Words Sherrin Griffin, Sidney Senior Care
A few weeks ago, I received my application for CPP, our Canada Pension Plan retirement pension. Six months away from turning 60, it was a concrete reminder that I am soon entering the domain of “seniordom.”
The inevitability of becoming a full-fledged senior filled me with mixed emotions: disbelief that I am really “that old” and fear that life is going by at breakneck speed and I’m soon entering that “final chapter.” Yet, I am also filled with a sense of pride and accomplishment of what I have achieved and the person I have become. I’m excitedly anticipating the winding down of my work life and the revving up of my play life, for the things that I love to do but lack the time now, like reading, writing, gardening, travelling, and of course learning how to play pickleball, lol.
Upon receiving the 11-page CPP application, naturally the big question is: do I take my CPP early? It is completely up to us as individuals, and there are justifiable reasons for both sides.
Of course, like many of us, my initial reaction is: why not take early CPP? After all, it’s “free money,” right? Despite the dangling carrot, as most of us know, the longer we wait to collect, the more we will receive each month.
It really is a decision worth careful consideration. The best age for you to start your pension depends on your own unique situation: your personal health profile, current finances and retirement plans all play a part. Questions you may want to ask yourself are: How badly do I need extra money right now? Am I struggling with expenses now that I won’t have at age 65, based on my current situation re: housing and household expenses, financial support from others, etc? Do I have a big mortgage currently that early CPP money would help with, or credit card bills that would accumulate less interest by paying them off now rather than later? Will I be receiving an inheritance later on which will cover off future expenses, but am really struggling with them right now?
It may make more sense to wait until age 65 to collect full monthly CPP If you plan to quit work entirely at age 65, with no pension plan at your place of employment, or if you have a health condition which may incur substantial expense later down the road.
CPP, plus the Old Age Security pension (received at 65 years), together with your personal savings, must be enough to cover your retirement income needs, or you’ll be going back to work whether you like it or not; a situation many end up in after miscalculating monthly expenses or overspending past their retirement budgets.
As far as how much you’ll receive for CPP, it depends on how much you paid into the Plan, how long you paid into it, and the age you choose to start receiving your pension.
If you start your pension before age 65, it will be reduced by 0.6% per month (or 7.2% annually) with a maximum reduction of 36%. If your pension starts after age 65, it will increase by 0.7% per month (or 8.4% annually). The maximum increase is 42% if you start your pension at age 70 with no more increases after that.
So, essentially, if I start CPP right after my 60th birthday, I realistically might receive only 64% of my monthly pension, which is a big hit to take. Being a “newbie” in the retirement world, I was also mortified to learn that CPP is taxable income, which will further reduce the amount if I do decide to take it early.
To get a personalized estimate of your retirement income, visit www.canada.ca/retirement-income-calculator.
