The Canada Pension Plan (CPP) has served Canadians as one of the main pillars of retirement income, and there are many looking to start receiving CPP benefits when turning 60 or wondering how much higher benefits will be if starting to receive them at a later age. For many, beginning CPP at 60 may just be the right decision, depending on their personal circumstances. Here are five persuasive reasons to consider it:
You require that money.
Among the obvious reasons for starting CPP at age 60 is income equity for meeting one’s needs. Many Canadians deal with issues such as debt repayment, healthcare cost obligations, and financially supporting other family members. For some, starting CPP early may be part of a comprehensive package that provides immediate results and at the same time allows for lifestyle maintenance without having to dip much into savings or credits.
Problems with health or life expectancy
If you have a health condition or a family predisposition that may shorten your life expectancy, it may be advisable to start in the 60s with CPP. The system is set to reward people who delay taking the money, but if you do not expect to live long enough to reap the benefits of those larger checks, you are better off taking it earlier.
For example, if you start your CPP at age 60 and have collected benefits for 20 years, your total benefits may surpass that which comes with starting at 65 or 70.
Additional Flexible Options for Retirement Fund
Starting your CPP at the age of 60 will allow you to manage your entire retirement income more flexibly. Here’s how really early withdrawal from CPP helps:
- It will reduce the amount withdrawn from your RRSPs or any other savings accounts so they can be tax deferred.
- It grants you the ability to use CPP payments just for the day-to-day cost of living, while you can invest other assets or keep them for a rainy day.
- This plan will also serve quite well in tax planning if your other income sources put you into a tax bracket back into higher levels for the remaining years of retirement.
Enjoyment of Retirement While You Are Younger
Retirement is more valuable than money; it is about good things in life. So, if you apply for CPP at 60, you can have the best of these remaining years while you are still quite alive and very healthy when it comes to traveling, engaging in hobbies, or spending time with family. There are benefits to delaying such income since your monthly payments might be higher, but eventually one has to wait until older age to gain access to the privileged income.
Pro Tip: Early CPP commencement will generate cash flow required for upfront spending if some of your retirement goals require immediately taking on expenses.
Protection against Future Changes to Policy
Although there is a certain reliability and stability of the CPP program, it is still open to changes in government policies or economies that may later modify benefits. You begin locking in your benefits under the current rules by applying for CPP at age 60. This should lend you some peace of mind, especially in case such benefits or even eligibility criteria changes slant downward in the future.
Major Considerations Prior to Enrolling for CPP at Age 60
There are many compelling arguments in favor of beginning CPP at an early age, but it is important to weigh the decision carefully:
- Reduced Monthly Payments: There is a reduction of 0.6% for each month before reaching age 65, so starting at 60 means receiving only 64% of the full amount across-the-board less 36%. This could be quite significant if you are above the age of 90 at time of death.
- Longevity Risks: Such people may consider delaying their CPP until later in case of normal mortality expectancy, it could yield higher lifetime benefits.
- Other Income Sources: Consider including CPP within the overall retirement income plan involving savings, pensions, and investments.
Conclusion
Deciding on “when” to start receiving CPP is an individual decision based on multiple factors, such as financial needs, health, and retirement objectives. Starting at 60 would make perfect sense when one needs the income now, wants to retire earlier, or worries about such policies being changed in the future. But, a financial advisor should be spoken to, aligning the entire decision with all other issues around retirement.
