Although age 65 has traditionally been considered the age for full retirement, there is no mandatory retirement age in Canada under federal law. However, some specific occupations or industries may have their own retirement age requirements. Additionally, individual employment contracts or collective agreements may stipulate retirement ages.
What Factors Influence When A Person Retires?
The retirement age in Canada can vary widely depending on factors such as personal preference, financial situation, health, and job opportunities. As stated earlier, traditionally, many Canadians have retired around the age of 65, which is when they become eligible for full Canada Pension Plan (CPP) benefits. However, some individuals choose to retire earlier, while others may continue working past the age of 65 either part-time or full-time.
In recent years, there has been a trend toward later retirement due to factors such as increased life expectancy, changes in pension plans, and the desire to remain active in the workforce. Additionally, flexible retirement options, such as phased retirement or working reduced hours, have become more popular.
What Happens To Your CPP If You Retire Before Age 65?
If you retire before age 65, your CPP pension is reduced by 0.6% percent for each month before age 65 that you choose to begin receiving it. This reduction is permanent. This means that if you started receiving your retirement pension at age 60, it would be 36% less than if you had taken it at 65. However, your pension will still increase each year based on increases in the Consumer Price Index.
What Are The Benefits Of Delaying CPP To Age 70?
On the other hand, your CPP retirement pension is increased by 0.7% for each month after age 65 that you delay receiving it, until age 70. This means that if you started receiving your CPP retirement pension at age 70, the amount would be 42% higher than if you had taken it at 65.
If you are applying after your 65th birthday, you can choose to receive retroactive pension payments, but they cannot begin earlier than the month after your 65th birthday. In general, you can receive retroactive payments of CPP benefits for up to 12 months (11 months plus the month you apply).
If you delay applying for your CPP retirement pension after you turn 70, you risk losing benefits. There is no financial benefit in delaying your pension after age 70.
CPP Payment Dates in 2024
Retirement Calculators For Canadians
There are several retirement calculators available in Canada that can help individuals estimate their retirement needs and plan accordingly. Here are a few popular options:
- Government of Canada Retirement Income Calculator: This calculator, available on the Government of Canada website, helps individuals estimate their retirement income from various sources, including the Canada Pension Plan (CPP), Old Age Security (OAS), and personal savings. It provides personalized estimates based on individual circumstances and retirement goals.
- Retirement Planning Calculator by MoneySense: MoneySense, a Canadian personal finance website, offers a retirement planning calculator that allows users to calculate how much money you’ll need in retirement, based on how much your monthly spending will be once your mortgage and larger expenditures are behind you.
- Retirement Savings Calculator by RBC Royal Bank: RBC Royal Bank offers a number of retirement savings calculators that help individuals determine how much they need to save each month to reach their retirement goals. Some of the useful calculators that are included on the RBC site include the retirement budget calculator, the RRSP calculator, the TFSA calculator and the RRIF calculator. Users can input various factors, such as current age, retirement age, desired retirement income, and expected rate of return on investments.
- Retirement Planner by TD Canada Trust: TD Canada Trust provides a retirement planner tool that helps users estimate their retirement income needs and determine if they are on track to meet their goals.
These are just a few examples of retirement calculators available in Canada. It’s essential to choose a calculator that suits your needs and provides accurate estimates based on your individual circumstances and retirement goals.
Best Retirement Calculator
In our opinion, the MoneSense tool is the best one of the bunch. It is simple and straightforward and above all, it seems to be the only calculator that we have seen that uses post-retirement expenses rather than a person’s pre-retirement income to calculate a retirement savings goal.