The new CPP: Do you take it now or later?

Summer 2010

IMPORTANT NOTICE: Due to strong interest in this topic, we have an updated series of articles you will want to read:

Maximizing CPP Under the New Rules

Maximizing OAS Under the New Rules
When is the Right Time for You to take CPP and OAS

This series of three articles gives you a good perspective on the $$$ as well as some of the other points that should be considered as part of your overall financial plan.

What to consider when deciding when to start receiving CPP*

T.E. Wealth Strategies first reported on the then-proposed changes to the Canada Pension Plan in the Winter 2010 issue. Now that those changes have been given royal ascent, people are wondering what they should do. Should you take CPP early, even though the discount for early payment has increased? Or would you be better off to continue to work and contribute to the plan to receive an enhanced payment at age 65 or later?

The rules of the game have changed

Before you can decide what’s the best choice for you (and your spouse or partner, if you have one), you need to assess what the CPP changes really mean in terms of the CPP benefit you can receive. Keep in mind that changes are being phased in – all changes will be fully effective by 2016 at the latest.

A new discounting rate. If, before 2012, you elect to take CPP benefits early, your payment will be discounted 0.5% for each month you receive the benefit prior to age 65. For simplicity’s sake, let’s assume your annual CPP benefit at age 65 is $10,000. If you commence receiving CPP at age 60 before 2012, the discount would be 30% (12 months x 0.5% x 5 years) or $3,000. However, if you elect to take CPP benefits early after 2012, the discount factor will be phased in to eventually equal 0.6% per month by 2016. To continue with the example, after 2016 the discount for taking CPP benefits at age 60 will be 36% (12 months x 0.6% x 5 years) or $3,600.

Enhancements if you defer. Currently, if you defer receiving CPP benefits to after age 65, your benefit is enhanced by 0.5% per month for each month of deferral up to age 70. Beginning in 2011 and fully phased-in by 2013, CPP benefits will be enhanced by 0.7% for each month of deferral after age 65. Following the previous example, deferring benefits to age 70 would result in a 42% (12 x 0.7% x 5 years) enhancement or $4,200.

Opportunity for additional contributions and enhanced benefits. The revised rules eliminate the work cessation test by 2012. This test restricted your ability to collect CPP benefits if you were still working, depending on how much you worked. Under the new rules, you can work as much as you want and collect CPP benefits at the same time. However, you will be required to contribute to the CPP and these contributions are mandatory up to age 65, and optional to age 70. Contributions create a new “Post-Retirement Benefit”, which is added to your CPP benefit when you fully retire or at age 70, whichever is earlier. This benefit is based on how much you earn in the year and an actuarial adjustment based on your age at that time. The maximum Post-Retirement Benefit in any year is 1/40th of the maximum pension for the year multiplied by the actuarial adjustment factor.

Factor in mortality

The inducement for deferring your CPP benefits to age 70 is hard to ignore. By waiting from 60 to 70, you more than double the annual CPP benefit you can receive. It’s a wise investment, assuming you live long enough to see it pay off. And given the new discounts and enhancements, you don’t have to live all that long. If you begin receiving the CPP benefit at age 60, you will receive $64,000 in payments by the time you turn 70. However, when you reach age 79, the total CPP received by deferring benefits to age 70 ($127,800) is more than the total received under a discounted benefit beginning at age 60 ($121,600), with the gap widening in every subsequent year. The results are similar if you wait to age 65 to begin collecting benefits. It just takes nine years before waiting to age 65 would pay off. So when is the best time to take the CPP? It can be as simple as answering the question, “How long do you think you will live?” and then determining how much are you willing to bet on your answer.

Run the numbers to be sure

The decision of when to take the CPP becomes further clouded if you are planning to continue working in retirement. Your CPP benefits will be increased by the Post-Retirement Benefit based on how long you work and how much you earn and contribute to the CPP during that period. With so many variables, you’ll need to work out the numbers specific to your situation with your T.E. Wealth consultant. However, don’t count on the Post-Retirement Benefit to make up for the discount for taking CPP benefits early. According to a presentation from the Federal Government titled Modernizing the Canada Pension Plan, “The new post-retirement benefit provides modest compensation for this reduction.” In addition, the Post-Retirement Benefit does not apply to survivor and disability benefits.

