When should you take your Canada Pension Plan?

We’re living longer and healthier lives.

Some people elect to retire before the age of 65.

Others are working into their 80s.

How do you decide when to retire and collect your Canada Pension Plan benefits?

Need help covering your bills? Consider taking your pension earlier.

If you are an employee and a low wage earner between 65 to 70 years old, taking the Canada Pension early will bring in more income.

This can be helpful if you are struggling to pay the bills.

If you take the CPP early, you may also take the Old Age Security at 65 or 69. This way you can qualify for the Guaranteed Income Supplement.

In a higher tax bracket? Consider taking your pension later.

If you are an employee in a higher tax bracket, you may want to defer your pension income until you reach 70 years of age.

In this case, you will have a full company pension at the time of retirement and may continue to work until you are 70 or older.

Of course, everything depends on your health and the retirement packages offered by your employer.

If your company pension, investment income and/or savings is sufficient to cover your costs, you may want to stop all the contributions into the CPP as you have reached the maximum amount.

In your own business?

As a freelancer, independent contractor or self-employed person, you are required to pay into the Canada Pension Plan every year. While this may impact the cash flow in your business, it also means that when you reach the age of 60, you can apply to receive your Canada Pension.

When should you apply?

  • If you are in higher tax bracket you may want to defer applying until you reach 70 years.
  • If you wait until you are between 65 to 70 years, you will receive higher pension payments. This will also mean you to pay more taxes.
  • If you take your pension early between 60 to 65 years, your payments will be lower. This also reduces the payment amount in the later years.

If you decide to opt into early retirement payments, you can still make CPP contributions.  However, if you are self-employed you may want to reduce the amount of contribution by applying early.

Need help deciding?

If you’re approaching retirement age, you will need to make this decision soon.

If you’d like some professional insight, contact Ina for a free consultation.

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