For a lot of Canadians, choosing when to start the Canada Pension Plan is one of the most important decisions they will ever make about retirement. The CPP is more than just another government benefit. It is a monthly payment that lasts for life and changes with inflation. It can help you stay financially secure for decades.
A lot of people start taking CPP as soon as they turn 60, but more and more people are talking about a powerful strategy waiting until they turn 70. If you can wait, the reward can be big. Financial planners are telling Canadians more and more to think about delaying because it will give them higher monthly payments, better protection against inflation, and more stable long-term income.
This article explains how CPP works in detail, what happens if you wait until you’re 70, who benefits the most from waiting, and when it might not be the best choice. If you’re thinking about retirement and want to know if being patient really pays off, here’s what you need to know.
How CPP Payments Work
You and your employers paid into the Canada Pension Plan while you were working. The amount you get in retirement depends on a number of things, such as how long you worked, how much you made, and when you decide to start getting payments.
You can start CPP as early as age 60 or as late as age 70. The age you choose will have a direct and lasting effect on your monthly payment amount.
If you start earlier, your monthly payments will be lower for life. The longer you wait, the more money you’ll get each month for life. Once you start CPP, you can’t change your mind, except for a short time when you can cancel.
The standard age to start CPP is 65.
The standard age to start CPP is 65. If you start CPP at age 65, you will get the full amount of your pension based on how much you have contributed.
This is the amount you start with. If you decide to start earlier or later, this base amount goes up or down.
For instance, if your CPP at age 65 would be $1,000 a month, that number is used to figure out how much more or less you will get depending on when you start.
What Happens If You Get CPP Early at 60
You can start CPP as early as age 60, but it costs money.
Your payment goes down by 0.6 percent for every month you take CPP before age 65. If you start at 60, that’s a 36 percent drop.
Using the example from before:
At 65, CPP costs $1,000 a month.
About $640 a month for CPP at 60
That drop is here to stay. Even though CPP payments go up with inflation, the lower base amount stays with you for life.
Some people may want to take CPP early, but it will lower their long-term income by a lot.
The Big Benefit of Waiting Until Age 70
This is where the real benefit comes in.
Every month you wait to get CPP after age 65, your payment goes up by 0.7%. That adds up to a 42 percent increase over five years.
For example:
At 65, CPP costs $1,000 a month.
At 70, CPP is about $1,420 a month.
That’s an extra $420 a month, or more than $5,000 a year, for the rest of your life.
This rise is guaranteed, backed by the government, and adjusted for inflation every year. There aren’t many retirement income options that can give you that kind of return without any risk in the market.
Why the Increase Is So Strong Over Time
The higher monthly payment is not the only benefit of delaying CPP. It is how that payment grows over time.
If you live into your 80s or 90s, the total amount you get from CPP by waiting until 70 can be tens of thousands of dollars more than if you start early.
Because CPP is tied to inflation, the bigger payment grows faster as prices go up. That gives you better protection against the rising cost of living, especially later in retirement when your other savings may be running low.
CPP and Protection Against Inflation
Every January, CPP payments go up because of inflation. This change affects the whole amount you get each month.
A bigger CPP payment at age 70 means more than just more money now. It gives you a higher base that keeps going up.
When you retire for a long time, protecting your money from inflation is just as important as the amount you get at first. When costs for things like housing, utilities, food, and health care go up, a higher CPP benefit gives you more stability.
Longevity Risk and Why CPP Says to Wait
One of the biggest dangers of retirement is running out of money. CPP directly addresses this risk because it pays you for the rest of your life, no matter how long you live.
If you wait to get CPP, you’ll have more money in later years, when your private savings might be gone and healthcare costs might go up. Waiting until age 70 can be very helpful for people who expect to live a long time or who have family histories of longevity.
In a way, CPP is like insurance for long life. The longer you live, the better it is to wait.
Who Gets the Most Out of Waiting Until 70
Not everyone should wait to take CPP, but some groups tend to gain more from it than others.
People Who Get Money From Other Sources
If you have workplace pensions, RRSPs, TFSAs, or other savings that can help you in your 60s, it might be a good idea to wait to get your CPP.
People Who Are Healthy
If you think you’ll live into your late 80s or longer, the higher lifetime payments from delayed CPP are often worth more than the years you didn’t get them earlier.
People Who Are Worried About Inflation
CPP gives you guaranteed income that goes up with inflation. You are safer from rising costs the more you pay.
Couples Making Plans for Survivor Benefits
A higher CPP payment can also mean a higher survivor benefit for a spouse, which gives them more long-term security and stability.
When it doesn’t make sense to wait
Even though there are benefits, putting off CPP isn’t always the best thing to do.
Health Issues
If you have serious health problems or a shorter life expectancy, starting CPP earlier may give you more money over the long term.
Not having any other income
If you can’t pay your bills without CPP and it’s your main source of income, waiting may not be a good idea.
Personal Cash Flow Needs
Some people care more about making money now than making money later, especially if they want to travel or do hobbies in early retirement.
The choice is up to you and depends on your health, finances, and what matters most to you.
Using Other Money While You Wait
One common strategy is to wait to get CPP benefits until after age 60 and use other sources of income in the meantime.
This could include:
- Taking money out of an RRSP
- Investments that aren’t registered
- Work part-time
- Pensions from employers
In some cases, taking money out of savings earlier can help CPP grow into a bigger, safer source of income later on. This can also help you manage your taxes over the long term by spreading out your income over your retirement years.
Things to think about when it comes to taxes When You Put Off CPP
You have to pay taxes on CPP. When you start can change how much you owe in taxes overall.
If you wait to take out your CPP and use your RRSP withdrawals in your 60s, you might be able to lower the amount of money you have to take out of your RRIF in the future, which could lower your taxes later in life.
If you start getting a higher CPP payment at 70, you may not need to take as much money out of your taxable savings in your 70s and 80s, which will help you manage your tax brackets more effectively.
The Bigger Picture of CPP, OAS, and Retirement
There is no such thing as CPP on its own. It goes along with Old Age Security and other benefits.
If you wait to get your CPP, it won’t change how much OAS you get, but the higher CPP income could affect benefits that are based on income, like the Guaranteed Income Supplement.
For retirees with higher incomes, a bigger CPP payment can still be useful because it replaces investment income that could be at risk in the market.
The Mental Side of Waiting
Fear is one reason why a lot of people take CPP early. Being afraid of missing out. Worry about dying before collecting. Worry that the system might change.
These worries are understandable, but CPP is meant to be stable and last for a long time. Delaying is not about taking risks. It’s about making a choice that will definitely raise your lifetime income.
A larger, reliable monthly payment is worth the wait for many retirees because it gives them peace of mind.
How to Choose What’s Best for You
There is no one answer that fits all. The best choice for you will depend on your own situation.
You should ask yourself these questions:
Before I turn 70, will I have enough money to meet my needs?
How is my health and the health of my family over time?
How important is having a steady income compared to having options?
What does my plan for retirement income look like as a whole?
Talking to a financial planner or running projections can help you understand how different start dates will affect you in the long run.
Canadians get CPP, which is one of the best retirement benefits. The payment will come no matter when you start, whether it’s at 60, 65, or 70. When to unlock it is the real choice.
If you can wait until you’re 70, the payoff can be big. One of the best ways to plan for retirement is to put off getting your CPP. This will give you more money each month, better protection against inflation, and more financial security later in life.
