When to Apply for CPP Benefits

senior cpp image

The amount of CPP benefits that you are eligible to receive depends on how long you earned employment income, and how much you earned in those years.

You can visit the My Service Canada website to see how much you have paid in to CPP over your working years. This information is used to calculate your CPP benefits.

Have you ever wondered when you should apply to start receiving CPP? There are three options available when it comes to applying for CPP benefits

  1. Apply for CPP as early as age 60 and before 65
  2. Apply for CPP at age 65
  3. Defer applying for CPP until after 65 and before age 70

 

Will the benefits I receive remain the same, regardless of when I apply for CPP benefits?

If you apply to receive CPP prior to age 65, the benefit is reduced by 0.6% for each month

No! If you apply to receive CPP prior to age 65, the benefit is reduced by 0.6% for each month between when the CPP benefits start and when you turn 65. If you delay CPP benefits until after age 65, the benefit is increased by 0.7% for each month between when you turn 65 and when CPP benefits start.

Example – Individual is entitled to maximum CPP benefits

a)      CPP at 60 – annual benefit of $8,556.83 in 2017

b)      CPP at 65 – annual benefit of $13,370.04 in 2017

c)       CPP at 70 – annual benefit of $18,985.46 in 2017

 

 

When you look at the potential CPP benefit payment amounts, it appears that waiting until age 70 would be the best option, as the benefit payments will be the highest if you defer until 70. However, there are other factors to consider as well.

1)      Life expectancy – how long do you expect to live for? If you anticipate your life expectancy to be less than average then it may be more beneficial to apply for CPP benefits early, at age 60. Or, if you expect that your life expectancy will be more than average then it may be more beneficial to defer CPP benefits until age 70 in order to receive the higher monthly benefits. See our chart below.

Many people find that they enjoy having the funds while they are  younger

2)      Cash needs – if you have stopped working and do not have adequate retirement savings or a private pension plan, you may have income requirements at an earlier age, and it may make sense to apply for CPP early. As well, many people find that they enjoy having the funds while they are  younger and do not need as much money as they get older, especially over 80 years of age.

You can elect to start CPP benefits as early as age 60, even if you are continuing to work. However, you are required to contribute to CPP up until age 65, even if you started receiving CPP benefits at age 60.

Age at start of CPP benefits      Annual           benefits             Cumulative Benefits Received
Age       70       75       80       85       90
60 8,557 85,568 128,352 171,137 213,921 256,705
61 9,519 85,675 133,273 180,870 228,467 276,065
62 10,482 83,857 136,267 188,678 241,089 293,499
63 11,445 80,113 137,337 194,561 251,785 309,008
64 12,407 74,444 136,481 198,518 260,555 322,592
65 13,370 66,850 133,700 200,551 267,401 334,251
66 14,493 57,972 130,438 202,904 275,369 347,835
67 15,616 46,849 124,930 203,011 281,092 359,173
68 16,739 33,479 117,175 200,871 284,568 368,264
69 17,862 17,862 107,174 196,486 285,798 375,110
70 18,985 0 94,927 189,855 284,782 379,709

This chart does not take into account any time value of money which would make taking the CPP benefits earlier even better.

If you would like more information or have any questions, feel free to contact us at 780.466.6204, or click here to send us an email.

Thanks to Taryn Yundt of KWB Chartered Accountants for providing this content.

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