Maximize Your Retirement Income: Timing Your CPP Strategically

Find out why waiting isn’t always the best choice and how early claiming can work in your favour.

As a strategic wealth advisor, I often get asked about the right time for Canadians to start claiming their Canada Pension Plan (CPP) benefits. It’s a crucial decision that can significantly impact your retirement income, and there’s no one-size-fits-all answer. In this post, I want to share some insights to help you make a more informed choice, considering not just mathematics but your personal circumstances, health, and future goals.

Chart A

Many advisors tend to focus heavily on the numbers — the penalties for claiming CPP early versus the benefits of delaying. For example, claiming at age 60 results in roughly a 36% reduction in benefits compared to waiting until age 65, while delaying until age 70 can increase your benefits by around 42%. The cumulative benefit crossover point, where delaying benefits makes more sense financially, typically occurs in the mid-70s if you start at 60 versus 65, and in the late 70s or early 80s if comparing starting at 65 versus 70. This suggests that waiting can be more advantageous, especially if you have a longer life expectancy. See Chart for visual of maximum benefit accumulation over the years (inflation excluded).

But I’ve found that decisions about CPP are rarely just about the numbers. Personal factors, including your health, longevity outlook, and immediate financial needs, play a huge role. If you retire early at 60 and need the income to cover expenses, then taking CPP early might be necessary, regardless of potential penalties. Conversely, if you’re in good health and plan to enjoy many more years, delaying can maximize your lifetime benefits.

Chart B

One effective strategy I often discuss with clients is to take your CPP benefits early, say at age 60 and then invest that income into an RRSP if you have contribution room and don’t immediately need the income. This approach allows you to leverage the tax advantages of RRSP contributions and gives your money room to grow through investment returns. For example, with a reasonable 5% annual return, the invested amount can potentially outgrow the benefits you would have received by delaying claiming CPP until later years. See the Chart B for a comparison of investing early benefits and redeeming later as opposed to simply relying on the fixed CPP income.

This strategy also provides flexibility, as the funds are not tied to CPP rules and can be withdrawn or used according to your evolving needs. Additionally, unlike CPP benefits, which only continue partially to a surviving spouse and then generally cease upon death, RRSP assets can be passed on to your heirs, making this a better estate planning strategy giving you more control over your legacy. Overall, this approach can optimize your retirement resources while providing a transfer of wealth to loved ones.

Ultimately, your CPP decision should be tailored to your unique situation. It’s not just about mathematical calculations but also about your health, income needs, estate plans, and emotional comfort. I encourage my clients to think carefully about these factors and work with a professional to develop a plan that fits their goals.

To learn more about how to strategize your CPP benefits, watch my 15 minute video for more information and context.

If you’re approaching retirement and want to explore how best to structure your income streams—including CPP, investments, and estate planning—I’d be happy to help. Retirement is a journey, and with the right strategy, you can maximize your benefits and enjoy peace of mind in your later years. Reach out today, and let’s start crafting your personalized wealth plan.

Author: Marcel LeBlanc, CFP, CIM

Strategic Wealth Advisor

Moncton, NB

This information is the writers's opinion and not necessarily that of Onvisor Inc. It is intended for general knowledge only, not professional advice on legal, tax, accounting, investments, or personal finances. All figures or data are believed accurate at the time of publication. Consult qualified professionals for personalized guidance & planning.