Tax Tips: Should You Take Your CPP Early or Late?

Should you start your Canada Pension Plan early or late? The tax consequences may help you decide. First, know that CPP pension benefits are taxable.

Also, you will be able to assign benefits to your spouse if you’re both at least age 60, to try to smooth out the taxes payable between the two of you for a better overall result. But taking CPP early will reduce your benefits. The benefits reduction rate is 0.6% per month for each month before your 65th birthday, starting in 2016. Check with a tax specialist to find out exactly what the cost is to your potential pension.

If you continue to work while receiving the CPP, you’ll have to continue to pay premiums at least to age 65. But you’ll shore up your future benefits with a PRB—Post-Retirement Benefit. This will increase your total benefits in the long run. Remember you can opt out of paying CPP premiums at age 65 if you’re already receiving your CPP retirement pension. Do so by filing form CPT30 with your employer the month before you wish to stop; or, if self-employed, complete the opt-out declaration on Schedule 8 of your personal tax return.

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