*Changes to the CPP have not been adopted by the Quebec Pension Plan.

How the CPP benefits add up

CPP benefits after all discounts and enhancements are fully implemented, assuming an annual CPP benefit of $10,000 at the normal retirement age of 65.

CPP benefits commence at

Age 60

Age 65

Age 70

One year

$6,400 (age 61)

$10,000 (age 66)

$14,200(age 71)

Five years

$32,000(age 64)

$50,000 (age 69)

$71,000 (age 74)

Ten years

$64,000 (age 69)

$100,000 (age 74)

$142,000 (age79)

49 replies
    • T.E. Wealth says:

      Hi Jean,
      Before the recent CPP changes, if you were receiving CPP and still working you did not pay CPP contributions. Starting in 2012, if you are 65-70 years old and you are collecting CPP you can choose to make additional CPP contributions or you can opt out. If you decide to make the contributions, your employer will also have to make CPP contributions on your behalf. Your new contributions will allow you to continue to build your CPP Post-Retirement Benefit, even if you are already receiving he maximum CPP amount.

      • Adam says:

        My father began collecting cpp in spring of 2011 and went back to work in the fall of 2011 and the employer deducted his cpp from each cheque in 2011. In 2012 we tried to have his 2011 contributions refunded, but CRA said they were properly deducted. He was 62 yrs old in 2011. Any idea which section of the ITA to quote to prove to CRA that he should not have been deducted CPP contributions? Is there a 2011 election form still around to elect to not have CPP deducted?

        • Matthew J. Ardrey says:

          Hello Adam,

          Sometimes employers make the error of deducting CPP when they should not. The election to not have CPP deducted has to be made in advance of the deduction, so there is no facility to back date the form. CRA would be correct if your father was working in 2012. The new Post-Retirement Benefit (PRB) makes it mandatory to contribute to CPP while working up to age 65, even if you are taking the pension. However, this was not enacted until January 1, 2012. I had a similar situation for a client in 2011 where CPP was deducted from their pay while the client was already taking the CPP. When filing their tax return, the extra CPP overpayment came out as a deduction on line 448 of the tax return. My first suggestion would be to see if it is refunded there. If not, then have your father file a T1-adjustment to his 2011 tax return to claim the CPP overpayment.



          • Adam says:

            Hello Matt,

            Thank you for the reply, I will file the T1 adjust form and post here as to the outcome.



  1. Brenda Switzer says:

    I just turned 63 and am working full time (40 hours per week). I have been a widow for nearly 9 years now and receive a death benefit of a little over $279 per month. I am trying to decide if I should take an early CPP. I have concerns as to whether or not I would be able to continue to work if I decided to take this route. I am not ready to retire as I feel I have much to contribute yet to the work field.

    How does an early CPP affect the income of a full time employed person? Am I only allowed to earn a certain amount or work a certain number of hours per week? Is there a penalty? I look forward to receiving an answer and thank you in advance.

    Yours truly

    • Brent Soucie says:

      Hello Brenda,

      Previously, in order to take your CPP early, you had to have wholly or substantially ceased working. You are considered to have substantially ceased working if you earn less than the maximum monthly CPP retirement pension (roughly $1,000 per month). In other words, you had to be earning less than $1,000 per month in order to take CPP before age 65.

      As of 2012, if you are receiving CPP retirement pensions and choose to work, you will continue to make CPP contributions that will increase their payments through the Post-Retirement Benefit (PRB). From age 65 to 70, contributions are voluntary.

      In general, every month that you take CPP early (i.e. – before age 65) results in a 0.5% reduction in your annual entitlement. Deciding whether or not you should take your CPP early can depend on several factors, but strictly speaking, and without considering one’s cost of living, the net mathematical side of the decision comes down to how long you end up living. For example, if someone were to pass away at age 66, then they would have been much better off opting for early CPP. On the other hand, if someone were to live past 90, they would be much better off deferring their CPP until age 70. As I said above, this analysis doesn’t consider other qualitative factors, like if you need your CPP in order to finance your lifestyle. That is the sort of analysis we would be happy to help you with. If you would like to come in for a no obligation meeting, please let me know and I would be happy to schedule something.

