The Canada Pension Plan (CPP) provides financial support to Canadian retirees, offering flexibility on when payments begin. Even with a reduced monthly payout for early claims, nearly 40% of Canadians opt to start their CPP at age 60 instead of the standard age of 65, as shown by Statistics Canada. This trend often stems from immediate financial needs, health concerns, or shorter life expectancy projections.
Taking CPP Early
Opting for early CPP comes with significant financial implications. Payments reduce by 0.6% for each month before age 65, equating to a 7.2% decrease annually. If benefits begin at 60, recipients face a permanent 36% reduction in their monthly pension. For instance, instead of the average monthly payment of $831.92, early claimants would receive $546.05.
| Age Started | Monthly Pension | Percentage Change |
|---|---|---|
| 60 | $546.05 | -36% |
| 65 | $831.92 | Baseline (0%) |
| 70 | $1,181.33 | +42% |
Claiming Later
Canadians who delay their CPP until after 65 receive a 0.7% increase per month, or 8.4% per year. This results in a 42% boost by age 70, yielding a monthly payment of $1,181.33. Delaying claims can be a smart move for those with other income sources or good health, enhancing financial security in later retirement years.
Retirement Income
The CPP only covers about 25% of pre-retirement income, which is often insufficient for a comfortable retirement. Financial advisors stress the importance of additional savings and investments to complement CPP and Old Age Security (OAS).
Investment Strategy
Dividend investing is a reliable strategy for creating pension-like income. Enbridge (TSX) is a prime candidate for a retirement portfolio, known for its stable business model, consistent dividend growth, and robust financials. As of now:
- Share Price: $59.40 (+33.6% YTD)
- Dividend Yield: 6.2%
Enbridge has a 69-year history of dividend payments and 29 consecutive years of dividend increases. The company’s fundamentals remain strong, with Q3 2024 profits rising 143.1% year-over-year to $1.3 billion. CEO Greg Ebel stated that Enbridge’s business model is built to succeed across market conditions.
Atrium Mortgage Investment Corporation
Atrium Mortgage Investment Corporation (TSX) is another reliable dividend stock to consider. This non-bank mortgage provider offers a monthly dividend yield of 8%:
- Share Price: $11.26 (+14.45% YTD)
- Monthly Dividend: $0.075 per share
- Portfolio: 97.3% first mortgages
Atrium’s Q3 2024 revenue grew 5.6% year-over-year to $11.6 billion, and the mortgage portfolio reached a record $926.3 million. The company also offers an annual special dividend, further enticing investors.
Retirement Decisions
When to take CPP depends on personal health, financial stability, and lifestyle. While claiming early might meet immediate financial needs, delaying can offer enhanced long-term benefits. To secure financial independence, Canadians should consider diversifying with dividend stocks like Enbridge and Atrium for steady, retirement-friendly income.
FAQs
What percentage of Canadians take CPP at age 60?
Almost 40% of Canadians choose to start their CPP at age 60.
How much is the reduction if you take CPP at age 60?
The reduction is 36%, resulting in a lower monthly payment.
Why do some Canadians delay taking CPP until 70?
Delaying to 70 increases the payment by 42%, providing higher long-term income.
What are good investment options to supplement CPP?
Dividend stocks like Enbridge and Atrium Mortgage Investment Corporation are reliable options.
Is the CPP payout enough for retirement?
No, it covers only about 25% of pre-retirement income. Additional savings or investments are recommended.
