Take CPP at 60 or 70? The $100,000 question

Starting CPP at 60 instead of 70 changes your monthly cheque by 122%. It is the largest single financial decision most Canadians make in retirement, and it is irreversible after twelve months.

The adjustment factors

Every month before 65 costs 0.6% permanently. Every month after 65 adds 0.7%, to a maximum of 42% at age 70. Both adjustments are locked in for life and both are indexed to inflation afterwards.

Where the lines cross

Taking CPP at 60 puts you ahead in cumulative dollars until roughly age 74, where the 65 start catches up. The 70 start overtakes the 65 start at about age 81. Live past the mid-eighties and deferring wins by a very wide margin; die before 75 and taking it early wins.

Four things the break-even chart cannot tell you

1. Health and family history. The break-even assumes you reach it. This is the single most important input and it is not financial.
2. Other income. If deferring CPP means large RRIF withdrawals in your sixties, the extra tax can cancel the benefit.
3. The OAS clawback. A larger deferred CPP raises net income at 71, which is exactly when RRIF minimums begin and the $95,300 threshold starts to bite.
4. Inflation protection. A deferred CPP is a larger indexed, government-backed income for life. No annuity available privately matches it.

Deferring CPP is the cheapest longevity insurance a Canadian can buy. Taking it early is the cheapest way to fund the years when you are still able to travel.

A common middle path: retire at 62, live on non-registered savings and modest RRSP withdrawals, and start CPP at 65 or later. The withdrawals lower future RRIF minimums while the CPP entitlement keeps growing.