Many Baby Boomers wonder when to apply for their Canada Pension Plan retirement pension. You can begin CPP any time between 60 and 70, but the choice — and it is a choice — will change the amount of your pension forever more.
Until recently, I had generally encouraged people to draw CPP as early as possible, as the math tended to work in their favour. Parliament seemed of the same mind, deciding to take the edge off by making Bill C-51 by making early CPP a little less attractive. So it in effect implemented a bonus for taking “late” CPP, after age 65. These changes are being phased in between 2012 and 2016.
If someone is still working after 60, there are special factors involved with the timing decision. So for our purposes, we’ll consider someone who has stopped working.
Everyone effectively “invests” their CPP payments — whether they draw their pension early or late
Beginning in 2013, the monthly reduction for starting your pension pre-65 is 0.54%, versus a 0.7% bonus after 65. Although the CPP rates for 2013 have yet to be announced, I estimate a maximum annual pension for a 60-year old in January 2013 to be about $8,164. If they instead waited until their 70th birthday, that pension might be about $20,905. Is it worth giving up an estimated $89,393 of payments during one’s sixties for a higher pension post-70?
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