Ask MoneySense: Early CPP

There is a penalty for taking the CPP early so it’s best to know the rules in advance.



From the April/May 2012 issue of the magazine.


Is there a straightforward formula I can use to determine whether, in the long run, it would be best to start collecting CPP at age 60 or 65—or even 70?

— Jeff Gifford, Grimsby, Ont.

Sorry, there isn’t an easy way to make an optimal decision about when to take CPP. In fact, with the new rules that come into effect this year, it’s even more difficult, says David Trahair, a chartered accountant and author. The first problem is the penalty for taking CPP early. This was 6% annually prior to 2012, but is gradually increasing to 7.2% (0.6% a month) by 2016. “So the current 30% penalty for taking CPP at age 60 will rise to 36%,” Trahair says.

If your RRSP is relatively small, Trahair says it might make sense to take CPP at age 60, even with the significant penalty. “This will take the pressure off your RRSP and leave more time for the funds to grow,” he says. The opposite is true if your nest egg is very large, however. In that case, it might make sense to start drawing down your RRSP early to avoid large forced withdrawals that begin at age 71. If you go that route, it makes little sense to take early CPP as well.

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2 comments on “Ask MoneySense: Early CPP

  1. If you start taking CCP at 60 and live to 75 you will draw more money in total even with the penalty but if your rrsp income runs out at, say, 65 then you will be more dependant on CCP income. So if you wait to draw ccp til age 65 you will draw less in total but have more monthly income to rely on, about 36% more. Right?


  2. I always get a kick out of advice about money that is all about figures and nothing about the actual person and how he/she lives his/life. The concept of having a certain amount of money at a given age is rediculous. That is because people can adjust their expenses to meet their income. This simple approach to living is never mentioned. It is always about how much is needed to enjoy life. Well people do adjust what they do to their income. Not everything in life that is enjoyable takes a lot of money. Try looking up the Danish word hygge for some insight to this.

    Getting to the topic of when to take one's CPP. Given that if one dies and is NOT collecting a CPP pension, there is no benefit – i.e. no return to the individual or estate for all the year's of contribution. SO… the sooner one starts to collect CPP (and OAS for that matter), the better. One is simply playing the odds. It is not only illness that brings on death. Death also comes by way of accident or mis-adventure. Any way it comes, if one is collecting CPP, the estate gets an additional $2500 death benefit – something that is NOT paid if one is not collecting CPP. The best approach is to take CPP at age 60 and bank it (in a TFSA is a good way to go) if one does not need it.

    AND ABOVE ALL, you and I will not need a lot of money in our advanced years. As one gets older, one slows down a lot. And consequently spends less. The best years of retirement should be ones early years immediately after retiring. That is when one can do more, and consequently needs more money. So… my advice is collect your CPP A.S.A.P.


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