Average CPP Benefits at 60 and 65: What You Need to Know in 2024

The average CPP benefits differ at 60 and 65 and future retirees must understand that there are income gaps to fill in both options.

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The 2024 Retirement Survey by Abacus Data for the Healthcare of Ontario Pension Plan (HOOPP) reveals that 49% of Canadians nearing the sunset years did not save or are struggling to save for retirement. While money is the top concern of the majority, 43% expressed retirement readiness because they have saved enough.

If the Canada Pension Plan (CPP) is part of your financial planning, it is essential to know the CPP benefits, at least the average, at 60 and 65. I skipped the delay option (age 70) as nine of 10 Canadians take their benefits at 65 or earlier.

Standard retirement age

The CPP’s standard retirement age is 65. A new retiree aged 65 and claiming the CPP today can receive the average monthly amount of $831.92 (January 2024). The maximum benefit is $1,364.60, although only a few contribute enough yearly for 39 years.

The difference between the max CPP and the average payout is $532.68. If you have money to invest, dividend income from Toronto-Dominion Bank (TSX:TD) can fill the gap. The bank stock trades at $74.94 per share and pays a 5.44% dividend. Over time, you can accumulate 1,568 shares ($117,500) to generate the desired income.

TD is Canada’s second-largest bank, and this $131.8 billion giant lender has been paying dividends for 167 years. In the first half of fiscal 2024 (six months ended April 30, 2024), total revenue and net income rose 12% and 10% year over year to $27.5 billion and $5.4 billion, notwithstanding the 61% increase in provision for credit losses (PCL) to $2 billion from a year ago.

Bharat Masrani, TD Bank Group’s president and chief executive officer (CEO), said there’s solid momentum across its franchises in Canada, the U.S., and globally. More importantly, the quarterly dividends are well-covered by earnings.

Early take-up

There’s also a difference in payouts if you start CPP payments at 60 instead of 65. The pension amount is reduced by 0.6% per month (7.2% yearly) before age 65. Hence, the 36% permanent reduction translates to $532.43 monthly from $891.72. Again, dividend income can compensate for the shortfall.

Pembina Pipeline (TSX:PPL) in the energy sector is a dividend heavyweight. At $50.31 per share (+13.36% year to date), the dividend yield is 5.49%. Assuming the yield is constant, a $40,248 investment (800 shares) will compound to $69,430.50 in 10 years, including dividend reinvesting. Your money will generate $952.93 quarterly (roughly $317.64 monthly).

The $29.15 billion company operates transportation and storage infrastructure and delivers oil and natural gas to and from Western Canada. In the first quarter (Q1) of 2024, revenue dipped 5% to $1.54 billion versus Q1 2023, while net earnings rose 19% year over year to $438 million.

On June 26, 2024, Pembina Pipeline confirmed taking on the $4 billion Cedar floating liquified natural gas (FLNG) project, a 40/60 partnership with Haisla Nation. Its president and CEO, Scott Burrows, said the project will deliver industry-leading, low-carbon, cost-competitive Canadian LNG to overseas markets and contribute to global energy security.

A foundation, not a plan

CPP users must know that the pension is a foundation for retirement and not a retirement plan. Whether you start payments at 60 or 65, you need other sources to boost retirement income.   

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 Christopher Liew has no position in any of the stocks mentioned. The Motley Fool recommends Pembina Pipeline. The Motley Fool has a disclosure policy.

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