Should You Take CPP at 65 or 70? Here’s What Research Says

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Should you take your Canada Pension Plan (CPP) benefits at age 65 or age 70? It’s not a dilemma that many Canadian retirees face because the vast majority of Canadians take benefits somewhere between the ages of 60 and 65. It appears that waiting all the way until 70 to take benefits isn’t a popular move. However, it’s possible to do so, and it can come with some big upside. If you delay taking CPP until age 70, you get 42% more benefits per month than you would by taking CPP and age 65.

In this article, I will explore the case for taking CPP at age 65 versus at age 70, so you can decide which move is right for you.

CPP benefits at age 65

According to the Canada Revenue Agency’s (CRA’s) website, the average Canadian who takes their CPP benefits for the first time at age 65 gets $758 per month in benefits. That works out to $9,096 per year. This isn’t enough money to cover most people’s expenses. If you earned the maximum pensionable income your entire life, you can get up to $1,306 in monthly CPP pension income at age 65. However, not everybody earns enough money to make that happen.

The average life expectancy in Canada is 81.75 years old. Therefore, an average Canadian who starts taking CPP at age 65 gets $152,358 in cumulative benefits. That’s a decent amount. Does a person who claims CPP at age 70 fare better?

CPP benefits at age 70

As mentioned previously, the average CPP benefit at 65 is $758. Therefore, if the average CPP benefit at 70 is 42% higher, it should be $1,076. That’s making the assumption that the average Canadian who takes CPP at 65 and the average Canadian who takes CPP at 70 are otherwise identical. The actual figure should be relatively close to the amount calculated above.

$1,076 per month is $12,912 per year. If you live to 81.75, then you will get $151,176 in lifetime benefits by delaying taking CPP until age 70. It would appear, then, that taking CPP at age 65 is better than taking it at age 70.

What to do if you want to delay taking CPP benefits

If you want to earn an income while you delay taking CPP to age 65 or 70, you could just keep working. However, if you have savings, investing is probably a better idea. By investing in stocks and stock index funds, you can earn dividends and capital gains that pay you in retirement.

Consider Brookfield Asset Management (TSX:BAM) for example. It’s a Canadian dividend stock with a 3.57% yield at today’s prices. It has performed very well in the markets and paid big dividends along the way. Also, the company’s dividends are growing: in the last 12 months, the dividend has increased by 21%.

How is BAM able to pay all of these rising dividends? Put simply, it does so by executing. The company is one of the most profitable in the financial services industry, running popular funds and raising lots of money for new ones. On the whole, BAM should be profitable enough to keep paying dividends for the foreseeable future.

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