When Is the Best Time to Take Your CPP?

The Canada Pension Plan (CPP) is a key part of retirement income. Navigating the choices surrounding when to begin receiving these benefits is a significant aspect of comprehensive retirement planning.

Standard and Flexible Start Ages

The standard age for an individual to begin receiving Canada Pension Plan retirement benefits is 65. The plan offers flexibility, allowing individuals to start their benefits earlier or later.

Individuals can begin receiving CPP benefits as early as age 60. Choosing this earlier start date means the monthly benefit amount will be reduced compared to what would be received at age 65. Conversely, individuals can defer their CPP benefits beyond age 65.

The latest age one can elect to start receiving CPP benefits is 70. Delaying benefits past age 65 results in an increased monthly payment. This flexibility allows individuals to tailor their CPP commencement to their personal financial situation.

Benefit Adjustments Based on Start Age

The monthly amount of Canada Pension Plan benefits is actuarially adjusted based on the age an individual chooses to begin receiving them. The standard age for receiving the full benefit is 65.

If benefits commence before age 65, a reduction is applied for each month prior to the 65th birthday. The monthly benefit is reduced by 0.6% for every month it is received before age 65, equating to an annual reduction of 7.2%. For instance, starting at age 60, which is 60 months before age 65, results in a total reduction of 36%.

Conversely, delaying the start of CPP benefits beyond age 65 results in an increase to the monthly payment. For each month that benefits are deferred past age 65, up to age 70, the monthly benefit amount is increased by 0.7%, translating to an annual increase of 8.4%. Waiting until age 70, which is 60 months after age 65, increases the monthly benefit by a total of 42%.

To illustrate, consider an individual eligible for a hypothetical $1,000 monthly CPP benefit at age 65. If they chose to start at age 60, their monthly benefit would be reduced by 36%, resulting in a payment of $640. If they waited until age 70, their monthly benefit would be increased by 42%, leading to a payment of $1,420. These adjustments are permanent and significantly impact the total lifetime benefits received.

Personal Circumstances for the Decision

Deciding when to begin receiving Canada Pension Plan benefits involves a careful consideration of individual circumstances. Current financial needs play a significant role. Individuals who require immediate income to cover living expenses or manage other financial obligations may find it necessary to start their CPP benefits earlier, even if it means accepting a reduced monthly amount.

Other income sources, such as private pensions, Registered Retirement Savings Plans (RRSPs), or Tax-Free Savings Accounts (TFSAs), also influence the timing of CPP. If an individual has sufficient retirement savings or other pension income, they may have the flexibility to defer their CPP benefits, allowing them to grow. Conversely, a lack of alternative income sources might necessitate an earlier CPP commencement to bridge financial gaps.

Health and life expectancy are deeply personal considerations that can impact the decision. An individual with health concerns or a family history suggesting a shorter life expectancy might consider taking CPP benefits earlier to maximize the total amount received over their expected lifespan. Conversely, those expecting a longer lifespan might benefit more from deferring CPP to receive a higher monthly payment for an extended period.

The coordination of CPP with other government benefits, such as Old Age Security (OAS), can also affect the decision. OAS begins at age 65, and its receipt is not tied to CPP start age, but understanding the combined income from all sources is important for comprehensive retirement planning. Spousal CPP benefits or survivor benefits may also interact with an individual’s decision, as the timing of one spouse’s CPP can sometimes affect the other’s eligibility or benefit amount.

Applying for CPP Benefits

After deciding on the preferred start date for Canada Pension Plan benefits, the formal application process must be initiated. Individuals do not automatically receive their pension; an application is required. It is advisable to apply in advance to ensure benefits commence on the desired date, with applications accepted up to 12 months before the chosen start date.

The most common method for submitting a CPP application is through the online portal via a My Service Canada Account (MSCA). To use this method, individuals need to register or sign in to their MSCA. The online application process involves completing and submitting the required information electronically. After online submission, a signature page from the application must be printed, signed, and mailed to Service Canada to complete the process.

For those unable to apply online, a paper application form, such as Form ISP1000, can be completed and mailed to Service Canada or dropped off at a Service Canada office. Regardless of the submission method, certain information is required, including the applicant’s Social Insurance Number (SIN) and banking details for direct deposit of payments. If applicable, the SIN of a spouse or common-law partner may also be requested.

After the application is submitted, Service Canada processes the request. Online applications have a faster processing time, with a decision received within 7 to 14 business days. Paper applications may take longer, with a written notification of decision taking up to 120 days. Applicants can check the status of their application through their My Service Canada Account.