A couple of weeks ago, we took a few minutes to ramble on about the ins and outs of Canada Pension program, which is listed in the last few blog posts if you missed that one! Go ahead and read it first, we don’t mind waiting…
So, now that you went back and brushed up on the CPP as a whole, we want to add a quick supplemental on to what the Canada Pension looks like, or would look like, if you elect to draw it out as early as possible.
If you choose to collect it at the age of 60, rather than waiting longer, the main repercussion is the fact that your overall benefit will reduce by 36%, compared to what you would have received if you had waited until you were 65.
You can also elect to take your CPP at the age of 61, 62 or 63 and the 36% will reduce by 7.2% for every year you wait. You are basically penalized for taking it early. The CPP amount is reduced by .6% for each month you receive it prior to turning 65 (7.2% per year).
If you do decide to take the lower CPP payment at the age of 60, remember that Statistics Canada data and insurance company actuarial calculations have now found that the average Canadian reaches a breakeven point somewhere above age 76. By breakeven point, we mean as long as you stay above ground with the living until the age of 76, drawing out early at 60 or 65 is irrelevant, as the total amount received will equate to the same amount by this age. It is for this reason that people choose to draw their CPP as early as possible, in the hopes we all stick around a little longer than our ancestors!
Now let’s say that after withdrawing your CPP early (age of 60), you decide that you were temporarily insane and had made a mistake. You can request a cancellation of your CPP pension up to six months after you begin receiving it. You must make the request to cancel in writing and you would have to repay all the CPP benefits you received; however, you can then apply for it at a later age.
Always remember, this is more of a personal financial situation, as it is you who have to survive off your monthly income. If you need your CPP, then take it, as opposed to stressing over the bills. Just please remember to elect to have the proper amount of income tax deducted!!!
Check out the link below, section 6, for further information: