10 Reasons to Take CPP at 60

Deciding when to start your Canada Pension Plan (CPP) retirement pension is one of the biggest decisions you'll make when building your retirement income plan. You can generally start CPP as early as age 60, but starting early means receiving a smaller monthly pension for life.

So why would someone choose to take CPP at 60 rather than wait until 65 or even 70? There are several legitimate reasons, depending on your health, financial situation, retirement goals, tax situation, investments, and other sources of income.

Here are 10 reasons why taking CPP early may make sense for some Canadians.

Reason 1: You Want to Enjoy Retirement Sooner

One of the simplest reasons to take CPP at 60 is that you want to use your retirement income while you're younger.

If you've retired early and want to travel, spend more time with family, pursue hobbies, or simply enjoy more freedom, CPP can provide additional income during those years.

Retirement isn't only about maximizing the income you receive decades from now. It's also about deciding how you want to spend your time today.

Reason 2: You Want More Retirement Cash Flow

Starting CPP at 60 gives you an additional source of monthly income earlier in retirement.

That income could be combined with RRSP or RRIF withdrawals, investment income, rental income, employment income, or other retirement resources.

Using the Retirementize retirement calculator can help you see how starting CPP at different ages changes the overall cash flow in your retirement plan.

Reason 3: Your Health or Life Expectancy May Influence Your Decision

Your personal health and expected longevity can be important considerations when deciding when to start CPP.

Someone with serious health concerns or a family history of shorter longevity may place more value on receiving CPP sooner rather than waiting for a larger monthly payment later.

On the other hand, someone who expects to live well into their 80s or 90s may place greater value on the larger monthly income available from delaying CPP.

Life expectancy statistics are population averages, however, and they don't predict how long any individual will live. Your own circumstances should be considered rather than relying on an average alone.

Reason 4: You Need the Income to Cover Immediate Expenses

Sometimes the decision is simply about cash flow.

If you've stopped working and need additional income to pay your mortgage, rent, utilities, food, travel, or other living expenses, starting CPP at 60 can provide money when you need it.

Using savings to fund several years of retirement before starting CPP can also have consequences. Depending on your investments and withdrawal strategy, taking CPP earlier could allow you to preserve some personal savings for later in retirement.

Reason 5: You Plan to Continue Working Part-Time

Retirement doesn't always mean completely stopping work.

You might leave a full-time career but continue working part-time, consulting, freelancing, or running a small business.

If your employment income is lower than it was during your career, CPP can provide an additional source of cash flow.

Continuing to work while receiving CPP can also result in additional contributions that may increase your CPP pension through the Post-Retirement Benefit, provided you meet the applicable requirements.

Reason 6: You Prefer to Receive CPP Earlier Rather Than Rely on Future Changes

Some Canadians are uncomfortable relying on future government decisions. They may prefer to begin receiving CPP as soon as they are eligible rather than wait for a larger benefit later.

However, it's important to distinguish between a personal preference for receiving benefits earlier and the financial condition of the CPP itself. The Canada Pension Plan is designed as a contributory pension plan with assets and contributions supporting future benefits.

Future governments can change pension rules, but assuming that benefits will be cut is not a sound basis by itself for making a CPP decision.

Reason 7: Early CPP May Fit Your Tax Strategy

CPP is taxable income, so taxes should be considered when deciding when to start it.

For example, someone with significant RRSP savings might choose to draw down some of those savings earlier in retirement. Depending on the size and timing of withdrawals, starting CPP at 60 could be part of a broader strategy for managing taxable income over several years.

However, taking CPP early does not automatically reduce taxes. CPP income itself is taxable, and the best strategy depends on your complete income picture.

OAS recovery tax can also become relevant at higher income levels, so CPP timing should be considered alongside RRSP/RRIF withdrawals, investment income, OAS, and other taxable income.

Reason 8: You Want to Reduce Withdrawals From Your Personal Savings

Starting CPP at 60 can provide an income stream that doesn't depend on the performance of your investment portfolio.

For example, suppose you retire at 60 and have a portfolio that you would otherwise need to draw from every month. Starting CPP could reduce the amount you need to withdraw from your portfolio.

