CPP – To delay or not to delay?

When is the right time to take CPP?  Should you delay or should you take it early?  I’m asked this question quite often and the answer is -“It depends”.  Everybody’s situation is different and what’s best for your neighbour might not be the best option for you.

CPP payments have typically been a rite of passage for 65-year-old retirees.  However, with people working and living longer, some people are rethinking their withdrawal date.

The Government of Canada provides a lot of leeway when it comes to taking your CPP.  You can start as early as 60 or delay as late as 70, or any time in between, but make sure you fully understand the consequences of your decision.

Let’s take a look at how the CPP system works:

If you take CPP at 65 – you will collect your full calculated amount.

If you take it earlier – your full monthly payment will be reduced by 0.6% for each month you take it before 65.  This would add up to a 36% loss of your regular benefit if you started your CPP at 60.

If you delay beyond 65 – your full monthly payment will be enhanced by 0.7% for each month that you delay starting payments after 65.  So, if you waited until 70 to start your CPP benefits you would receive 42% more than if you had started at 65.

If you are working past the age of 65 you may want to consider delaying CPP, especially if you can live on that income or have other adequate cash flows.

Those in good health and with longevity in their families might consider delaying CPP in order to have the enhanced payment for the rest of their lives.

Your Certified Financial Planner will be able to figure out your break even age.  The age when taking CPP early will match starting at 65 or delaying.

Knowing your cash flow, your anticipated income needs, how CPP will affect your tax liability and how long you think you will live, are all things to consider.

Deciding when to take CPP is a very personal decision and should be based on a good understanding of your overall financial plan – so the best place to start is by talking to your Certified Financial Planner.

This column is written by Michelle Weisheit CFP, IG Wealth Management and presents general information only and is not a solicitation to buy or sell any investments.  Please contact your own advisor for specific advice about your situation.