The Canada Pension Plan (CPP) is a government-run pension program that provides retirement income to eligible Canadians. One of the options available to CPP recipients is the ability to withdraw their benefits before or after the age of 65. In this article, we will explore the pros and cons of withdrawing CPP before and after 65 to help you make an informed decision about your own retirement planning.
Pros of withdrawing CPP before 65:
Early access to funds: Withdrawing CPP before the age of 65 allows you to access your retirement funds earlier, which can be useful if you need the money for unexpected expenses or if you want to retire early.
Increased flexibility: Withdrawing CPP before 65 also gives you more flexibility in terms of how you use your retirement funds. For example, you may choose to invest the money in a business or real estate venture, or you may use it to travel or pursue other interests.
Cons of withdrawing CPP before 65:
Reduced benefits: The biggest downside of withdrawing CPP before 65 is that you will receive a reduced benefit. The CPP benefit is reduced by 0.6% for every month before age 65 that you begin receiving it, up to a maximum reduction of 36%.
Limited access to other benefits: Withdrawing CPP before 65 may also limit your access to other government benefits, such as the Guaranteed Income Supplement (GIS) or the Allowance for the Survivor.
Pros of withdrawing CPP after 65:
Increased benefits: The biggest advantage of withdrawing CPP after 65 is that you will receive an increased benefit. For every month after age 65 that you begin receiving CPP, your benefit will increase by 0.7%, up to a maximum increase of 42%.
Potential for other benefits: Withdrawing CPP after 65 may also increase your eligibility for other government benefits, such as the GIS or the Allowance for the Survivor.
Cons of withdrawing CPP after 65:
Reduced flexibility: Withdrawing CPP after 65 reduces the flexibility in terms of how you use your retirement funds.
Potential for lower income: Withdrawing CPP after 65 may also lead to a lower overall income in your retirement years.
In conclusion, the decision to withdraw CPP before or after the age of 65 is a personal one that should be based on your individual circumstances and retirement goals. Before making a decision, it is important to consider the pros and cons of both options and to consult with a financial advisor to help you make an informed decision.
