ages of reference are extended as your company is required to match your personal contributions to the CPP plan.  

Current and future earnings and tax impacts

If you are still working and elect to take CPP early, you are required to continue making CPP contributions until 65 on any employment income , after which you will have a choice whether to continue your contributions until 70 or opt out. Any contributions made after electing to receive CPP will increase your CPP benefits in the year following the contributions.

Another factor to consider is the possibility of Old Age Security (OAS) clawback, which is imposed on net income greater than $74,789.  If your net income exceeds this amount then you will have to repay 15% of the excess, up to a maximum of the total OAS benefits received.  Receiving CPP benefits may put you over the threshold and a portion of your OAS will be clawed back. 

It is important to review your specific situation with your professional advisor, including the aspects noted, before making a decision as to when to start receiving your CPP.