Canadians: Should You Start Your CPP Pension at 60?

Retiring early means a lower CPP amount that you can benefit from. However, depending on your circumstances, there may be a better option to consider. Here’s what you need to know.

When you are approaching retirement, one of the trickiest things to do is figuring out when to take your Canada Pension Plan (CPP)

Most Canadians tend to retire at 65 or after, but CPP benefits can be availed as early as 60. However, retiring early also means a lower CPP amount that you can benefit from. But depending on your circumstances, it may be a better option to consider. Here’s what you need to know.

Retiring at 60

There are a lot of things to consider when choosing the right age to retire. If you start collecting your CPP benefits at 60, while your monthly income will be lower, there are also other factors to consider.

First is life expectancy. At age 74, a retiree who waited to receive benefits till age 65 will start exceeding the amount they collect compared to a retiree who took CPP at age 60. If you know you have good genes, don’t suffer from a chronic disease, or don’t work a physically demanding job, it would be better to wait to collect your benefits.

Otherwise, especially if you are on a limited income, it would be better to start benefiting from CPP early.

This will allow you to focus on keeping your health in an optimal condition free of work stress. Additionally, you will get to enjoy your retirement while you are in better shape physically.

Boost your retirement income

Before deciding to retire, it is also essential to know exactly what amount you will be entitled to as part of your CPP. It is mostly dependent on how much you contributed over the course of your working years, with a maximum income of $1,175.83 per month as of 2020.

Regardless of the amount, it is unlikely to cover more than the minimum of life expenses. To ensure a quality lifestyle, it is vital to hold an investment portfolio that generates steady passive income to complement your retirement benefits.

Given the low appetite for risk for old age, stocks you invest in should be dependable and safe but still give decent monthly payments. This is exactly why Canadian Imperial Bank of Commerce is a great dividend stock to consider.

CIBC is one of Canada’s largest banks and has an incredible streak of not missing out on a single payment to its investors since 1868. At its current dividend yield of 5.21%, an investment of $60,000 yields $260 of monthly passive income. This may not sound like much, but you are getting a reliable stream of extra income without any effort on your part.

Summary

Currently, at a forward P/E of just 8.86, CIBC stock may be undervalued at present, and investors choosing to invest in it right now may benefit from not only a nice dividend but also upside in the stock’s value, as it rebounds to its intrinsic amount.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Jason Hoang has no position in any of the stocks mentioned.

More on Dividend Stocks

Train cars pass over trestle bridge in the mountains
Dividend Stocks

Is CNR Stock a Buy, Sell, or Hold for 2025?

Can CNR stock continue its long-term outperformance into 2025 and beyond? Let's explore whether now is a good time to…

Read more »

coins jump into piggy bank
Dividend Stocks

The Smartest Dividend Stocks to Buy With $500 Right Now

These top dividend stocks both offer attractive yields and trade off their highs, making them two of the best to…

Read more »

Middle aged man drinks coffee
Dividend Stocks

Here’s the Average TFSA Balance at Age 35 in Canada

At age 35, it might not seem like you need to be thinking about your future cash flow. But ideally,…

Read more »

ETF stands for Exchange Traded Fund
Dividend Stocks

How to Invest Your $7,000 TFSA Contribution in 2024

Here's how I would prioritize a $7,000 TFSA contribution for growth and income.

Read more »

a man relaxes with his feet on a pile of books
Dividend Stocks

CPP Pensioners: Watch for These Important Updates

The CPP is an excellent tool for retirees, but be sure to stay on top of important updates like these.

Read more »

Technology
Dividend Stocks

TFSA Investors: 3 Dividend Stocks I’d Buy and Hold Forever

These TSX dividend stocks are likely to help TFSA investors earn steady and growing passive income for decades.

Read more »

four people hold happy emoji masks
Dividend Stocks

Love Dividend Growth? Check Out These 2 Income-Boosting Stocks

National Bank of Canada (TSX:NA) and another Canadian dividend-growth stock are looking like a bargain going into December 2024.

Read more »

An investor uses a tablet
Dividend Stocks

A Dividend Giant I’d Buy Over Enbridge Stock Right Now

Enbridge stock may seem like the best of the best in terms of dividends, but honestly this one is far…

Read more »