Take CPP at 60: 3 Key Reasons

Dividend Earner

Dividend Earner

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3 min read Affiliate Disclosure

Deciding on when to start receiving your CPP is a constant dilemma for all soon-to-be retirees. Not knowing how much you may get and the impact of taking it early is usually where the question comes from. Depending on the size of your portfolio, the decision to take CPP becomes a tax strategy along with an income maximization strategy.

As it happens, the immediate quick math is if you take CPP at 60, there is a 36% reduction in income.

The math is simple: you have a reduction of 0.6% every month prior to your 65th birthday. As such, taking CPP at 60 means a 36% monthly income reduction (60 months times 0.6% = 36%). That’s a significant drop in income. 

The #1 reason to take CPP at 60 is because you need the money. 

That said, the CPP statistics for the starting age below do not indicate that so many retirees need the money, in my opinion. They highlight how complex it is to plan for all the variables and health.

I would say that waiting is difficult when you have to think about health. “A bird in hand is worth two in the bush” comes to mind when I see the CPP statistics by age.

CPP at 60 until 70

Reasons to Take CPP at 60

1. You Need The Money

If you have no choices and your other sources of income from RRSP, TFSA, or work pension are insufficient, you may want to request early CPP. You may expect to qualify for the Guaranteed Income Supplement (GIS) to help you further.

Everyone’s situation is different, but in general, working until your 60s means you should have put in a really good 30 to 35 years of work, and you (and your employer) would have made CPP contributions along the way.

It’s a pension plan, and the longer you wait and let your money work, the more you can get. While you don’t receive a guaranteed percentage like some of the government pension plans, you do have the expectation of receiving your Canada pension adjusted for inflation.

While it would be great for all of us to receive the maximum CPP payments, the average monthly payment is $779.32 for 2022.

Aside from needing the money, there are a couple of considerations, but it doesn’t change the 0.6% monthly reduction for every month you start before you are 65. It’s the impact of taking the money earlier.

2. Life Expectancy Consideration

Now, while not trying to become too morbid, life expectancy is also a factor to consider.

The concept of break-even point exist when it comes to attempting to figure out when to start getting your CPP. This is an important factor for someone who may have a timeline on life. I know it’s not something we want to think about but it’s a reality.

If you have a timeline, there is a break-even point you can calculate to get the most out of your CPP.

3. Zero Earning Years Consideration

Another optimization consideration is to understand your zero-earning years. Below is a table that shows how your earned income will contribute to the calculation of your CPP monthly payments. 

Since 2014, 17% of your lowest earned months will be dropped from your CPP calculation. So the question for you is to figure out how many ZERO income months you have between 18 and 60. It may also be a reason to avoid completely stopping work in your 50’s and just do some part-time work and contributing to your CPP.

To understand the details, it’s best to request a Statement of Contributions, which will stop you from guessing and trying to build a complicated spreadsheet.

wdt_ID CPP Starting Age Maximum Contribution Months Maximum Drop-Out Months
2 60 504 86
3 61 516 88
4 62 528 90
5 63 540 92
6 64 552 94
7 65 564 96