The pros and cons of receiving your Canada Pension Plan benefits early or late

(NC) Financial planners used to ask their clients, “What if you die? How will you look after your family?” Nowadays, with people living longer, the question is, “What if you live?” One of the key decisions that many Canadians need to make in retirement planning is when to begin receiving your Canada Pension Plan (CPP) benefits. It’s an important decision that can have a significant impact on retirement income, but it’s a decision that is different for everyone based on personal circumstances.

Understanding the impact of early and late benefits: The standard age to receive CPP benefits is 65. You can start as early as 60, but you’ll receive a smaller amount; or you can delay until 70 and receive higher benefits. (The maximum monthly amount is reached at 70, except for increases due to inflation.) Here’s how it works:

• If you choose to start receiving benefits before age 65, payments will decrease by 0.6 per cent each month (or 7.2 per cent per year), up to a maximum reduction of 36 per cent if you start at age 60.
• If you start after age 65, payments increase by 0.7 per cent each month (or 8.4 per cent per year) up to a maximum of 42 per cent if you wait until age 70.

Based on those figures, if you were eligible to receive $10,000 a year in CPP benefits at 65, the amount would be $6,400 if you started taking payments at age 60 versus $14,200 at 70.

Factors to consider before deciding: It can be daunting to make the decision, but there are several questions you can ask yourself before you decide – and of course you can choose to begin receiving benefits any time between ages 60 and 70.

For example, you may consider taking CPP earlier if you are ill or have a family history of shorter lifespans. You may also want to pay off debts or invest the money. On the other hand, you may consider waiting longer if you are healthy, have a family history of living longer and don’t need the money for immediate needs.

Benefits assurance: Whatever you decide, the benefits will be there for you – and you’ll keep receiving payments for as long as you live. As of September 30, 2024, the Fund stands at $675 billion. It’s professionally managed by CPP Investments, the independent Crown Corporation that operates at arm’s length from the federal and provincial governments. The independent Office of the Chief Actuary, which monitors the long-term health of the Fund, says in its latest review that the CPP Fund is financially sustainable for at least the next 75 years.