Learn about the potential benefits and drawbacks of taking your Canada Pension Plan (CPP) early. Discover what you need to consider before making this important decision
If you’re nearing retirement age, you may be considering whether to take your Canada Pension Plan (CPP) early or to wait until you reach the age of 65 or later. While there are some advantages to taking early CPP, there are also some drawbacks to consider. In this article, we’ll explore the pros and cons of taking early CPP so that you can make an informed decision.
Pros of Taking Early CPP
One of the main benefits of taking early CPP is that you’ll receive payments sooner. If you’re in need of additional income, this can be a significant advantage. Additionally, taking early CPP may allow you to retire earlier than you would otherwise be able to. This can be appealing if you’re looking forward to enjoying your retirement and have other sources of income to supplement your CPP payments.
Another advantage of taking early CPP is that your monthly payments may be higher than if you waited until age 65 or later to begin receiving benefits. This is because the CPP is calculated based on your average earnings throughout your working career, so if you take early CPP, you’ll receive more payments over a shorter period of time.
Cons of Taking Early CPP
While there are some advantages to taking early CPP, there are also some disadvantages to consider. One of the main drawbacks is that your monthly payments will be lower than if you wait until age 65 or later to begin receiving benefits. This is because the CPP is designed to encourage individuals to work until age 65 or later, so if you take early CPP, your payments will be reduced.
Additionally, taking early CPP may have tax implications. If you’re still working and earning an income, your CPP payments may be subject to income tax. This can reduce the amount of money you have available to spend each month.
Another potential disadvantage of taking early CPP is that you may not have as much money available to you later in life when you may need it more. If you live a long and healthy life, you may run out of CPP payments before you pass away, leaving you with less income to rely on in your later years.
Factors to Consider When Deciding Whether to Take Early CPP
When deciding whether to take early CPP, there are several factors to consider. First, consider your financial situation. If you need additional income and have no other sources of income available, taking early CPP may be a good option for you. However, if you have other sources of income and can afford to wait, it may be more beneficial to wait until age 65 or later to begin receiving benefits.
You should also consider your health and life expectancy. If you have a serious medical condition or a family history of a certain illness, taking early CPP may be a good option for you. However, if you’re in good health and expect to live a long life, waiting until age 65 or later to begin receiving benefits may be more beneficial.
Finally, consider your retirement plans. If you’re planning to retire early and have other sources of income to supplement your CPP payments, taking early CPP may be a good option for you. However, if you plan to work until age 65 or later, waiting until that age to begin receiving benefits may be more beneficial.
In conclusion, there are both pros and cons to taking early CPP. While you’ll receive payments sooner and may be able to retire earlier, your monthly payments will be lower, and you may have tax implications to consider. Ultimately, the decision to take early CPP should be based on your financial situation, health, and retirement plans. By considering these factors, you can make an informed decision that’s right for you.