Calculating CPP's Break Even Point | Canada Pension Plan Explained

Calculating the break even point on collecting your CPP is extremely important as it will help guide you to decide when to start collecting payments.

Let's assume your CPP at age 65 is $1,000 per month...if you take CPP at age 60, your monthly amount will be $640 per month

From age 60-65 you will have collected $38,400

The monthly difference between age 65 and age 60 is $360 ($1000-$640).

Thus if we take the amount collected ($38,400) and divide it by the monthly difference ($360) we get 106.67 – let’s round that to 107.

This means it will take 107 months to make back that difference, or 8 years and 11 months.

So now we add 8 years and 11 months to age 65 and we come out with 73 years and 11 months.

So, if you live past age 73 and 11 months, then it would make more sense to delay taking your CPP to age 65 versus taking it at age 60.

Obviously there is much more to this than a simple calculation and we will cover these in our next 3 videos: taking CPP and 60, 65 and 70.

Everyone’s situation is different, so the best plan for you likely is not the best plan for your neighbor.

And remember, the breakeven point is just part of the calculation – if you were to invest the CPP payments from age 60 in a TFSA, then that would boost the overall amount you have later and further benefit taking the CPP earlier - but we all know you aren’t going to save your CPP payments!

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DISCLAIMER: The videos and opinions on this channel are for informational and educational purposes only and do not constitute investment advice. Adam Bornn is not registered to provide investment advice and as such does not provide recommendations - those looking for investment advice should seek out a registered professional. Adam is not responsible for investment actions taken by viewers and his content should not be used as a basis for investment trades.

[wcg]

Great explanation. I know you’ve mentioned it before but people still miss the concept that your plan would be to use other savings/investments while you delay CPP. The concept isn’t to “tough it out” for 5 years to get more money. The opposite is true, you spend more in your go-go years because you know your slo-go and no-go years are well funded with inflation adjusted income. Simply put, if you don’t have those alternative savings when you retire, then taking CPP right away makes the most sense.

[MrPatrick]

IMO, between 60 and 74 you will likely be more physically capable (i.e. to travel, play certain sports etc.) so having CPP sooner is better than later to enjoy those years when you still have less physical barriers. Depends on your lifestyle I suppose.

[petermurdoch]

turned 65 July 2, handed my Papers in today, dropped them off Service Canada, 6 week wait, before $

[MegsCarpentry-lovedogs]

Had to listen to this vid a few times to get the full appreciation of what you are teaching...but that is what the joy of videos is about...you can rewatch and pause when needed. And with zoom meetings with friends, and screen share, we can have discussions about what you are teaching...so enriching stuff. Thank you Adam!💯. You are doing wonderful delicious work! We as Canadians are very fortunate to have you want to produce these videos. Gosh! So many tidbits of very important information...who knew all of these tiny bits eh⁉️

[blairkinsman]

A CPP anomaly .. if I was planning to retire at 67 but took my CPP early at 60 while still working .. so using the same numbers and your example and not including inflation, I could contribute $54k to my RRSP (I have the room - meaning I can go 18% on my paychecks and I have unused room from prior years for the CPP) and at 7% it would grow to $70k .. flipping that into a RIF at 7% I could take out the $360 differential perpetually and the fund would not deplete - compared to starting at 67 with 1000 we would be in the same place but I would have a fund at death, OR, I could take out $460 monthly ($100 more) for 30 years (67 to 97) before the RIF was depleted .. I think I’m further ahead to take it early

[richardbartolo]

Great videos, very informative. I'm 54, with a half decent nest egg and quickly growing tired of the stress and anxiety of working for an engineering firm. The goal of retiring at 60 is on my mind and your videos give me lots to think about and investigate.

[ironmantran]

Your show addresses a great MANY of critical points for acute judgements & plannings towards maximizing and ensuring lasting incomes in the seniors.

[barbhaines]

This is the best explanation I have ever heard. Thank you.

[malenamonge]

Your videos are very informative, If I had gotten this information before I shouldn’t have taken my CPP at 60. Thanks.

[ronbonora]

How long is a person going to live is another big question! If you have health issues it maybe better to take it sooner!

[micheldevost]

Starts at 1:50. Great topic and information!

[rongrant]

I would say that unless you have a health reason to suspect you won't live to age 74, wait until 65 as the odds are you'll live beyond 74. Play the odds. This assumes that you don't NEED the money before then, because if you truly need it earlier, take it earlier. And if you waited until 65, but die before age 74, I promise it won't be too upsetting for you afterwards.

[billgiffen]

Thank you for these simplified videos - we have chats with friends all the time about this and the information is always someone's opinion - nice to have the facts!

[jaxwylde]

Another great video. If someone (such as me) retires at 55 (or whatever x number of years before 65), another factor to consider is that there will be more years without CPP contributions if the individual waits to receive CPP until 65 vs 60. Of course, each case is different (ex. how many years between 18 and 55 did individual max out their CPP contribution, etc. etc.), but it is something to consider (if you retire in your 50's). In my case, the break-even is at year 77 (for 60-65), and 81 (for 70 vs 65)

[williamw]

you should cover single vs married. im single, taking mine at 60 . nobody to pass death benefit on to, , ,

[Dave-qemt]

With 3 kids at home, 2 in post secondary the break even point is irrelevant for this 60 year old. I don't need an additional 30% at 74 as the kids will be gone and we will be downsizing the big family home long before that. $100 now has far more value than $130 at age 74. More factors to consider than just total dollars. Enjoy your channel, great advice, currently going through your videos.

[artvandelay]

Even if that money isnt invested, assuming your spending habits dont change- then that $640 cheque every month means that youre not withdrawing $640 from your savings (which albeit right now arent making much if its a savings account- but there are other investments that do). so many variables.

[janbarriault]

i'm getting close to 60, and like everyone else here, i'm trying to make the best decision 'for me' ! i like the take early and invest concept, but my life is much the same as most people and there is a 'space' between what i think i will do, and what really happens. i try to remind myself that i have control of my income, and i can choose to do two things with the extra money at 60, , i can invest some of it, and also use a portion of my CCP for daily living costs. planning for future is good, but it is not a great substitute for living best life now.

[briangriffiths]

CPP is based on your best 39 years of premiums. Many people at 60 will not have paid maximum premiums for 39 years. Since your benefit will be divided by 39, the bigger payoff would most certainly be when you continue to earn the cpp insurable maximum until you are 65. This would offset those years when you made less than the maximum.

[pkaufman]

Great video to get people to think about break even points between the 3 "typical" CPP drawing ages (60, 65, 70).
Agreed people will generally not invest this income (and really, they shouldn't, enjoy your retirement CPP income!), but does it make sense to "think" about this income as making interest as it will be amounts you do not need to draw from your RRSP/RIFF (i.e. the money in those vehicles you are not pulling out because you get CPP instead, those are still making interest)?