Early Canada Pension Plan- Why Age 60 May Be Your Best Option
The Canada Pension Plan (CPP) is a critical pillar of retirement income for millions of Canadians. While the standard age to start collecting CPP benefits is 65, many opt to begin as early as age 60—despite the fact that this comes with a permanent reduction in payments.
Why would someone choose to receive reduced monthly payments for life? The answer lies in personal circumstances, financial needs, and strategic considerations.
In this article, we’ll explore solid reasons to take CPP at 60, current figures, and important factors you should weigh before making this decision.
Understanding Early CPP Payments
You can start CPP at age 60, but for each month you take it early (before age 65), your payment is reduced by 0.6% per month (or 7.2% per year). That means a 36% permanent reduction if you begin at 60.
However, for many, this is not necessarily a disadvantage—depending on individual situations.
| Age to Start CPP | Monthly Reduction or Increase | Annual CPP (2025) | Max Monthly Payment (2025) |
|---|---|---|---|
| 60 | -36% | ~$10,480 | ~$873 |
| 65 (standard) | 0% | ~$16,375 | ~$1,364 |
| 70 | +42% | ~$23,267 | ~$1,939 |
Now, let’s look at why taking CPP at age 60 makes sense for some Canadians.
1. Immediate Financial Need
Many Canadians face sudden life changes—job loss, health issues, or family responsibilities—that create an urgent need for cash flow. Tapping into CPP early can offer a much-needed income stream when savings or other income sources are insufficient.
For example, if you’ve lost your job at age 60 and can’t find suitable employment, taking CPP at 60 can help you maintain your financial stability.
2. Reduced Life Expectancy
If you have health issues or a family history of reduced lifespan, starting CPP early could be financially advantageous. The typical “break-even age”—where delaying CPP begins to pay off—is around age 69 to 71.
If you don’t expect to live into your late 70s or beyond, collecting CPP earlier ensures you maximize the value received over your lifetime.
3. Career and Contribution Gaps
Those who retire early or shift from salaried employment to self-employment may experience CPP contribution gaps.
CPP payments are based on your highest-earning 35 years. If you anticipate several low-income years in your 60s, taking CPP at 60 could lock in a benefit based on your past higher-earning years, potentially giving you a better payout than if you waited.
4. Flexibility and Control
Taking CPP at 60 provides more financial flexibility. You can choose to use the funds for:
- Paying down debt
- Covering healthcare expenses
- Supporting your lifestyle or family members
- Investing (if you’re comfortable with market risk)
Many Canadians prefer having control over their money earlier rather than relying on uncertain future events.
5. Peace of Mind
Knowing that you have a guaranteed source of income—even if reduced—can bring valuable peace of mind.
Retirement is often about balance and comfort. Having CPP payments begin earlier can help reduce financial stress and allow for better planning in the early retirement years.
Should You Delay CPP Instead?
Of course, delaying CPP also has merits:
- You’ll receive a 7.2% increase per year after 65.
- It offers inflation protection.
- If you live past 85, delaying CPP will likely result in higher lifetime income.
But these benefits are most useful if you have excellent health, a long life expectancy, and other income sources to cover your 60s.
Deciding when to take Canada Pension Plan benefits is a personal and strategic choice. For many, the reasons to take CPP at age 60—whether driven by financial need, health concerns, or life planning—make this a smart move.
If you’re nearing retirement, weigh your options carefully and consider working with a financial advisor to align your CPP decision with your overall retirement strategy.
FAQs
How much is CPP reduced if taken at 60?
CPP is reduced by 36% if taken at age 60 (0.6% reduction per month before age 65).
Is it a good idea to take CPP at 60?
It can be, depending on your health, financial needs, and life expectancy. Many take CPP early for cash flow or peace of mind.
Can I work while collecting CPP at 60?
Yes, you can continue to work while collecting CPP payments. You may also continue to contribute, which could increase future benefits through the Post-Retirement Benefit (PRB).
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