Can I collect CPP while working?

In this segment of Finance Friday, Dave answers viewer questions around the Canada Pension Plan and Old Age Security.

Aired on May 5, 2023, on CHCH Morning Live.

00:23 I’m still working and going to start collecting Canada Pension. I heard that you can stop CPP contributions at 65. Is there a benefit to this and should folks do it?

If you start CPP between 60 and 65, and are still working, you have to pay CPP contributions until age 65, it is mandatory if you are working, even if you have started receiving CPP benefits. Between 65 and 70, if you are drawing CPP and still working you can stop CPP premiums but I would not stop because If you continue CPP contributions after 65, your employer has to pay as well and it creates a CPP ‘Post Retirement Benefits. If you stop CPP contributions, so does your employer and you don’t create the additional Post Retirement Benefits. Also, since Judy has not started drawing CPP yet, she may want to hold off (if she can) as long as she is working as it will increase her CPP benefit for the rest of her life. CPP increases 0.7% per month, an 8.4% increase every year from 65 up to age 70.

01:20 If I start collecting my CPP and Old Age Security in the Fall and continue working, should I inform my employer to stop these deductions from my paycheck? If I decide to retire, would it be better to wait and retire in January vs in the Fall? What if I went to part time in the Fall?

This is very similar situation to Judy’s re CPP contributions but note that there’s no deductions for Old Age Security from your paycheck. OAS is a government benefit paid by the government out of our income taxes. Robin is turning 65 in the Fall (due to her comment on starting OAS). If she is still working, I’d hold off starting her CPP and OAS as long as possible. Like CPP, OAS also increases after age 65 (0.6% for every month), so it’s a benefit to hold off retiring until January as your CPP and OAS pensions will both increase. If you went to part time at 65, that might be a nice transition, you could start one of the pensions (OAS) lesser of the two, and hold off on CPP so it increases more before you start to collect.

02:36 I’ll be 63 this year and a federal government retiree, trying to figure out when best to take CPP. My federal pension is adjusted at age 65 based on the CPP amount I will receive. My question is, would it be better to take my CPP now, or should I wait until 65 when the adjustment is made to my federal pension?

Government pension plans include a “bridge benefit” which is a top up to their government pension for those who retire prior to 65. It’s temporary to ‘bridge the gap’ until you start your CPP benefit at age 65. When the retiree reaches 65 the bridge benefit disappears (that’s the adjustment) and most retirees then start CPP. Taking CPP before 65 doesn’t reduce your bridge benefit, but it does reduce your CPP, 0.6% every month. Taking it at age 63 means 14.4% less than waiting until 65. Also, even though the bridge benefit ends at 65, holding off on taking CPP until after 65 gets you an 8.4% annual increase every year you wait until age 70.

At FirstOntario Credit Union, we are committed to financial literacy. We know that strong financial literacy is key when making confident, informed decisions about money, including when you should spend it, why you should save it and how to make it grow. Our CSO, Dave Schurman, visits CHCH Morning Live every other week for a live Finance Friday segment. He discusses different ways to make the most of your money and addresses viewer questions. If you would like to submit your questions to Dave, send them by email at [email protected] or via Twitter at   / finance_friday  .

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