When should you start CPP?
The Canada Pension Plan pays a monthly retirement pension based on your contributions during your working years. You can start anytime between 60 and 70. Start at 60, and your payment is reduced by 0.6% per month before 65, that is 36% lower for life. Wait until 70 and you get an extra 0.7% per month after 65, that is 42% higher for life. The maximum CPP at 65 in 2024 is about $1,365 a month ($16,375 a year). Most Canadians get less because they did not contribute the max for 39 years.
Maximum CPP at 60: about $874 a month. At 65: $1,365. At 70: $1,938. The break-even age between starting at 60 versus 65 is around 74. Between 65 and 70, it is around 82. Statistically, Canadians who reach 65 in good health live to 85 or 86 on average. Delaying CPP is, for most healthy retirees, the highest-return inflation-linked annuity money can buy.
Taking CPP at 60 because ‘I might die early’ while still working full-time. You give up 36% of your guaranteed inflation-indexed income for life to fund spending you could fund another way. CPP is longevity insurance. The risk you cannot fund is living too long, not dying young.
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