When Should You Take CPP?

For a lot of Canadians, CPP feels like it should be a pretty simple decision. Take it at 60, wait until 65, or hold off until 70 and get more. But like most things in retirement planning, the answer depends on what the rest of your life and finances look like.

CPP can start as early as age 60, with 65 being the standard starting age. If you take it before 65, your monthly payment is permanently reduced by 0.6 percent for every month you start early. If you take it right at 60, that works out to 36 percent less per month than if you waited until 65. On the other side, delaying CPP after 65 increases the payment by 0.7 percent for every month you wait. If you wait until 70, your monthly payment is 42 percent higher than it would have been at 65.

So on paper, waiting looks pretty attractive. But the bigger payment is only part of the story.

How Long Do You Expect to Need the Income?

This is one of the biggest considerations. If you start CPP at 60, you get five extra years of payments compared with someone who waits until 65. If you wait until 70, you are giving up another five years of income in exchange for a much larger monthly payment later.

That trade-off looks very different depending on your health, your family history, and how long you expect retirement to last. Someone with health concerns may put more value on taking CPP earlier. Someone who is healthy, has longevity in the family, and expects to live well into their eighties or nineties may look at that differently.

Retirement can last a long time, and that matters because CPP keeps paying for life. It is also adjusted over time for inflation. That makes it different from simply drawing money out of an investment account. If you take $20,000 out of an RRSP, that money leaves the account. CPP keeps showing up every month for as long as you live.

For someone concerned about outliving their savings, that larger payment later in life can be very valuable.

But you still have to get there.

What Does Waiting Mean for the Rest of Your Money?

If you retire at 65 and decide to wait until 70 for CPP, those five years still need to be funded somehow. That may mean drawing from cash, RRSPs, non-registered investments, a pension, or another source of income.

Sometimes that makes sense. Sometimes it does not.

This is why the question should not simply be, “Will I get more if I wait?” A better question is, “What do I have to do with the rest of my money while I am waiting?”

If delaying CPP means putting too much pressure on your investments, taking on debt, or creating uncomfortable cash-flow pressure, the larger payment later may not be worth as much to you.

On the other hand, if you have a strong workplace pension, significant savings, or other reliable income, waiting may be much easier.

That is why two people with the exact same CPP entitlement can reasonably make completely different decisions.

Taxes Matter Too

CPP is taxable income, so when you take it can affect how it fits with everything else you are receiving.

Maybe you are still working. Maybe you have a pension. Maybe you are drawing from an RRSP or RRIF. Maybe you have investment income from a non-registered account. All of that income can stack together.

For someone who is still earning a strong income in their sixties, taking CPP right away may simply add more taxable income during years when they are already in a higher tax bracket. For someone else, taking CPP earlier may allow them to withdraw less from another taxable account.

Later in retirement, income can also affect Old Age Security if your income is high enough for the OAS recovery tax to apply.

So CPP should not really be looked at on its own. It should be looked at beside everything else.

What If You Are Still Working?

You do not have to stop working to collect CPP.

If you are working and receiving CPP between ages 60 and 65, you generally continue contributing to CPP. Those additional contributions can create Post-Retirement Benefits, which are added to your retirement income.

Between 65 and 70, you can generally choose whether you want to keep contributing while you work and collect CPP. At 70, contributions stop.

For someone planning to work well into their sixties, that becomes another piece of the decision.

There Is a Personal Side to This Too

Not every retirement decision needs to be reduced to a spreadsheet.

Some people simply want to take CPP as soon as they can. They would rather have the money while they are younger, healthier, and more likely to travel or spend it.

Others like the idea of delaying it and knowing they will have a larger, inflation-adjusted payment later in life.

Both can be reasonable.

A strategy can look perfect mathematically and still not be the right strategy for the person who has to live with it. Comfort, lifestyle, family priorities, and peace of mind all matter too.

A Few Questions Worth Asking

Before deciding when to start CPP, it helps to look at the whole picture.

How much income do you actually need each month? Are you still going to be working? Do you have a pension? How much would you need to withdraw from investments if you delayed CPP? What does your tax situation look like now compared with later? Could additional income affect your OAS? How important is leaving money behind compared with maximizing retirement income? How is your health? Does longevity run in your family?

And maybe most importantly, which option gives you the most confidence in your overall retirement plan?

The Bottom Line

There is no magic age for taking CPP.

Starting at 60 gives you more years of payments, but each payment is smaller. Waiting gives you a larger monthly amount, but you need to fund the years in between.

For some people, taking CPP early will make sense. For others, waiting until 70 could be a very valuable part of the retirement plan. And for plenty of people, the right answer will land somewhere in the middle.

At DO Wealth, we look at CPP alongside everything else: your investments, pension income, taxes, spending, health, longevity, and the lifestyle you actually want in retirement.

Because the goal is not to maximize one cheque. It is to make the whole plan work.

So before automatically taking CPP at 60, 65, or waiting until 70, it is worth asking one better question: When does CPP fit best with the rest of my life?

This article is for informational purposes only and does not constitute financial, investment, tax, or legal advice. CPP decisions depend on individual circumstances, income needs, health, longevity, tax position, and other retirement assets. Speak with your DO Wealth advisor before making decisions about your retirement income.