When should I apply for CPP?

February 4, 2022

One of the most common questions that we get asked is “When is the right time to apply for CPP?” And honestly, there isn’t just one right answer. You should consider your health, family history and mortality, cash flow and other income sources, and your desired retirement lifestyle.

How much CPP are you entitled to?

It’s important to understand how much CPP you are entitled to, and how the payments are reduced or increased if you decide to apply early or delay payments. In 2019, people aged 65 received an average CPP payment of $672.87 per month. You can start collecting CPP benefits as early as age 60, or as late as age 70. If you decide to apply before age 65, your payments will decrease by 0.6% each month (7.2% per year). If you start taking payments at age 60, that means a maximum reduction of 36%. Based on the average payment amount above, this means a monthly payment amount of $430.64 at age 60. If you wait until after age 65, your payments will increase by 0.7% each month (8.4% per year). If you start at age 70, that means a maximum increase of 42%. Based on the average payment amount above, delaying CPP until age 75 would translate to a monthly payment of $955.48.

The Break-even point

If you take CPP at age 60, you’re getting less money, but you’ll be getting it for a longer period of time – 5 more years. So how do you decide if that’s a worthwhile strategy? This is where the break-even point comes in. The break-even point is the age at which an early CPP taker will have collected the same benefits as someone who started taking CPP at 65. For instance, if you’re 60, you’ll have collected the same amount of money as the 65-year-old when you both turn 74.

If you’re someone who doesn’t need the extra income at age 60, maybe because you’re still working or you have other income sources, and you have a family history of longevity and good health, delaying taking CPP until at least age 65 might be the right strategy for you, as you’ll collect more money over your lifetime.

Conversely, if you’re no longer working and need the income, or your health or family history would lead you to believe that you may not live past age 74, then applying for CPP at age 60 would be appropriate.

As you can see, there is no “one size fits all” rule; everyone’s situation is unique and needs to be considered independently. If you’re approaching age 60 and would like to discuss how applying for CPP at different ages will impact your retirement income plan, please contact our office to make a review appointment. Currently appointments are mostly being conducted virtually.

Until next time, please stay safe.