Making a Decision on the Start of your CPP

Retirement Pension is a million-dollar decision

…an article submitted by Gregory Dobson, EPC, Burlington, ON

“The Pulse” Elder Planning Counselor Edition 11 Volume 2; 02/26/2014

from Services Canada website:

Your monthly CPP retirement pension amount will increase by a larger percentage if you take it after age 65.

Before the changes, your CPP retirement pension increased by 0.5% for each month after age 65 (and up to age 70) that you delayed receiving it.

This meant that, if you started receiving your CPP pension at 70, your pension amount was 30% more than it would have been if you had taken it at 65.

From 2011 to 2013, the Government of Canada will gradually increase this percentage from 0.5% per month (6% per year) to 0.7% per month (8.4% per year). This means that, by 2013, if you start receiving your CPP pension at the age of 70, your pension amount will be 42% more than it would have been if you had taken it at 65.

Ok, so in simple terms you will incur a penalty of 36% if you start receiving the CPP at age 60 and you receive a bonus of 42% if you start receiving the CPP at age 70. Penalty versus bonus, hmmmmm?

As a retirement income specialist we optimize the client’s retirement income using proprietary tools that we have developed . When we compare the returns on fixed income investments, and unless those investments are earning 8.4% per yr (equivalent annual CPP bonus each year) then maybe the optimum solution could be to draw down on the RRSP first? Which option did your advisor recommend and which one is in your best interest?

Now, here is a quick example and the options are endless, so I have simplified

Archie age 60 and Betty age 57

Maximum CPP Retirement Pension at age 65

$12,144.00 and $12,144.00

Life Expectancy Archie age 82 and Betty age 85

When to Begin Taking CPP Combined Accumulated CPP (In Future Dollars at 3% inflation)

Both start at age 60 $635,455

Both start at age 65 $770,783

Both start at age 70 $872,375

Optimum Solution Combined Accumulated CPP (In Future Dollars at 3% inflation)

Archie begins at age 68 plus 1 mth


Betty begins at age 69 plus 7 mths


Notice the difference between age 60 and age 70, $236,920 without the Optimum solution.

However, when the optimum solution tool is used, Archie should wait until age 68 plus 1 month and Betty should wait until age 69 plus 7 months to begin their CPP retirement pension. The accumulated CPP retirement pension is $866,455, pretty close to a million dollars.

Interestingly enough Canadians may make their decision based upon a “water-cooler” discussion rather than reviewing their complete retirement income resources (supply of cash-flow).

Choosing the start date is a permanent retirement income solution.

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