If you start your Canada Pension Plan at 60, your monthly pension is 36% smaller than at 65, for life. If you wait until 70, it is 42% larger. Taking it early pays off if you need the money or do not expect a long retirement; waiting pays off if you live into your mid-80s or beyond.
How the adjustment works
- Before 65: your pension falls by 0.6% for each month you start early, or 7.2% a year.
- After 65: it rises by 0.7% for each month you wait, or 8.4% a year, up to age 70.
| Start age | Change vs 65 | If your age-65 pension is $1,000 a month |
|---|---|---|
| 60 | −36% | $640 |
| 62 | −21.6% | $784 |
| 65 | 0% | $1,000 |
| 67 | +16.8% | $1,168 |
| 70 | +42% | $1,420 |
The pension is indexed to inflation every January, whichever age you choose.
Break-even ages
Ignoring investment returns and taxes, starting at 65 instead of 60 puts you ahead from about age 74. Starting at 70 instead of 65 puts you ahead from about age 82. A 65-year-old Canadian today can expect to live into their mid-80s on average, and many live longer.
When taking CPP at 60 makes sense
- You need the income and would otherwise run up debt.
- You have a health condition or family history that shortens life expectancy.
- You have stopped working and extra zero-earning years would lower your pension anyway.
- You are a lower-income senior and a bigger CPP later would reduce your Guaranteed Income Supplement.
When waiting to 70 makes sense
- You are healthy and longevity runs in your family.
- You have savings or work income to live on first.
- You want more guaranteed, inflation-indexed income that you cannot outlive.
- You worry about running out of money in your 80s and 90s.
A common approach is to draw down RRSP savings in your 60s and delay CPP, which can also lower lifetime tax. See the RRSP guide and TFSA room guide.
Other things to know
- CPP is taxable income.
- Old Age Security is separate. It starts at 65 and can be deferred to 70 for a 36% increase.
- If you keep working while collecting CPP under 65, you keep contributing and earn a post-retirement benefit.
- Couples can share CPP pensions to reduce tax.
Check your own estimate in My Service Canada Account before you decide.
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Frequently asked questions
Can I change my mind after starting CPP?
Only within 12 months of starting, and you must repay everything you received.
Do I get the maximum CPP?
Most people do not. The maximum needs about 39 years of contributions at or above the yearly earnings ceiling.
Does the 36% reduction ever go away?
No. The adjustment is permanent.
Source: Government of Canada CPP rules. This article is general information, not financial advice.
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