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The Canadian Pension Plan (CPP) is aimed at the elderly people so that they can live off a certain amount after they retire and not have to worry about no income. The actual amount received from the CPP claims depends on how much an individual puts in and for how long one has contributed into CPP.


In most cases, the Canadian Pension Plan has proved its worth to millions of elderly people living in Canada. Most elderly do not require the additional money they get from CPP, so they choose to invest the money elsewhere. However, some people do find themselves in problems even before their retirement age. So, if you’re one of them, what should you do to apply for a CPP claim early? Let’s find out!


Do You Have To Stop Working?

Before 2012, it was required that you had to stop working to benefit from the CPP. Since then, things have changed. Now, you don’t have to stop working to claim your CPP early.


There are many Canadians who are over the age of 60 and are still working. Some of them collect CPP as early as age 60 and still continues to work. This makes sure that they have enough cash to run their lives smooth. The only downfall to working while claiming CPP is that you’ll have to keep paying the CPP. Moreover, the contribution you make into the CPP will enhance your benefits in the long run.


Applying Early: How Much Will CPP Reduce?

Prior to 2012, an individual claiming for CPP benefits prior to the 65th birthday had a reduction of 0.5% every month. This means that if someone claims CPP benefits at the age of 60 would have a reduction of 30% of the original amount.


After 2012, the reduction has been bumped to 0.6% for every month prior to the 65th birthday. This means that individuals who claim for their CPP benefits at the age of 60 had a reduction of 36% in benefits.


However, if you claim for the CPP after your 65th birthday, the amount will rise by 0.7% each month. This also means that the individuals claiming for their CPP benefits at the age of 70 will have their pensions increase by 42%.


This might seem a bit off, but you need to have a good understanding of maths to truly understand exactly when you should be taking off the CPP claims.


Should You Apply For Early Pensions?

This is a subjective question – it depends on your situation. If you’re in a situation where the pensions will truly help you live off life, and you have no other options left, it’s better to apply for CPP early.


However, if you are living off well enough and do not necessarily need the support from your pensions, it’s suggested that you hold it off up until you actually need it. Why? Let’s explain using examples!


Rachel and Bertha are colleagues, and they both qualify for a CPP of $1000 per month at the age of 65. Now, Rachel loses her job and decides to take the CPP at age 60 while Bertha keeps waiting until age 65.


As Rachel claims her pensions 5 years early, she receives a 36% decrease in her amounts. This means that she gets $640 every month starting on her 60th birthday.


As 5 years pass, Bertha is now eligible for claiming her pensions as well. She gets $1000 per month starting from her 65th birthday.


However, in these 5 years, Rachel has received $38,400 at the $640 monthly pension plan. For Bertha to catch up and receive more pensions than Rachel, it will take just around 106 months, at age 74. This means that the breakeven point for such pension plan is 74 years!


The benefits of hiring an attorney to help you claim your CPP


The Bottom Line

The Canadian Pension Plan is truly something beneficial for all. It helps support elderly people live off their remaining lives without having to worry about anything. However, some people might want to claim their pensions early.


For those people, it might seem that claiming CPP early might mean that they’re missing out on some way or the other. This is not always the case. They will continue to receive their CPP.


Moreover, it’s recommended that you consult with an expert attorney to discuss your CPP claims. The attorney will give you deeper insights and will help you decide if you truly should apply for your CPP early. The expertise and knowledge of the attorney will indeed help you make the right decision with your pension plan!

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