Living expenses, health problems, and expectation of short retirement reasons for early retirement
Most of the Canadians who were under the Canadian Pension Plan (CPP) typically take it while they are at the earliest possible age to do so, as reported by The Globe and Mail.
An informal survey conducted by The Globe and Mail found that the most popular age to take one’s CPP benefits is 60, with 34 percent of the respondents saying so. This was followed by those aged 65 with 19 percent and those aged 70 with 16 percent. This coincided with the data from Statistics Canada that also found that nearly 40 percent of Canadians who were born between 1940 and 1950 began to take their CPP benefits at the age of 60.
Despite the CPP legislation stating that anyone who will begin taking their pension before they reach the age of 65 will have their payments decrease by 0.6 percent every month, amounting to 7.2 percent annually and a maximum reduction of 36 percent at 60.
Although, those who will take their pension after 65 will see payment increases by 0.7 percent every month, amounting to 8.4 percent every year with a maximum increase of 42 percent by the age of 70.
Taking benefits early can result in loss of retirement income
A report from the Toronto Metropolitan University’s National Institute on Ageing and the FP Canada Research Foundation in 2020 noted that those who will take their pensions at 60 instead of waiting until they turn 70 can possibly lose a total of $100,000 retirement income. However, the report found that less than one percent of Canadians wait until 70 to take their CPP benefits.
The Globe and Mail survey found that the reasons behind this included the need for financial coverage of living expenses, having health problems or family history of health issues with the expectation of not having a long retirement, as well as the uncertainty of life. Some were also concerned about the possibility of the CPP being compromised in the future, with many citing the departure of Alberta from the CPP for the Alberta Pension Plan.
There were also those who wanted to take their benefits early in order to invest the money, with the hope that they will be able to make more than what the government will be providing them down the line. Some chose to take it so they will not be put in a higher tax bracket and risk losing their benefits.
Meanwhile, those who took the pension between the ages of 65 and 70 stated that their reason behind this was to increase the payout of their benefits.
Notably, the amount of CPP benefits a person can receive is based on factors such as the amount of their contributions during their working years as well as their average earnings. It can also be adjusted depending on times when one has little to no earnings, years of raising young children, as well as if they received a CPP disability pension.
According to the federal government, the maximum monthly one can receive in 2024 if they began to take their CPP benefits at the age of 65 is $1,364.60.