This may be particularly attractive to someone who wants to preserve more of their investment assets for later retirement.

There is an important trade-off, though: starting CPP early permanently reduces the monthly pension compared with starting at 65 or later. The question is therefore not simply whether CPP can reduce withdrawals today, but how the entire retirement plan looks over time.

Reason 9: You Are Coordinating CPP With a Spouse

Couples don't necessarily need to make the same CPP decision.

One spouse may choose to start CPP early while the other delays it. The appropriate approach depends on each person's CPP entitlement, age, health, income, savings, and expected retirement needs.

Coordinating CPP with other retirement income can help a couple create the cash flow they need while potentially preserving flexibility for later retirement years.

This is one reason it can be useful to model CPP decisions as part of the entire household retirement plan rather than looking at CPP in isolation.

Reason 10: You Believe Your Investments Can Make Better Use of the Money

Another reason some people consider taking CPP at 60 is the opportunity cost of waiting.

If you have a well-diversified investment portfolio, you may believe that receiving CPP earlier and investing the money could provide a better result than waiting for the larger CPP pension.

But this involves investment risk. CPP provides a government-administered inflation-indexed pension, while investments can rise or fall in value.

The comparison should therefore consider more than an expected investment return. Taxes, inflation, longevity, market volatility, withdrawals, and the value of having a larger guaranteed income later in life all matter.

How Much Is CPP Reduced If You Start at 60?

This is one of the most important things to understand before taking CPP early.

Your CPP retirement pension is reduced by 0.6% for each month you start before age 65. Starting at age 60 means starting 60 months early, resulting in a maximum reduction of 36% compared with the amount you would receive at age 65, based on the same CPP entitlement.

In exchange for starting earlier, you receive payments for a longer period. This creates a trade-off between a smaller monthly pension for more years and a larger monthly pension beginning later.

CPP can also be started after 65. The pension increases by 0.7% for each month you delay after 65, up to age 70, for a maximum increase of 42% compared with starting at 65.

Taking CPP at 60 vs. Waiting Until 65 or 70

There is no universal CPP start age that works for everyone.

Starting at 60 provides income sooner but results in a smaller monthly pension. Waiting until 65 provides a larger pension, while waiting until 70 produces an even larger monthly amount.

The decision should consider your complete retirement picture, including:

• Your health and expected longevity
• Your retirement age
• Your current income
• Your RRSP and RRIF savings
• Your non-registered investments
• Your other pension income
• Your OAS eligibility and future income
• Your spouse's retirement income
• Your planned retirement spending
• Your tolerance for investment and longevity risk

What About OAS?

CPP and Old Age Security are separate programs, and they don't have to be started at the same time.

CPP can generally begin as early as 60, while OAS normally begins at age 65 at the earliest. OAS can also be voluntarily delayed to age 70 for a higher monthly payment.

This means your retirement income strategy can involve different start dates for CPP and OAS.

Should You Take CPP at 60?

Taking CPP at 60 can make sense in some retirement plans, but it's not automatically the best choice.

The advantage is straightforward: you receive income sooner. The trade-off is equally important: the monthly CPP pension is permanently smaller than it would have been if you waited.

The right question is therefore not simply, "Should I take CPP at 60?" Instead, ask:

"How does taking CPP at 60 affect my entire retirement plan?"

That's where retirement modelling becomes useful. Changing your CPP start age can affect your withdrawals, taxes, investment balances, and income throughout retirement.

Conclusion

Taking CPP at 60 can provide valuable retirement income when you need it most. For some Canadians, the additional cash flow, flexibility, health considerations, tax planning opportunities, or desire to preserve personal savings can make early CPP an important part of their retirement strategy.

But taking CPP early also means accepting a permanently smaller monthly pension. Waiting until 65 or 70 may provide substantially more guaranteed income later in life.

There isn't a single answer that works for every Canadian. The important thing is to compare the different options using your own retirement income, savings, spending, taxes, and longevity assumptions.

You can also compare this article with our 10 Reasons to Delay CPP article to explore the other side of the decision.

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