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November 02, 2021

Is it smart to take early CPP benefits?

Last week, MSN readers weighed in on the merits of earning possibly increased benefits from the Canada Pension Plan. The consensus: Good idea, but who's going to end up paying for it?

But for middle-aged Canadians struggling to figure out just what pension income they can count on, that conversation is way in the future. Their more immediate question: How much can I anticipate from CPP and when can I get at it?

Generally speaking, you can expect to receive about 25 per cent of the earnings you put into the plan for life, providing you wait until 65. But most Canadians – about two thirds of us – don’t wait that long, jumping on board at age 60 for the most part.

And that’s not going to be as easy as it once was. 

Starting in 2012, the early-retirement discount is going to gradually increase to 7.2 per cent a year. In other words, applying for CPP on your 60th birthday will ultimately mean losing 36 per cent of the amount you would have received at 65, rather than the current 30 per cent penalty.

These new rules will be phased in over a five-year period from 2012 to 2016.

This haircut better balances the overall payout equation, gradually eliminating the slight head start that early retirees have been receiving up until now.

You'll also now be required to continue making contributions to the plan if you keep working past 60, although the amount of your pension will be increased to reflect these additional contributions.

Click here for an exhaustive breakdown of the new rules, including a variety of 'earlier versus later' CPP retirement scenarios.

No mention though of the self employed (they pay double premiums) or widows (there's a cap on how much a surviving spouse can earn).

Do you see yourself taking the money as quickly as you can? Or will you hang on in anticipation of a higher benefit over the long haul?

By Gordon Powers, MSN Money



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Gordon PowersGordon Powers

A long-time fund company executive, Gordon Powers now heads up the Affinity Group, a financial services consulting firm. Gordon was a personal finance columnist for the Globe & Mail for many years, has taught retirement planning...

James HaversJames Havers

James is the senior editor of MSN Money living in Toronto. He has worked for the Nikkei Shimbun (Tokyo),,, Canadian Business and other publications. Havers turned to journalism after teaching overseas.

Jason BucklandJason Buckland

The modern-day MC Hammer of money, Jason can often be seen spending cash that isn’t his with the efficiency of a Wilt Chamberlain first date. After cutting his teeth as a reporter for the Toronto Sun, he joined the MSN Money team with...