When Should You Take Your CPP?

What if I told you there was an easy way you could earn nearly 50% more money? You’d probably think there was a catch. Usually, with offers like this, there are. But not this time.

You can start receiving your Canadian Pension Plan (CPP) benefits at age 60 if you’re willing to receive 36% less. If you wait until you’re 65, you’ll receive your full benefits. But if you defer until you’re 70, the payments you receive will be 42% higher. And all you have to do is wait. That’s it.

Keep in mind that these payments are inflation protected and you receive them for the rest of your life. Given how long life expectancies are these days, this can add up to a lot of money.

The interesting thing is almost no one does this – approximately 1% of Canadians defer their CPP benefits. It appears that people would prefer to spend their government payments rather than dip into their savings. But this is shortsighted and inefficient. It makes more sense to spend the risky assets you possess now in a RRSP or RRIF and enjoy higher guaranteed government payments indexed to inflation for the rest of your life.

Canadians have until they’re 71 to convert their RRSP but you can do it earlier. This will make it easier to defer your CPP benefits. You can also take advantage of pension splitting with your spouse beginning at age 65. This doubles the amount you can withdraw each year from a RRIF.

Your decision on when to start receiving your CPP benefits depends on your individual financial situation. But if you have significant assets set aside in a RRSP or other savings and pension plans, it makes sense to defer receiving your CPP benefits. Reward yourself for being patient. Help yourself to some free money.

If you would like to discuss your personal situation with one of our Certified Financial Planners, contact us. We’re always happy to help!

Click here to read our White Paper, titled, “What the Investment Industry Doesn’t Want You to Know”.