      All the best,


  2. Ross P says:

    If i stop working early, example at 58, and have no employment income, are my CPP benefits baased on my previous 30 years of contributions while i was employed or on all my years before i take my benefits (ie at age 60, or 65, or 70) ie, does my lack of income since 58 decrease the benefit. Could this be a factor in my deciding to take cpp at 60 vs 70. As well should we not consider that higher cpp benefits at 70 can result increaased oas clawback which would not occur with benefits between 60-65?

    • Matt Ardrey says:

      Hi Ross,

      Thank-you for your interest. These are excellent questions. The contributory period for CPP begins at the later of your age 18 and January 1, 1966 and runs through to the date when you start receiving your retirement pension or age 70. So you are correct in assuming that having no income between ages 60-70 would impact the pension payable to you. However, when you look at this from your personal circumstances you will need to see how deferring the pension compares to taking it earlier when you are no longer contributing. A good first step would be to request a Statement of Contributions from Service Canada. Once you have that, consider how the General Drop-out Provision, and the Child Rearing Drop-out Provision, if applicable, would impact your situation.

      It is also true that a higher CPP from deferral may push someone across the threshold where OAS clawback would occur. Again this is personal circumstances and should be reviewed before making any decision on when to take the CPP. Please stay tuned for the third installment of my blog series on government pensions where I discuss how personal circumstances can affect the decision of when to take your government pensions.


  3. Ralph says:

    Hi I’m turning 60 in January 2014 if take Cpp early will my survivor pension be effected, also I will be receiving a company pension

    • Matthew Ardrey says:

      Thanks for this great question. CPP survivor benefits are one of the more misunderstood areas of the pension plan. First I would like to note that your company pension has no bearing on your CPP retirement or survivor pensions.

      In terms of the survivor pension you would leave a spouse after your death, there is no impact on when you take your pension. The survivor benefit pension calculation is based on your calculated retirement pension, or the pension you would have received having taken it at age 65.

      If you are the surviving spouse, however, your decision to take the CPP early will have an impact on the total combined retirement survivor pension you receive. Based on your age, I have provided the option information for someone receiving the survivor benefit after age 65. The survivor benefit pension, when combined with the retirement pension, is calculated as the lesser of:

      1. The difference between your calculated retirement pension and the maximum retirement pension

      Example: Assume the maximum monthly pension is $1,050. If you calculated retirement pension was $800 and you took it at 60 in 2014, you would have a pension of $531.20. Further assume your spouse has a pension of $700, of which 60% would be $420. Ignoring any inflation, if your spouse died after you were 65, the maximum you would receive under this calculation would be $250, not $420. This is because of the limitation that the survivor pension, once added to your calculated retirement pension, cannot exceed the maximum retirement pension.

      2. The survivor benefit pension reduced by the lesser of 40% of the survivor pension or 40% of the calculated retirement pension

      Example: 40% of the survivor pension of $420 = $168 versus 40% of $800 = $320. Thus the lesser of these two is $168. Therefore the calculation is $420 – $168 = $252.

      Based on the above, your survivor benefit would be calculated under the first option, as $250 is less than $252.

      Just when you think this isn’t complicated enough, there is a special adjustment that only applies if the surviving spouse started receiving their pension before age 65. This adjustment increases the retirement pension and is calculated as the uncombined survivor benefit pension less the combined survivor benefit pension multiplied by reduction factor for taking the pension early.

      Example: Following our example from above, ($420 – $250) X 33.6% = $57.12 Thus, the retirement pension is now $531.20 + $57.12 = $588.32 and the total pension is $588.32 + $250 = $838.32


  4. Matthew Ardrey says:

    Hi Gina,

    Thanks for your great question. It would be tough for me to give you an exact answer without knowing more about your personal situation, but I will try to give you some guidance by making a few assumptions as I go along.

    According to Service Canada, the maximum monthly CPP payout is $1,038.33 per month in 2014. Assuming inflation of 2%, it would be $1,059.10 in 2015 when you are 60 and $1,169.33 in 2020 when you are 65.

    There are 47 eligible years to which to contribute to CPP (18-65). Even with the general dropout provision of 8 years, you would only be contributing 36 of 39 eligible years if you took your pension at 60. Where at 65, you would have contributions in every eligible year and may even be able to drop some lower income years. Most individuals have some contribution years where they have not made the maximum. Also, many individuals are making more at the ends of their careers than at the beginning. Based on this, I am going to assume that if you take CPP at 60, you will receive 75% of the maximum and 90% of the maximum if you take it at age 65. I have ignored any child rearing dropout provision.

    You would receive some Post-Retirement Benefit (PRB) if you continued to work after age 60 and took the CPP. Based on the available online calculator for PRB, which currently is not set for those born after 1953, at the maximum amount you would get a PRB of about $220 per year. This would continue for 3 years.

    The pension reduction you would incur by taking your CPP at age 60 instead of 65 in 2015 would be 6.96% per year.

    Let’s look at the two pension possibilities based on the above assumptions.

    1. Take CPP at age 65

    $1,169.33 X 12 X 90% = $12,628.76 per year

    2. Take CPP at age 60

    $1,059.10 X 12 X 75% X (1 – 6.96% X 5) + 220 X 3 = $6,874.80 per year

    Based on this, by the time you are age 72 the cumulative CPP received would be greater by taking it at age 65 than 60. This of course is ignoring the tax effects of this as well. You would likely be in a higher tax bracket while you are working and lose more of that CPP at 60 to taxes than the later amount at 65.

    Also, you seem to be determining your retirement date based on the date you retire your debt. Retiring your debt is the cornerstone of financial independence, but you need to ensure that you have sufficient assets to fund your lifestyle throughout retirement as well. As a general rule, a higher CPP and working longer will cause the need for less assets than more.

    I hope this helps you with your decision. I realize this is just an example. If you want more detail about your specific situation, I would suggest seeing a fee-only financial planner to have some personal analysis on your retirement completed.

    Best regards,


  5. boo says:

    what’s missing in the early CPP benefit is the income potential if well invested. The increase in value has to be factored in when considering taking the benefit at 65. Someone who takes an early cpp at 60 has a five year head start in investing the money in hand. In my case that has more than made up for the 30% decrease

  6. boo says:

    Also, if one stops working at 60 and does not collect the early cpp does this not affect the rate at 65 since no cpp contributions were contributed in the interim.

    • Matthew Ardrey says:

      Dear Sir/Madam,

      Thank-you for your interest in our article. The topic of the new CPP and when to take it has generated a lot of interest. Please see my comments based on the new CPP and how investing the after-tax proceeds impacts the choice of when to take it.


      The pensioner stops working at age 60 and makes no further contributions to CPP
      2016 CPP reduction rates are in effect – this is the full impact of the new CPP changes
      Rate of return on investments is 5%
      Rate of inflation is 2%
      Tax on CPP at 31.15%
      No tax on investment returns
      As CPP is received monthly, return on new contributions is prorated

      Based on the above assumptions, at the age of 81 someone who took the pension at 60 would have about $375,000 saved versus $377,000 saved for someone who took the pension at age 65.

      In your case you have determined that you are better off for taking the CPP early because it is offset by the investment benefits; however this may not be true in all cases. How this analysis works out is highly dependent on the assumptions one makes. A change in one assumption can drastically change the result of the analysis. So what may work for one person may not for another. This is where the value of having a financial planner review your personal situation comes into play.

      If you would like to learn more about the changes to CPP and OAS, I encourage you to take a look at my blog series. The first of three can be found by following this link.


  7. Elaine says:

    I’m 65 and have elected not to receive my CPP until age 70. What form do I fill out to let CPP know that. I can’t seem to find out anywhere?

    • Matthew Ardrey says:

      Hi Elaine,

      There is no form to elect to take your CPP later. The CPP does not start automatically. When you are ready to receive it, apply a couple of months in advance, as it often takes about 8 weeks to receive it.


  8. Donna says:

    I am a 6o year old widow who is working and paying into CPP. I receive a Survivor’s Benefit, and would like to know if I am eligible to receive the PRB.

    • Matthew Ardrey says:

      Hi Donna,

      From what I understand, you receive the CPP survivor benefit, but not the retirement pension. If this is correct, then your contributions to CPP are going towards accumulating your retirement pension. The PRB is an additional amount on an existing retirement pension.


  9. Roger Reddy says:

    I m 66 and m still working but not contributing to cpp buy collecting from 2009 May can I contribute to cpp for another 18 months before I retire and how much more an I going to get when I retire receiving about $660

    • Matthew Ardrey says:

      Hi Roger,

      You may elect to contribute to CPP by filling out form CPT30 and submitting it to the CRA. This will allow you to contribute towards the post-retirement benefit (PRB). When you fill out the form, give a copy to your employer and send the original to CRA. Your election will become effective on the first of the month following receipt of the form. To note, if you change your mind about contributing, you can only make this election once a year. This form can be found through the link below.

      Without knowing your income, I cannot estimate what additional PRB you will receive; however, using the same link below, there is a PRB estimator on that page. This will give you an idea of how much the PRB will add to your pension. to note, contributions to the PRB do not affect any other CPP benefits. Also, the PRB is not eligible for credit splitting or pension sharing.


  10. Liz says:

    Hi, I receive survivors benefit of 311 and spousal support of 1000 a month, which is to be paid till June 2025. I will be just shy of my 69th birthday. Will my spousal support affect my amount of pension I receive, does cpp deduct from my pension the amount of my survivors benefit, or do I get full pension and full survivors benefit? I will be doing credit splitting with the ex since I homeschooled for 8 years and did not work. I really need to know how all these things work together for the best outcome for me. Thanks

    • Matthew Ardrey says:

      Hi Liz,

      There are a few questions you have placed below and I will answer each in turn.

      First, spousal support does not impact the amount of CPP you receive. Both the CPP retirement and survivor pension are paid based on contributions made to the plan and the formulas for translating those contributions into pension income.

      Next, I assume by pension you mean your CPP retirement pension. Your CPP survivor pension and retirement pension will eventually be combined into one pension. The most that can be paid to a person who is eligible for the retirement pension and the survivor’s pension is the maximum retirement pension, which is more than the maximum survivor’s pension.

      Last, pension credit splitting is available for the amount of years you were married. This will enhance your retirement pension payable, based on the assumption that you did not work and your spouse did.

      The combination effect comes into play once you have started taking the CPP retirement pension. The CPP survivor pension will be rolled into the retirement pension to the extent that you are not at the maximum CPP retirement pension already. The CPP pension credit splitting will give you are larger CPP retirement pension as well. Overall both of these factors will work together to give you a larger CPP retirement pension than you would have been otherwise entitled without them. To note, you should also look into the general dropout provision and the child rearing dropout provision, as these can remove zero/low income years from your CPP calculation and will also enhance your pension payable.


    • Matthew Ardrey says:

      Hi Sam,

      The PRB does not have an impact on the disability or survivor benefits from CPP. In addition, amounts from the PRB cannot be split or shared.


    • Matthew Ardrey says:

      Hi Linda,

      Thank-you for your question. The calculation for your CPP works much like a fraction, with the numerator being your number of years contributing and the denominator being the total number of years that you could contribute. To note, the numerator is also affected by the level of contributions in any given year, as the denominator always assumes the maximum contribution. Thus by stopping your contributions to CPP at age 58, you are removing 7 years (65 – 58) from the numerator. This in turn reduces the overall fraction and your CPP payable. As the total number of years available to contribute to CPP is 47 (65 – 18) a 7 year gap is not insignificant. In fact it represents almost 15% of the total years available. By taking your CPP at age 60, your pension payments will be subject to a reduction factor of 7.2% per year, this will be the factor in 2016, for a total of 36%.

      To illustrate the impact, take a look at the following comparison.

      According to Service Canada, the maximum monthly CPP payout is $1,038.33 per month in 2014 or $12,459.96 per year.

      If we apply the factors to this pension that were described in your situation above and assumed otherwise you were eligible for the maximum pension, your pension would be:

      $12,459.96 X 85.12% X 64% = $6,787.79

      There are a couple of provisions you can use to increase your CPP calculation by reducing the total number of years in the calculation, or reducing the denominator. The general drop out provision will permit you to drop the lowest 8 years from you CPP contributions. So if all other years were at the maximum from age 18-58, the remaining years could be dropped and would have no impact on your pension payable. Also, if you have children, you were the primary caregiver and meet the requirements set out by Service Canada, you may be eligible to receive the child rearing provision as well. Please see the link to Service Canada to determine if you would be eligible .


    • Matthew Ardrey says:

      Hi Oda,

      If you qualify for Employment Insurance (EI), then yes you can apply for it even if you are receiving CPP; however, the payments you receive from CPP are considered earnings for purposes of any EI and your EI payment will be reduced by your CPP payments. According to Service Canada, the only time a pension is considered earning is when:

      A pension income is not considered to be earnings for EI benefit purposes when an individual requalifies for EI benefits after the date on which payment of the pension begins. The following criteria must be met for the pension not to be considered earnings to be deducted from benefits:

      After the date on which the pension became payable,
      and while receiving your pension,
      you worked and accumulated the necessary number of insurable hours to establish a claim, and
      that claim is calculated using the insurable hours accumulated after the start of the retirement pension.

      For more information on this, please follow this link below to the Service Canada website.

  11. Fred Stewart says:

    I am deferring my CPP and OAS until I turn 70. I am continuing to work full time for this period. I am paying CPP contributions. What impact does the continuing contributions have on my eventual CPP benefits. The examples I can find seem to all be talking about persons already getting CPP benefits.

  12. Greg says:

    Two unrelated but complicated questions:

    1) I have been receiving a reduced CPP retirement benefit since age 60 (Feb 2007). At that time I was getting 70% of the maximum monthly retirement benefit. Now in 2015, I am receiving $693.82, which is only 65% of the current maximum retirement benefit. My monthly benefit has increased 8 times by a total of 14.8%, or only 1.74% per year. However the total increase in the maximum retirement benefit has been 23.3% over the same time frame (2.65% per year on average). Are these increases not both supposed to be indexed to inflation? If so, why are the annual increases different?

    2) Assuming that Service Canada is correctly calculating my pension benefit, what is the maximum CPP survivor benefit which my spouse can receive? She is currently receiving a CPP retirement benefit of $453.43 per month at age 68, which she began receiving at age 65.

    I understand this is a very complicated calculation, and the maximum combined retirement and survivor benefit cannot be more than the maximum retirement benefit in the year of death, but there are at least 3 separate calculations to make that will almost always ensure this combined benefit is less than the maximum. Is there an online calculator or spreadsheet that can provide an estimate of future combined CPP benefits, with death of a spouse at various ages?

    My initial calculation indicates that if I die this year, my spouse will receive less than 60% of my current CPP benefit plus her existing benefit, or not more than $869.72 per month.

    Similarily, I have estimated the maximum combined pension and survivor benefit I could receive this year in the event of my spouse’s death to be $965.88. Are these values correct? And how much additional reduction should either of us expect?

    If the overall reduction in the survivor’s benefit is significant, is the amount or percentage reduction in the initial combined benefit likely to increase or decrease over time, so that I will have to redo this calculation every year that we both survive?

    Any light you can shed on our situation would be most appreciated.

    • Matthew Ardrey says:

      Thank-you for your interest in our article. Please see below for my responses to your questions.

      1. Yes as I understand it, CPP should increase at the same rate. The formula for how they increase it can be found through this link If your initial number for your CPP payment is correct, then it would appear that they have not increased your pension at the same rate as they increased the maximum pension. I would agree with the numbers you mention below. I would suggest contacting Service Canada directly to determine what happened.

      2. The CPP survivor benefit for yours and your spouse’s age is based on 60% of the deceased’s retirement pension plus the survivor’s retirement pension, not to exceed the maximum retirement pension. Based on this, the numbers you mention appear to be correct.


  13. charles lancaster says:

    Hi :I receive the post retirement benefit,last year 2014 was the first yearand I had no problem getting it.This year the increase ( I worked and contributed all of 2014)for 2015 has not been added.I live in Ontarioand was wondering if anyone else hs this problem.Calling service Canada is a joke their answeris that it require a manual calculation and has not been done yet.Yes I know that the adjustment is retroactive,but I find it hard to believe it takes five to six months to do this.

    • lucy says:

      Hi Charles,

      I have not heard of anyone else having this problem with the post-retirement benefit (PRB). Typically, the PRB is calculated after CRA receives your employer’s information for the preceding tax year. They usually have everything calculated by April/May and you get a retroactive payment to January at that time. Given it is now almost October, there is definitely something else going on with your case. Did you and your employer contribute to CPP for you last year? If not, that may be the explanation. Otherwise, unfortunately there is not much else you can do than contact Service Canada to determine why you have not received your increase.

      Best regards,


  14. Bob says:

    I’m 29 next year.

    I’m tired of paying CPP. Same with EI. I’ve never been able to use the EI even when I ABSOLUTELY Needed to.

    Income tax is enough.

    My question is how do we opt out of CPP and EI Payments. If the answer is we can’t than I am headed to a lawyer and bringing this all the way (if it’s required) to the Supreme Court of Canada.

    I should not have to pay 4.5% to CPP and whatever EI is. It cuts into my budget and my security of the person and happiness. How are people, especially my age supposed to get ahead with these extra BS taxes, the price of shelter (rent, mortgage, outright cash purchases of such things) Food prices are through the roof.

    Income tax is enough. What if I die before 65? I have no spouse nor will I ever and have no kids. The Government needs to get its hands off of our hard earned money.

    Who’s with me?

  15. Mike says:

    I am retiring in March 2016 from a company I was with for 37 years. I will be 61 at retirement and have a fixed defined benefit pension(with NO cost of living adjustment)that I can begin collecting right away without penalty or reduction. However, like many other pensions ours is automatically reduced at age 65 by the amount of the max CPP (approx. $1000 per month). My thought is too hold off on applying for $1000 CPP until 65 when the $1000 company pension reduction kicks in which would basically leave my net total pension income about the same. Of course I could also apply for OAS at 65 and that would bring it up $500-$600/month. My dilemma is if I retire at 61 and no longer making CPP contributions between 61-65 will I still get max CPP or will it be less due to 4 year break in contributions? I just received my CPP statement from the government and it says my CPP at 65 will be $1063 ($750 if I take it at 61). I am concerned that it may not be $1063 due to the four years (61-65) of non contributions and that the $1063 is assuming I will be making contributions until 65

    • Matthew Ardrey says:

      Hi Mike,

      From the information you provided, it appears you will be very close to the maximum CPP payable. This will drop off slightly because of the the four years you are not working before 65. CPP works like a fraction. For someone who has been in Canada their entire life, there are 47 years in which you can contribute. to reach the maximum, ignoring any drop-out provisions, you need to contribute the maximum in all 47 years. To help reach the maximum CPP, there is the general drop-out provision which drops the lowest eight years of contributions. Thus, you need only reach the maximum in 39 years to receive the maximum CPP. This drop-out is included already in your statement calculation. So depending on what other years are now included when your four zero years are dropped out will determine how much your pension is impacted.

      The alternative is to take your CPP now. Based on the numbers you provided, this is almost a 30% reduction in your payment. Looking at past calculations I have done, the break-even between taking the pension at 60 and 65 is between age 73-74. So in most people’s cases, it does not make sense to take it early.

      Comparatively, in a worse case scenario where those four years at zero have the maximum impact, your monthly pension would be about $954 a month. This is calculated as 35/39 X $1,063. Though not perfect, it is a much more palatable number than $750.


    • Matthew Ardrey says:

      It is difficult to say without understanding more about your situation. Taking early CPP in general causes a significant loss in the amount paid, 36% between 60 and 65. That being said, you may still hit the maximum at retirement with a combination of your CPP and your CPP survivor benefit. If you will hit the maximum with the combination, then it is like there is no real penalty for taking it early. You need to review the two pensions and see how they will work out for you now and at 65.


  16. ruth says:

    Hi I appreciate how helpful this site is. I am 63yrs. old and estimate I will retire between 67-68 yrs. old calculated on my work pension of approximately $24,000 – $26,000 annually. Given I have a mortgage and in addition significant debt (30,000) I am wondering the following.
    Do I apply for early CPP taking into account I make $104,000 so the tax bracket is high; and use the CPP to pay down my debt (which I currently have with the bank for 6% for next four years) and secondly I have yet to apply for shared/split CPP credits from my ex marriage of 18 yrs. with my
    ex spouse who made 100% more than I did at the time. Thank you!

    • Matthew Ardrey says:

      Hi Ruth,

      Thank-you for a most interesting question. This is the type of real world example that makes so many Canadians question when is the right time to take the CPP. To give you any sort of answer, I had to make some assumptions.

      1. You will receive maximum CPP
      2. You will receive the full reduction for taking it at age 63 or full benefit to deferring it at 65
      3. You are paying $4,800 on the $30,000 loan at 6%. This will pay it off in 8 years
      4. Use 2015 tax rates
      5. You reside in Ontario
      6. 2% inflation on CPP and OAS

      If you take CPP at 63, you will have a 14.4% reduction in your pension payable. You are in a 43.41% marginal tax bracket. Thus, it will leave you just over $6,000 per year after tax to apply to your debt. If this is used solely to eliminate the $30,000 debt, it will be paid off in just under 3 years with an interest savings of about $4,700.

      If you wait until 67 to take CPP, you will have a 16.8% increase in your pension payable.

      Until you RRIF at age 72, we assume you are in a 20.05% tax bracket and then 31.15% afterwards. These tax brackets apply whether you take CPP at 63 or 67. Cumulatively, your CPP is greater if you take it at age 67, rather than age 63, just after your turn 73. If I account for the interest savings and assume you invest them in your TFSA at 5%, then the break-even age increases slightly to age 75.

      To note, the one factor not included in this analysis is your post-retirement benefit (PRB). Please see the following link below to estimate what your PRB could be. You will need your CPP statement of contributions to do so. That being said, you will likely have a break-even age close to 76-77.

      The bottom line is from an economic standpoint, assuming you live past your mid-70s, you will be better off to wait for your CPP than take it early. That being said, a full analysis of your situation, cash flow, debt repayment, etc. would be useful, as I have had to make several assumptions in this answer.


  17. Maureen says:

    Hi, I turn 60 on March 01,2016. I retired early – Jan. 01, 2013. Should I take my CPP now and invest it, or wait till I’m 65 in 2021?? I’m really not sure on this. My husband took his early at age 60 (last year). Thanks.

    • Megan says:

      Hi Maureen,

      There are several things to consider before taking CPP early.

      If you decide to take your pension at 60 the reduction for taking CPP early will be 7.2% per year, or 0.6% per month, to a maximum of 36%. Ignoring inflation and investment returns the breakeven point for age 60 vs 65 in which the total pension benefit received from CPP is age 74. The breakeven point will increase if you decide to invest the pension and not spend it. The new breakeven point will depend on the investment return you earn as well if and when you are going to start spending the money.

      Another factor is your health. According to the World Health Organization (WHO), life expectancy for Canadian men and women is ages 80 and 84 respectively. All other things being equal, the longer you expect to live the more you should lean towards deferring. If you are expected to have a less than normal life expectancy, then the opposite would be true.

      If you expect to have higher lifestyle expenses now than in the future, it may be beneficial to take your pensions earlier rather than later. Though the numbers show deferring the pension to a later dates, you should always consider how this is going to affect your own personal situation.

      Matthew Sears

  18. linda says:

    I am 59 and have been retired for two years now. I am still working part time for my husband and paying cpp. (small paycheck) I am healthy and have a house that will be sold in 2-3 years which will provide monies in around 400,000. I also have rrsp money and no debt
    Wondering about early cpp as it will supplement my income. Will these small earnings affect my cpp down the road?
    Thank you

    • Matthew Sears says:

      Hi Linda,

      CPP is not an income tested benefit. Once you begin drawing down your RRSP or any investment income earned from the proceeds of the house sale once invested will not affect your CPP Retirement Benefit.

      Your CPP Retirement Benefit will be affected by your part-time work for your husband. These contribution years will be included in the calculation of your retirement benefit. Your retirement benefit will be based on how much you have contributed and how long you have been making contributions. You can request a statement of contributions from to get an accurate estimate of what your CPP retirement benefit will be.

      Matthew Sears


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