When Should You Start CPP?

One of the most common retirement questions Canadians ask is when to start Canada Pension Plan (CPP) benefits. Some people consider starting as early as age 60, others wait until 65, and some delay beyond 65. The challenge is that there is no universal answer.

CPP timing should usually be considered as part of a broader retirement income plan. Health, income needs, expected retirement spending, pensions, registered accounts, non-registered accounts, tax planning, and family circumstances can all affect the decision.

Why Age Alone Is Not Enough

It can be tempting to focus only on the monthly payment amount. Delaying CPP can increase the monthly benefit, while starting earlier provides income sooner. But retirement planning is not simply about maximizing one government benefit.

A person who needs income earlier may have different priorities than a person who has a pension, significant savings, or wants to delay taxable income. A person in excellent health may weigh the decision differently than someone who has health concerns.

Think About the Income Picture

CPP is only one source of retirement income. Many retirees also receive Old Age Security, workplace pensions, RRIF withdrawals, TFSA withdrawals, and income from non-registered investments. How these sources work together can affect tax, cash flow, and investment decisions.

For example, starting CPP earlier may reduce the need to draw from investments in the early years of retirement. Waiting may increase future guaranteed income, but it could require drawing more from other accounts in the meantime.

Tax Considerations Matter

CPP benefits are taxable. The timing of CPP can interact with other taxable income, including RRSP or RRIF withdrawals, pension income, and investment income. In some cases, drawing from certain accounts earlier may help create flexibility later. In other cases, starting CPP earlier may be useful to support cash flow.

The key is to consider after-tax income, not just the gross monthly CPP amount.

Final Thought

The CPP decision should be made in the context of your overall retirement income plan. The right answer depends on your personal circumstances, not a rule of thumb. Before making the decision, it can be helpful to review your income needs, tax picture, account structure, health considerations, and long-term retirement goals.

Disclaimer

This information, including any opinion, is based on various sources believed to be reliable, but its accuracy cannot be guaranteed and is subject to change.

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Robert Van Alphen is an Investment Advisor with CIBC Wood Gundy in Penticton. The views of Robert Van Alphen do not necessarily reflect those of CIBC World Markets Inc.

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