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When Should You Start Taking CPP Payments?

If you’re over 60, chances are you recognize the importance of the Canada Pension Plan as a source of income for your retirement years. It’s equally important to recognize when you can start taking CPP payments, as there is some confusion regarding the issue.

Today we’re going to examine when you should start taking CPP payments, or whether it’s a good idea to hold off until a later date. A lot of this depends on the circumstances, so read along to find out which scenario is best for you.

Many people believe that you can start taking CPP payments at the retirement age of 65, but in reality, this is more of a generalization than a fact etched in stone. In fact, you can start taking payments at age 60, although there are a few caveats to take note of. The longer you wait, the greater your payout will be. Starting at 60, you will get just under 65% of the baseline amount, while waiting until 70 will deliver the highest amount. This presents several scenarios that you should take into account, should you wish to begin cashing in.

If you’re 60, but having trouble making ends meet, it could be beneficial to draw from your CPP in order to offset costs. On the other hand, if you’re financially comfortable, it might be better to wait until your later years before beginning payments. Perhaps you might find yourself tightening the belt as you approach 70, and this is where waiting can really pay off. Not only will you have a resource pool to draw from, but your monthly amounts will be much larger.

Consider dollar amounts. At the mid-ground age of 65, you might receive just shy of $14,000 per year, depending on your years of work, and the income you gained during those years. Few Canadians actually achieve the maximum CPP payment amount, which is why it’s a good idea to talk with your financial advisor to accurately predict what you’ll be getting, based on your years of service. On average, most Canadians receive just under $8000 per year. If you’re well off, and you can afford to draw on CPP payments, they could be used to pay for things such as retirement vacations or family gifts. If not, then you’ll definitely have to factor in your projected CPP payments into your annual budget.

Another factor to consider is your personal health. While it’s less desirable to ponder, it is nevertheless an important thing to keep in mind when deciding when to cash out your CPP. If your health is less than stellar, taking out CPP payments earlier can yield some good results, whereas if you are in good health, you can probably stow your savings for a little while longer. Other factors will need to be considered as well, such as any time off you took for child rearing or personal injuries throughout the course of your career, but these may not be as impactful in the long run. Deciding on a CPP payout structure is about weighing your current situation alongside your work history, and being honest about both. Doing so will yield the best payout for your particular lifestyle and current situation.

In truth, CPP payments are all about leveraging and balancing your lifestyle and health factors with your age. It’s a constant teeter-totter to figure out the most optimal time to start taking those payments. For instance, if you started taking your CPP payments at age 60, but you live to 75, your overall payout will be much smaller than it would be if you waited until you were 65. Similarly, if you wait until you’re 70 to take CPP payments, and you end up living to 85, your maximum lifetime benefits will be far greater in the long run. This is especially true in today’s age when Canadians’ life expectancy has shot through the roof, hovering somewhere between 80-85.

Now’s the time to speak to an expert who can help you formulate the best plan for your CPP payout structure! Give us a call today, so we can help assist you!