8 Reasons Why You Should Take Your CPP Retirement Benefit at Age 60?

Whether you decide to take your CPP Retirement Benefit at 60, 65 or 70, this remains one of the questions I get asked most by those at or approaching the CPP eligible age. Regarding your Canada Pension Plan (CPP), timing can make all the difference. While most Canadians start collecting CPP at age 65 (90% take it by age 65 or younger), some take it as early as 60 (approximately 40%). This decision isn't to be taken lightly, as it comes with its consequences. We'll explore the top eight reasons why many individuals choose to start receiving their CPP benefits at the earliest opportunity.

1. Need the Money

Sometimes, it's as simple as needing the money. Life's circumstances can vary, and for some, tapping into their CPP benefits at age 60 provides much-needed financial relief. Perhaps it allows them to retire early or transition to a part-time job they enjoy.

2. Shortened Life Expectancy

For those with a shortened life expectancy, taking CPP early can make sense. If you don't anticipate living long enough to maximize your benefits, it may be better to collect a reduced amount and enjoy it while you can. This ensures that you or your loved ones benefit from your hard-earned CPP contributions.

3. GIS Eligibility

The Guaranteed Income Supplement (GIS) is a financial lifeline for low-income seniors. If you anticipate qualifying for GIS when you turn 65, it might be wise to start receiving CPP early. Doing so lets you strategically manage your income to avoid GIS clawbacks and maximize your financial security.

4. Invest the CPP Benefit

Some individuals prefer to receive their CPP benefits early to put the money to work immediately through investments or insurance. While this strategy can be risky, especially given the potential for market volatility, it allows you to control and manage your retirement funds as you see fit.

CPP Age and Amounts

5. Avoiding OAS Clawback

The Old Age Security (OAS) clawback can reduce or eliminate your OAS benefits if your income exceeds certain thresholds. If you expect your income to be substantial in retirement, taking CPP early can help you maintain a lower income in your early retirement years, potentially avoiding the OAS clawback.

6. Market Turmoil

Market downturns can wreak havoc on retirement savings. If you plan to retire around age 60 and face a significant market downturn, you might take CPP early instead of tapping into your investments at an inopportune time. This allows your investments more time to recover.

7. Eight+ Years of Past Low Income

The CPP benefit calculation considers the highest-earning years of your working life. If you anticipate having eight or more years of low or no income before age 65, taking CPP at 60 might be beneficial. Those low-income years can be dropped from the benefit calculation, potentially resulting in a higher monthly payment.

8. Do Not Trust the Government

Distrust in government policies and changes can also influence your decision. Some individuals prefer to receive their CPP benefits early, ensuring they have control over their retirement funds without relying on government programs.

Conclusion

Deciding when to start collecting your CPP benefits is a significant financial choice. While taking CPP early can be advantageous in specific situations, weighing the pros and cons carefully is crucial. Be sure to consult with a financial advisor and use specialized software to calculate the long-term implications of your decision. Remember, your CPP benefits are your hard-earned money, and choosing when to collect them should align with your unique financial goals and circumstances.