Special to the Financial Independence Hub
The most common Canada Pension Plan question I am asked is: “Is it smart to take my CPP early?”
A quick review of the facts:
- The maximum CPP benefit in 2017 at age 65 is $1,092.50 per month, or $13,110 per year.
- You can start as early as age 60, but you get 7.2% less for every year before age 65. If you start at age 60, you get 36% less, so the maximum is $8,390 per year.
- New rules in 2012 increased the penalty for starting early, but you can start CPP even if you are still working.
The simple breakeven calculation misses many important factors. For example, if John starts receiving $8,390 per year at age 60 and Jane starts receiving $13,110 at age 65, it will take her nine years to catch up. The simple breakeven is age 74. John gets more before age 74 and Jane gets more after.
This implies that if you expect to live past 74 (and most people will), you should delay your CPP. But this is not the full answer.
The answer depends on five main factors: