Should You Delay CPP Payments? The Pros and Cons of Waiting Until 70

Deciding when to start your Canada Pension Plan (CPP) payments is an important retirement decision. While some Canadians begin collecting CPP at age 60 or 65, delaying until age 70 can offer significant financial benefits. However, this choice depends on many factors.

Let’s dive into the pros and cons of waiting until age 70 to receive CPP payments.

How CPP Payments Change Based on When You Start

Before discussing the pros and cons of waiting until age 70 to start receiving your CPP payments, let’s examine how timing affects these benefits.

• If you start at 60, you receive 36 percent less than the amount you’d get at 65.
• If you start at 65, you receive the full standard amount.
• If you start at 70, you receive 42 percent more than the standard amount.¹

The Pros of Delaying CPP Until 70

Increased Monthly Payments

As we showed above, delaying CPP past age 65 results in a higher monthly benefit. Specifically, your pension increases by 0.7 percent for each month you delay, up to a maximum of 42 percent at age 70.¹ For example, if you’re eligible for $1,000 per month at 65, waiting until 70 would increase your benefit to $1,420 per month versus $640/month if you start at 60.

Longevity Protection

If you anticipate living into your 80s or beyond, delaying CPP can lead to a higher lifetime income. A study found that for a woman living to age 90, there’s a 100 percent probability she’ll receive more income by delaying CPP to age 70, assuming she invests in a growth portfolio.²

Potential Tax Benefits

You might not need CPP immediately if you’re still working past 65 or drawing on other income sources like RRSPs. Delaying can reduce your taxable income during those years and smooth out retirement cash flow later.

Inflation Adjustment

CPP payments are indexed to inflation, ensuring that your purchasing power remains stable. Higher base payments from delaying provide better protection against rising living costs.

The Potential Cons of Delaying

Delayed Access to Funds

Waiting until 70 means forgoing CPP income up to a decade after initial eligibility. This could be challenging if you need funds for living expenses or unforeseen costs earlier.

Health Considerations

If you have health issues or a shorter life expectancy, starting CPP earlier might result in more total benefits over your lifetime.

Financial Requirements

Delaying CPP requires alternative income sources to bridge the gap. Not everyone has sufficient savings or other income streams to support this strategy.

Market Uncertainty

If your retirement plan is tied to the market, and your portfolio has taken hits, early CPP can reduce pressure on your investments. This can help prevent you from withdrawing your other assets at the wrong time.

Timing Your CPP Is a Personal Decision

There’s no one-size-fits-all answer to when you should take your CPP payments. Delaying CPP until 70 can give you a stronger financial foundation in later retirement years, but only if you can wait.

Before deciding, ask yourself:

• Do I have other income to support me until 70?
• Am I in good health with a long life expectancy?
• How would a higher monthly income at 70+ improve my lifestyle?

Consider talking with a financial advisor to model different scenarios based on your situation to structure a retirement income that works for your life.