CRA: When Is the Best Age to Take the CPP — 60 or 65?

The CPP decision, whether at 60 or 65, hinges on a user’s circumstance and other income sources in retirement. For higher, recurring investment income, Telus stock is the most viable choice today.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Should Canada Pension Plan (CPP) users start payments when the pension becomes available at 60 or wait until 65 to receive the basic CPP benefits? To delay or not the CPP is a delicate issue for most soon-to-be retirees. The timing decision doesn’t matter if the senior has amassed substantial retirement savings to cover retirement expenses, with or without the CPP pension.

Users can start CPP payments as early as 60 and not wait for their 65th birthday. However, those with minimal or zero savings have to evaluate their options because of financial consequences carefully.

A report commissioned by the Canadian Institute of Actuaries and the Society of Actuaries shows that more than 95% of Canadians have taken CPP payments at age 65 or earlier. But between the two choices, which is the best option?

Basic pension

An individual CPP user starting payments at 65 could receive a maximum of $1,203.75 per month as of 2021. However, you should have contributed enough and at least 39 years to receive the full benefit. If you did not, you could expect to receive the average pension of $689.17 (October 2020).

At 65, the Old Age Security (OAS) is also available. For 2021, the maximum monthly benefit is $615.37. Thus, your guaranteed monthly income for life is $1,304.54 or $15,654.48 annually — no more and no less.

Early take-up

Because the CPP is a flexible retirement program, a user can choose to start payments at age 60. Unfortunately, the early take-up is also the reduced pension option. You’ll receive 0.6% less in CPP for every month (7.2% per year) before age 65. The permanent reduction is 36% overall for the five years.

Thus, your annual CPP pension reduces to $482.82 per month, or $5,789.03 per annum. Also, the OAS benefit is available only to seniors 65 years old and older. However, if you need income support sooner or expect to live shorter due to health issues, the early take-up is a practical option.

Don’t count too much on your CPP

Retirement experts advise Canadians to not count too much on the CPP, as the only income source in retirement. The pension is a partial replacement (25%) of the average pre-retirement income. You might teeter on financial dislocation if you don’t have other income sources.

The best remedy to cure the shortfall is to use savings to invest and build a recurring income stream. Today’s attractive income stock is Telus (TSX:T)(NYSE:TU). This telco stock pays a respectable 4.64% dividend with a strong potential for capital gain in the near term. With the core telco business, Telus Health, and Telus International, the dividend payouts are sustainable for years.

If you own $167,500 worth of Telus shares, the annual dividend of $8,274.50 is commensurate to the annual CPP pension at 65. Add the OAS pension, and your yearly retirement income swells to $23,928.28. You can accumulate shares through the years if you don’t have enough funds. Keep reinvesting the dividends for the compounding effect or acceleration of profits.

Expenses versus income

When you get close to retiring, do an honest assessment of your estimated retirement expenses. Align them with your circumstance and income sources. You will know which option fits you best.

Should you invest $1,000 in Telus right now?

Before you buy stock in Telus, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Telus wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

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 Christopher Liew has no position in any of the stocks mentioned. The Motley Fool recommends TELUS CORPORATION.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Dividend Stocks

The TFSA is a powerful savings vehicle for Canadians who are saving for retirement.
Dividend Stocks

TFSA Investors: 2 Top TSX Stocks With Decades of Dividend Growth

These stocks have great track records of delivering dividend growth in challenging economic conditions.

Read more »

Piggy bank with word TFSA for tax-free savings accounts.
Dividend Stocks

TFSA: Invest $15,000 in This TSX Stock and Create $884 in Annual Passive Income

This TSX stock certainly has quite the long-term outlook -- one that could create passive income now and decades to…

Read more »

Dividend Stocks

Invest $20,000 in These REITs for Over $1,000 in Annual Passive Income

Are you looking for a boost in your passive income? Then consider these two REITs for your self-directed investment portfolio.

Read more »

Asset Management
Dividend Stocks

How I’d Allocate $10,000 in 2 Canadian Growth Stocks for the Long Run

Both growth stocks offer a compelling mix of income, growth, and value, and I believe they can outperform over the…

Read more »

grow money, wealth build
Dividend Stocks

2 Dividend-Growth Stocks to Buy on the Pullback

These stocks have increased their dividends annually for decades.

Read more »

Electricity transmission towers with orange glowing wires against night sky
Dividend Stocks

BCE Stock Analysis: A Smart Choice for Potential Value and Income

BCE stock has slipped to its June 2009 level amid Trump tariff uncertainty and intensity. Does the sharp dip provide…

Read more »

Person slides down a stair handrail
Dividend Stocks

Should You Buy Cargojet Stock at $70?

Cargojet stock might be down, but don't let that scare you off. It's still a long-term opportunity.

Read more »

Middle aged man drinks coffee
Dividend Stocks

3 Monthly Dividend Stocks to Buy and Hold Forever

Add these three TSX dividend stocks to your self-directed portfolio for reliable monthly passive income.

Read more »