How to get your CPP early
Written by Jim Yih •
Note: CPP rules have changes at the beginning of 2012. This article was updated in 2013
To qualify for CPP, you must be over the age of 60 and you must have made at least one valid contribution (payment) into Canada Pension Plan. How much income you get depends on how much you put in and for how long you contributed into CPP. Remember that CPP is a contributory plan which means that all benefits are funded by financial contributions made by employees and employers. CPP is not funded by general tax revenues. In other words, how much you get is dependent on how much you put in.
At the age of 65, you qualify for the normal retirement amount but it is important to note that the benefit does not start automatically. You must apply for it. Service Canada recommends that you apply for your pension six months before you want your CPP to begin. If you want to collect CPP before the age of 65, you must also apply.
Related article: How much will you get from CPP?
Do you have to stop working?
At one time, in order to collect CPP early, you had to stop working. This has changed in 2012.
CPP has not opened the door for many Canadians who are over the age of 60 and still working. All of these people can now collect CPP as early as age 60 and continue to work. If you continue to work, you will have to keep paying into CPP but every contribution you make will increase your benefit in the future. Basically, you can apply to collect CPP if you are working. If you do, you will still pay into CPP but paying into it means a bigger benefit.
The deterrent to taking CPP early
Opening the door to early CPP means more Canadians are going to draw early. Why wouldn’t you take a raise in pay? To deter all Canadians from taking CPP early, they are going to penalize you if you take it early and give you a lower benefit. The reduction depends on the year in which you collect CPP:
· 2012 – 0.52% reduction for every month prior to your 65th birthday (31.2% total reduction)
· 2013 – 0.54% reduction for every month prior to your 65th birthday (32.4% total reduction)
· 2014 – 0.56% reduction for every month prior to your 65th birthday (33.6% total reduction)
· 2015 – 0.58% reduction for every month prior to your 65th birthday (34.8% total reduction)
· 2016 – 0.60% reduction for every month prior to your 65th birthday (36.0% total reduction)
After 2016, the reduction formula stays at 0.6% monthly or 36.0% at age 60.
You must apply
Logistically, getting CPP early is simply a matter of completing an application form if you are over 60 years of age. You can visit your nearest Service Canada office or visit their website.
Should you take CPP early?
I have written extensively on this topic so rather than re-write everything, here’s links to some relevant information:
· Don’t forget about the Child Rearing Drop Out Provision
For a comprehensive list of information on CPP, visit Jim’s Online Guide to Canada Pension Plan (CPP) and Old Age