Turning 60 in 2027? Taking CPP Early Shrinks Your Cheque 36%

Taking CPP early means more years of payments but smaller monthly cheques. A simple calculation shows what waiting requires.

Amy Legate-Wolfe

Author Bio Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Her work can also be found at Canada's National Observer, where she writes on the business side of climate action. Before joining Motley Fool Canada, Amy wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Social Media Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published October 14, 5:00 pm EDT

Taking Canada Pension Plan (CPP) payments at 60 gives you five extra years of cheques. It also locks in a smaller age-adjusted payment than starting at 65. The decision deserves more thought than whether you’d like the money sooner. Most of us would pass that particular test.

CPP reduces payments by 0.6% for every month you begin before 65. Starting exactly at 60 means 60 months of reductions, or 36%. That rule describes the age adjustment to your calculated pension, not a guarantee about the dollar amount you’ll qualify for in 2027.

Your contribution history, earnings, dropout provisions, and continued work can all affect the underlying calculation. Someone turning 60 in 2027 reaches 65 in 2032. Comparing personalized estimates from those start dates is more useful than borrowing today’s maximum CPP payment.

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Make it visible

For a simplified comparison, hold the underlying age-65 pension at $1,000 monthly in today’s dollars. Starting at 60 reduces it to $640. The early starter collects $38,400 over the five years before 65, ignoring tax, investment returns, and differences from ongoing contributions.

Once the later starter begins, their monthly advantage is $360. Dividing $38,400 by $360 gives roughly 107 months, putting the simple cumulative-payment crossover near age 74. Both streams receive inflation adjustments; this fixed-dollar example makes the age adjustment visible.

However, the crossover isn’t a universal recommendation. Health, family longevity, income-tested benefits, taxes, and the value of spending earlier can change the answer. Paying down expensive debt with early CPP is also different from investing every cheque and hoping markets cooperate.

Build the bridge first

If waiting appeals to you, calculate the actual income gap from 60 to 65. A $640 monthly shortfall totals $7,680 annually or $38,400 over five years before inflation. That’s the same arithmetic as the early CPP stream, but now it becomes a funding problem you can solve.

I’d keep money needed soon in cash or appropriately timed GIC maturities. A Tax-Free Savings Account (TFSA) can hold those savings as well as eligible stocks. Tax-free withdrawals can offer flexibility, although account room and the rest of the retirement plan matter.

For the longer-term equity portion, Hydro One (TSX: H) is worth examining. Its Ontario transmission and distribution business earns regulated returns from electricity infrastructure. That gives it a different earnings driver from consumer spending or commodity prices.

A utility isn’t a pension

Hydro One reported second-quarter earnings per share (EPS) of $0.62, compared with $0.54 a year earlier, and declared a $0.35 quarterly dividend. The quarterly payment was about 57% of that quarter’s earnings. It’s a useful coverage snapshot, not a complete forecast of dividend safety.

Yet even a regulated utility needs capital for construction and faces borrowing costs, regulatory decisions, and storm expenses. Its valuation also matters. A good utility bought at an excessive earnings multiple can deliver disappointing returns while its electricity network performs perfectly well.

I’d use dividend stocks to supplement a diversified retirement portfolio, with enough cash to avoid selling after a market decline. I wouldn’t treat their payments as interchangeable with inflation-adjusted CPP, or buy one stock to finance an essential five-year bridge.

Dividend income alone can make an expensive bridge. At an illustrative 3% yield, generating $7,680 annually would require $256,000 invested before fees or tax. That is far more than the $38,400 five-year gap in our example. A bridge can deliberately spend principal, yet it doesn’t need to preserve every dollar forever. Separating that temporary spending job from lifelong investment income makes the CPP decision much more manageable.

Bottom line

If you’re turning 60 in 2027, start with your own CPP estimates and a funded spending plan. The 36% reduction is real. Whether accepting it helps you is personal. Hydro One could support long-term portfolio income, while a properly funded bridge gives you more freedom to choose when CPP begins.