Pensioners: Should You Take CPP Payout at 60?

You can collect your CPP payout anytime between 60 and 70. While the average retirement age is 65, circumstances may require you to collect CPP at 60.

| More on:

You have worked all your life and now are worried about retirement. When to retire is what you decide. This decision can be based on various factors, including your current financial situation, tax liability, and health condition. Since each individual’s circumstances are different, the Canada Revenue Agency (CRA) gives you an option to choose (anytime between age 60 and 70) when you want to collect your Canada Pension Plan (CPP) payout. 

Should you collect your CPP payout at 60? 

The average retirement age in Canada is 65. For 2024, the average CRA payout is $831.92 per month, and the maximum payout is $1,364.60. If you collect your CPP payout before that, it will reduce by 0.6% per month. 

How much payout you get will depend on how much you contributed and for how long. The CRA takes the best 40 years of your life to arrive at the payout. 

Financial situation: If you have had a successful career for 35 years and have been unemployed or underemployed for the last three to five years, you might want to take your CPP at age 60 to avoid reducing your payout. Even if you become employed later, you can continue earning a salary and the CPP payout. 

Tax situation: If you are a high-income earner, have a high tax liability, and have a sufficient retirement pool, you might want to collect a CPP payout at age 65 as it is taxable. If you have a spouse in the low-income bracket, you could split the CPP payout with them and reduce your tax liability. After your death, your spouse can only get 60% of the payout if they are 65 or older. Instead of using up all your RRSP and TFSA passive income, you might want to keep a portion for them. 

Health situation: Health is wealth. And if your health is not keeping you well, there is no point waiting till your last breath for a CPP payout. You might as well enjoy it from age 60 while you are alive. 

Why do you need a million-dollar TFSA retirement pool over and above CPP? 

The CPP is taxable income and has a maximum limit you can get. If both you and your spouse are receiving the maximum CPP payout, your CPP goes unused after your death. There are several restrictions on this pension. If you can’t fulfill your dreams even after retiring, there is no point earning all your life. The Tax-Free Savings Account (TFSA) gives you the liberty to withdraw any amount without reporting it to the CRA. 

Whether planning a trip to Europe or buying a luxury dinner, the TFSA gives you the freedom to withdraw any amount tax-free. Just as you contributed to CPP for 30 to 40 years, if you contribute to your TFSA even for 25 years, you can build a million-dollar retirement pool that is tax-free. Focus on building a portfolio that gives a 12-15% average annual return. 

Two stocks to add to your million-dollar TFSA retirement pool 

The TFSA allows you to invest in Nasdaq stocks. Since the TFSA allows you to grow your investments tax-free and even withdraw them tax-free, consider high-growth stocks. Nvidia (NASDAQ:NVDA) could be a good addition to your TFSA. It has unbeatable technology in a graphics processing unit that is defining the artificial intelligence (AI) revolution. As more use cases for AI grow such as self-driving cars, industrial robots, smart cities and more, Nvidia will be at the core of it. The stock has already surged 200% in a year. You can invest in it anytime, in any macro crisis or stock market crash. As long as Nvidia’s GPUs remain unbeatable and in demand, the stock will grow. 

You could also consider investing in the dividend reinvestment plan (DRIP) of Telus Corporation (TSX:T) while it trades at its four-year low. There are short-term headwinds like high-interest expense and regulatory uncertainty, but its secular growth from the 5G revolution is intact. The 5G rollout will open opportunities in the cloud, secure networking, AI at the edge, and other internet services. These opportunities could help Telus to continue growing its dividend in the long term. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Puja Tayal has no position in any of the stocks mentioned. The Motley Fool recommends Nvidia and TELUS. The Motley Fool has a disclosure policy

More on Tech Stocks

Rocket lift off through the clouds
Tech Stocks

2 Growth Stocks That Could Skyrocket in 2025 and Beyond

Wondering what types of stocks could rapidly rise in 2025? Check out these two stocks with substantial upside if they…

Read more »

up arrow on wooden blocks
Tech Stocks

The 3 Smartest Tech Stocks to Buy With $500 Right Now

Tech stocks can be seen as a bit risky, but these three have far less risk and more stability for…

Read more »

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Tech Stocks

Shopify: A Must-Have Growth Stock for Your TFSA Now (and the Next 10 Years)

Shopify (TSX:SHOP) stock isn't just a top growth company, it's a titan worth owning in your decades-long TFSA fund.

Read more »

cloud computing
Tech Stocks

Best Stock to Buy Right Now: Manulife vs CIBC

Want the best stocks? These two are certainly the best options. But which is the better buy?

Read more »

profit rises over time
Tech Stocks

4 Reasons to Buy Constellation Software Stock Like There’s No Tomorrow

Constellation Software stock continued its climb upwards after recent earnings, and this only adds to its appeal.

Read more »

calculate and analyze stock
Tech Stocks

1 Stock That’s Just as Hot as Nvidia (Without All the Hype)

Nvidia stock may look like a strong option, but its valuation is through the roof. Enter this other under-the-radar stock.

Read more »

A plant grows from coins.
Tech Stocks

3 Growth Stocks Wall Street Might Be Sleeping on, But I’m Not

Don’t miss your chance to load up on these three beaten-down stocks.

Read more »

think thought consider
Tech Stocks

Is CGI Stock a Buy Even With No Dividend Yield?

CGI stock may not have a dividend to speak of. But does that necessarily mean you should ignore this top…

Read more »