Should You Take Advantage Of The CPP Before Retirement?

Posted on Sunday 25 October 2015


wp-content/uploads/2015/10/shutterstock_323831951.jpg

Deciding if and when to access your Canadian Pension Plan is a very personal and sometimes complicated decision. It's actually pretty common for most Canadians. Especially if you took out loans in the past. Most people who took loans out in the past learned to manage their money at an earlier age. It's a weird stat but seems to be quite true.

So as far as accessibility to your CPP goes, how and when you access your CPP is up to you though. Regardless, you should consider your circumstances and your long term financial position before you make any moves. This is extremely important. Also listen to your gut as this could be a moment of 'growth'. Maybe you don't need to throw 'money' at the situation but make a shift internally which will definitely change your life.

So what exactly is the CPP retirement pension? The CPP is a monthly taxable benefit that replaces part of your income when you retire. If you qualify, you’ll receive the CPP retirement pension for the rest of your life.

You need to be at least 60 to apply and have made at least one (or hopefully more) contributions to the CPP in your life. The amount you receive each month is based on your average earnings throughout your working life. Your contributions to the CPP, and the age you decide to start your CPP retirement pension also matter. Your contributions to the CPP are based on your earnings. So like all savings, the sooner you start, the better off you are going to be in the long run.

It's just how it's setup and it's open to all Canadians who qualify for it. As long as you made valid contributions throughout your lifetime, most likely, you should be okay with getting your CPP when you really need it. If not, it might be a good idea to check in with the Canadian Revenue Agency right away and sort out any misunderstandings. The last thing you want to do is find out you don't qualify when you actually need the money the most.

When Should You Apply?

The age you can apply at varies from 60-70, with most starting at 65. This is a personal decision and is affected by many factors such as health, life expectancy and how much you need the funds at this very moment. These are just some things that go into play before anyone decides to apply for CPP. Of course each individual has their own unique circumstances, but these few things definitely play a key role.

Those with lower life expectancies (Such as individuals with chronic conditions), might be expected to take their benefits early. While others who appear to have excellent health and long life expectancy should wait until at least 65 as they can gain a 30% increase in those pension benefits. You simply have to decide if you want less money early or way more money later?

While applying early for these benefits will decrease your pension, this might also be beneficial to those who are having a difficult financial time at the present moment. Just know that early pension benefits can come with tax implications, but again this is something to consider for your own situation.


Budgeting For Retirement

While the CPP can be of great service in retirement, the monthly payments are really not huge. It's more of a supplement to your existing income and should not be something solely relied upon. The best way to plan for retirement is to be building up your own savings. Either through your years of employment or perhaps investments.

Sadly, Canadians who are saving money properly are very few. We are not known to be the best when it comes to financial literacy. Hopefully our school systems will really take this into consideration.

Life in Canada and generally is expensive, and the CPP doesn’t necessarily keep up with the rising costs of living. Of course, you may keep working well into your 60s and if that’s the case, then you can keep working on your savings as well. It will probably give you more time to collect your CPP.

So once again, it all depends on how you want to approach things. If you want to keep working, then go for it. Wait for your CPP when you really need it. Or you can always dive into it right away. See your whole situation first and then make the move.

Everyone wants to retire happy and financially secure, so having a money plan for your retirement years is an important step. Whether you take your CPP at 60 or 70, the extra money will surely go a long way to help you enjoy your time. Hopefully you'll have a few other sources to help you generate income along the way.


We also recommend selling some assets that you may have acquired and consolidate as much as you can. Who wants to manage way too many things at this stage of their lives anyways. I guess each person is different but if retirement is your goal, get rid of things that you don't need right away.

Sell them off and deposit that money into a savings account or some special investment that can help you increase your money almost right away. Some investment vehicles that we recommend are stocks, buying a business that is already running, forex or real estate. If you already own real estate at this stage, we highly encourage you to sell it for profit when possible.

Bottom line, it's not the government's job to make sure you are nice and happy in your special years. It's yours. Always rely on yourself because all the answers that you seek are truly within. You don't need anyone's validation or anything of that nature.

Make the decisions yourself, be kind, grow internally and great things will happen.

You'll be surprised to see that money won't even be an issue in your life. Everything will literally fall in it's place.