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Asked & Answered: When should I start taking CPP?

When should I start taking Canada Pension Plan (CPP)?
When should I start taking Canada Pension Plan (CPP)? - 123RF Stock Photo

The answer to this question is different for everyone and should be considered very carefully. There are several things to consider:

How long do you think you will live? Not a fun question to consider, but there's a very simple rule of thumb; if you think you will have a shorter lifespan, you may want to consider taking your CPP earlier. If you think you will live a longer life, you may want to defer it and consequently receive a larger benefit over time.

Do you need the money? If you are still working, have investment or rental income or are receiving an employer pension, the additional cash flow from CPP may not be needed and could, in fact push you into a higher tax bracket. If you require the income to supplement daily living expenses, then you may want to consider collecting the CPP benefit earlier. You should also consider how it may impact other benefits, such as Old Age Security, which implements a claw back rule.

What will you do with the payments? You may choose to use your CPP payments to pay down higher interest bearing debt, such as credit cards or lines of credit. Keeping in mind that the CPP benefit is a taxable benefit, paying down high interest debt could be more beneficial over the long term. Other options may include investing your CPP benefit into an investment account, such as a Tax-Free Savings Account, which can hold multiple investment options. In certain situations, you may also be able to save tax by sharing CPP benefits with your spouse or common-law partner who is in a lower tax bracket.

The bottom line is that there is no one-size-fits-all solution to determining when you should take this government benefit. Your best solution is to consult a Financial Advisor who understands your personal goals and circumstances and can work with you to determine what is right for you.

For more advice, visit Edward Jones

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