In Canada, the standard retirement age is 65, and however, you have the flexibility to start receiving your workplace pension as early as 60 or as late as 70. Starting your pension early will result in a lower monthly payout, while delaying it will lead to a higher payout each month. So, it’s wise to carefully consider your options before making a decision.
Delaying pension receipt until after age 70 does not provide any advantage. Once you turn 70, you will not be able to receive more than a certain amount each month.
Four Common Types of Retirement Plans in Canada
CPP (Canada Pension Plan): Benefits are typically started at age 65, however, recipients can choose to start receiving reduced payments as early as age 60 or postpone benefits until age 70.
OAS (Old Age Security): The begin collecting OAS benefits at a reduced rate as early as age 60 or to postpone them until age 70.
Workplace Pension Plans: The retirement age may vary depending on the specific plan several companies provide for workplace pension plans.
Personal Retirement Savings: For extra income during retirement, people can also choose Tax-Free Savings Accounts (TFSAs) or Registered Retirement Savings Plans (RRSPs).
CPP – Canada Pension Plan Enhancement
Currently, there are three components to the CPP
- The base (or original) CPP
- The first additional component, which was phased in between 2019 and 2023;
- The second additional component, which will be phased in between 2024 and 2025.
CPP Upgrade Basic Plans
- Retirement benefits from CPP
- Benefit following retirement
- Disability Benefits
- Pension for dependents
Note: It will not affect eligibility for CPP benefits
Requesting Payments for earlier times in CPP
- The CPP retirement pension can be received retroactively for up to 11 months if you apply after turning 65.
- Your monthly benefit amount depends on the start date you select for receiving your benefit.
- There are no retroactive payments for a CPP retirement pension obtained before the age of 65.
Should You hold out on getting started CPP Collection
Your age affects your pension amount
- Payments will reduce if you begin before age 65 by 0.6% per month (or 7.2% annually), with a maximum reduction of 36% if you begin at age 60
- Payments will rise if you begin after age 65 by 0.7% every month (or 8.4% annually), with a maximum increase of 42% if you begin at age 70 (or later).
Retirement Benefits CPP
The CPP offers two retirement benefits:
- The CPP retirement pension.
- The post-retirement benefit for people who keep working and making contributions while receiving a retirement pension
Retirement benefits (retirement pensions and post-retirement benefitsFootnote6) account for 80% ($41.1 billion) of the total benefit amount paid out by the CPP in the fiscal year ending March 31, 2021.
Consider Personal Circumstances
You should think about a variety of issues before selecting when to begin receiving retirement benefit.
- These consist of your financial condition, retirement goals, and general health.
- You can choose to delay the commencement of your CPP retirement pension if you’re in good health,
- As a result, your monthly pension will be higher, which can prevent you from outliving your funds.
- Choose to begin getting your pension before to age 65 if you’d prefer to work less
- If you need the money now to pay off debts or support your retirement goals.
Note: You can have a better understanding of your future financial security using the Canadian Retirement Income Planner
Can I retire before the age of 65 in Canada?
In Canada, you can indeed retire before age 65. The benefits from government pension programs like CPP and OAS may be decreased, though, if you decide to retire before age 65. When determining whether to retire early, it’s crucial to take into account the potential effects on your overall retirement income.
References: https://www.canada.ca/en/services/benefits/publicpensions/cpp.html | https://www.canada.ca/en/employment-social-development/programs/pensions/reports/annual-2021.html#h2.10 | https://www.canada.ca/en/services/benefits.html
Can I work after the standard retirement age in Canada?
In Canada, you are allowed to continue working even after you reach retirement age. There are no limitations on working after the age of 65. However, if you choose to receive government pension benefits while working, the number of benefits you receive may vary depending on your income.