Deciding when it’s time to start taking your CPP retirement benefits

Written by Richard Ouellette, CPA, CA on Oct. 6, 2015

You can start receiving CPP pension benefits when you reach age 65 (the month after your 65th birthday) which will entitle you to a full CPP benefit depending on how much and how long you have contributed to the CPP.

However, you have the following choices:

  • Take a reduced CPP retirement pension as early as the month after your 60th birthday or
  • Take an increased pension after reaching age 65

Taking your pension before age 65

From 2012 to 2016, the Government of Canada is gradually changing the early pension reduction from 0.5% to 0.6% for each month you receive it before age 65. This means that by 2016, an individual who starts receiving their CPP retirement pension at the age of 60 will receive approximately 36% less than if they had taken it at 65.

Taking your pension after age 65

If you take your pension after age 65, your monthly payment amount will increase by 0.7 percent for each month that you delay receiving it up to age 70 (8.4% per year).

This means that, an individual who starts receiving their retirement pension at the age of 70 will receive 42% more than if they had taken it at 65. More than twice as much as someone who started taking it at age 60. However, they will have received it for 10 years less.

It is important to mention that there is no financial benefit in delaying your pension after age 70.  Also, starting at age 65, you can choose not to contribute to the CPP.

Eligibility

Your CPP retirement pension dos not start automatically. You must apply for it and before you do, you must:

  • Be at least a month past your 59th birthday;
  • Have worked in Canada and made at least one valid contribution to the CPP; and
  • Want your CPP retirement pension payments to begin within 12 months

Before you decide when to take your CPP retirement pension, you may want to consider the following:

  • How your age will affect your monthly payment (reduced or increased)
  • Whether you plan on working while receiving your pension (stop or continue contributing)
  • How much you have contributed and for how long
  • Any personal savings,  investments or company pension plan
  • Whether you have other income such as rental or business investments

Generally speaking, we have found that in most cases it is better to start taking your CPP pension benefits as soon as possible. You have the money for longer and at a time when it has more impact to have it. However, each situation is different and should be approached uniquely. The best advice we can give is to talk to us a few months before you turn 60 to discuss what may be best for you.

Thanks to Richard Ouellette of KWB Chartered Accountants for providing this content.

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.

Richard Ouellette, CPA, CA

Richard Ouellette, CPA, CA

Partner

Richard joined KWB in November 2007. He graduated from the University of Lethbridge in 2003 with a Bachelor of Management. Before joining KWB, Richard articled and worked at a national firm. He successfully wrote the 2005 UFE, and obtained his CA designation in 2006.

On his personal time, Richard enjoys going home to his wife and playing with his two young children. He also enjoys traveling, golfing, biking, working out, and spending time with friends and family.

Richard's Contact Information

Other Posts by Richard

Oct 19 2012
Economic Snapshot

Are you interested in what some of the current economic conditions are in Europe and the U.S.? For a quick and easy to understand snapshot, in a half page summary format, read on.

Jul 10 2012
KWB Client Focus Group Meeting

On June 7th, KWB invited six of its clients to participate in a client focus group with the goal of discovering opportunities to better serve its customers. We learned a lot, and we want to share with you not only what we learned but also what we plan to do with it – to ensure that KWB is your accounting firm of choice today and in the future. For some of the details of what we learned and what we plan to do about it, read on.

Feb 16 2016
Income Splitting

Do you own a business - either incorporated or unincorporated - and have a spouse or one or more adult children with an income lower than your own? If so, you may be able to shift your income to these other family members, effectively moving the income from a high tax rate to a low tax rate and decreasing the overall tax burden on your family. This is called income splitting.

Feb 3 2014
KWB Seminar Topics

Vote on Future KWB Seminars 1.Retirement planning 2.Health & wellness 3.Hiring foreign workers 4.Client think tank (Improving customer experience) 5.Customer service ideas 6.Acting as an executor or agent 7.Travel 8.Finance for children, teens 9.Navigating post secondary 10.Budgeting 11.How to use an on-line portal

Feb 26 2019
Retirement Planning Alternatives

We have all been told to plan for our retirement.  Yet, have you ever wondered why? You need to consider the different retirement planning alternatives. Perhaps you have a plan, most people do, but is it the right plan? In the following example, it is clear how advanced planning can make a huge difference for you

Nov 12 2014
The "Family Tax Cut" credit

Prime Minister Stephen Harper and Finance Minister Joe Oliver recently announced a “Family Tax Cut” credit which allows certain Canadian families to reduce their overall federal income tax. This relief will be available starting in 2014. The new measure would allow a higher income spouse to shift a portion of their income to a lower

Feb 3 2015
Child Related Benefits, Expenses and Deductions

There’s great news for 2015 for Canadians with children. Stephen Harper has announced a “child care benefit boost” – which includes an increase to, or return of, the monthly Universal Child Care Benefit cheques and an increase to the amount taxpayers can deduct for child care expenses and the child fitness credit.   Changes to

Jul 23 2015
Change in use of property from capital to inventory or vice versa.

There are no immediate repercussions for the change in business use of property from capital to inventory. The differences arise upon sale of the real estate. There is no provision in the Income Tax Act which describes the circumstances in which gains from the sale of real estate are to be determined as being either

Aug 4 2015
Corporate expenses - What can you deduct?

Often deductible business expenses are overlooked or missed as business owners are unsure whether they are deductible. A business expense is any cost incurred by the company to generate income. These expenses must be supported by physical documents such as invoices, purchase contracts, sales receipt, etc. If cash is used to purchase items, it is

Sep 22 2015
Alberta Corporate Tax Rate Changes

In addition to personal income tax increases, the Alberta NDP government has also increased general corporate tax rates. However, businesses that earn $500,000 or less of active business income will not be affected by the tax increases due to an offsetting increase to the Alberta small business deduction rate. Businesses that have more than

Sep 3 2019
Director's Liability

What is director's liability? While the tax debts of a corporation belong to the corporation and the tax debts of an individual belong to that individual, there are some exceptions to the rules. Directors may have liability for certain tax accounts of the corporations they serve. When a corporation faces insolvency, remittances to the government

Mar 29 2016
HOME ACCESSIBILITY TAX CREDIT (HATC)

The 2015 federal budget announced the introduction of a new Home Accessibility Tax Credit (HATC), beginning in 2016. The HATC is a non-refundable tax credit for qualifying expenses incurred for work performed or goods acquired in respect of a qualifying renovation of an eligible dwelling of a qualifying individual. A qualifying individual and eligible individuals

May 24 2016
CRA Letter Campaign

Every year CRA conducts reviews and audits to sample and educate tax payers on tax compliance, and 2016 will be no different. CRA estimates that approximately 30,000 letters will be sent out across Canada this year. These letters will give you information about certain claims you have made on one or more of your

Aug 23 2016
Top 7 Overlooked Tax Deductions

Are you paying too much in taxes? Are you getting all the tax deductions available for your business? An effective way to minimize your company’s tax expense, in addition to good planning, is to ensure the company is claiming all of the expenses legitimately allowed under the tax act. Take a look and see if any