The average Canadian typically starts taking their Canada Pension Plan (CPP) at around 65. And yet, this still leaves many choosing to take it earlier at 60, with far fewer delaying it until 70. In fact, about 40% of people start collecting CPP early at age 60, while roughly 6% wait until age 70 to maximize their benefits.
Waiting until 70 can increase your payments by up to 42%, but most Canadians prefer the earlier option for immediate income! Whether to take CPP early or delay it depends on personal financial situations and life expectancy, with earlier withdrawals leading to reduced monthly payments. So, should you wait?
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The benefits
Waiting until age 70 to take your CPP can make a big difference in your retirement income. For each year you delay beyond age 65, your payments increase by 8.4%. Therefore meaning by age 70, you could receive up to 42% more in monthly benefits compared to taking it at 65! This boost can significantly help cover living expenses, particularly with the increasing cost of healthcare and other necessities as you age. So, while it might seem tempting to take CPP earlier, holding off can provide a more comfortable, stable income during your retirement years.
Another key reason to wait is longevity. With Canadians living longer, delaying CPP ensures that you receive larger payments for a longer period. This can be especially beneficial if you end up living well into your 80s or 90s. The higher monthly amount also provides a safety net against inflation and unexpected expenses in later life. Waiting until 70 isn’t the right choice for everyone, especially if immediate cash flow is needed. Yet for those in good health and with other sources of income, it’s a smart way to maximize retirement savings.
When it’s right
Canadians might consider taking their CPP before 70 if they need the income sooner, such as during an early retirement or due to health concerns. Starting payments as early as 60, though it results in reduced monthly payments (about 7.2% less for each year before 65), can be helpful, especially if you’re no longer working and need to supplement your income. It can also be a good choice if you expect to live a shorter lifespan. Or you simply want to enjoy more active retirement years while still healthy enough to travel and explore.
Another reason to take CPP earlier is if you have limited savings or pensions and need immediate cash flow. Even though waiting increases your monthly payments, the reduction is manageable if you have other sources of income, such as investments or part-time work. It can also make sense if you plan to reduce your workload gradually, and the CPP can help bridge the gap without fully depleting your savings.
How investing can help
Investing can be a powerful way to make up the difference when planning for retirement, especially with the growing costs of living. One strategy is to focus on low-volatility investments that offer a balance of stability and growth. This is where BMO Low Volatility Canadian Equity ETF (TSX: ZLB) shines. The ZLB exchange-traded fund (ETF) focuses on Canadian companies with lower volatility. This means these stocks tend to be less affected by market swings. This makes it a great choice for retirees or anyone looking to protect their capital while still getting growth potential over time.
In addition to being less volatile, ZLB offers exposure to companies that have consistently demonstrated strong performance. By targeting stocks that are inherently more stable, investors can benefit from both capital appreciation and some level of protection in uncertain markets. As a retiree, this kind of steadiness can be incredibly valuable, thereby offering peace of mind while your investments continue to work for you. Altogether, it’s a smart way to let investing close the gap that CPP might not cover on its own.
