I feel like this thread has a lack of poorly formatted spreadsheets posted by me, so I thought I'd take a stab at this one. Taking CPP early reduces your payout by 0.6% for every month you take it early. So taking it 60 months early (at age 60 instead of 65) will result in a 36% reduction in your benefits. Taking it late increases your payout by 0.7% for every month you take it late, or a 42% increase to your benefits if you wait until 70 to take it.
Some other considerations:
- Higher CPP payments could impact eligibility for OAS/GIS payments in retirement
- If you're still working from 60-65, your income in those years will also increase your CPP payout
- CPP is inflation adjusted and government guaranteed, which makes it an excellent source of retirement income, and hard to replace with other investments
- You might die without collecting if you wait
On to the spreadsheet. I've calculated the present value for 3 options, taking the CPP at 60, 65 and 70. I have arbitrarily assumed that the CPP entitlement would be $1000/month at 65, and that it won't affect either GIS or OAS. Generally speaking, unless your income is low you won't get GIS, and unless it high you will get OAS. Most people probably fit this assumption. If you don't, I'm a guy on a message board, get your own financial planner. The first spreadsheet just adds up the payments, basically it assumes you spend the money as you get it, and that you're trying to get as much total money from the government as possible.
Start Age 60 65 70
Monthly Payment 640 1000 1420
Age of Death Present Value Present Value Present Value
61 $7,680 $0 $0
62 $15,360 $0 $0
63 $23,040 $0 $0
64 $30,720 $0 $0
65 $38,400 $0 $0
66 $46,080 $12,000 $0
67 $53,760 $24,000 $0
68 $61,440 $36,000 $0
69 $69,120 $48,000 $0
70 $76,800 $60,000 $0
71 $84,480 $72,000 $17,040
72 $92,160 $84,000 $34,080
73 $99,840 $96,000 $51,120
74 $107,520 $108,000 $68,160
75 $115,200 $120,000 $85,200
76 $122,880 $132,000 $102,240
77 $130,560 $144,000 $119,280
78 $138,240 $156,000 $136,320
79 $145,920 $168,000 $153,360
80 $153,600 $180,000 $170,400
81 $161,280 $192,000 $187,440
82 $168,960 $204,000 $204,480
83 $176,640 $216,000 $221,520
84 $184,320 $228,000 $238,560
85 $192,000 $240,000 $255,600
86 $199,680 $252,000 $272,640
87 $207,360 $264,000 $289,680
88 $215,040 $276,000 $306,720
89 $222,720 $288,000 $323,760
90 $230,400 $300,000 $340,800
For this case, if you live past 82 you'd want to defer it as long as possible, and if you die before 73 you'd want to take it as early as possible.
However, that ignores the time value of money. Money now is worth more than money later. The following table uses 4% as a discount rate for the present value. It's lower than the rate I would normally use, but CPP is inflation adjusted, so the actual rate is 4% plus inflation. Essentially, that assumes assets you're using to live off instead of taking CPP early earn 4% + inflation. If you use a lower rate, it makes waiting look better, while a higher rate makes taking it early look better.
Start Age 60 65 70
Monthly Payment 640 1000 1420
Age of Death Present Value Present Value Present Value
61 $7,384.62 $0.00 $0.00
62 $14,485.21 $0.00 $0.00
63 $21,312.70 $0.00 $0.00
64 $27,877.60 $0.00 $0.00
65 $34,190.00 $0.00 $0.00
66 $40,259.61 $9,483.77 $0.00
67 $46,095.78 $18,602.79 $0.00
68 $51,707.48 $27,371.07 $0.00
69 $57,103.35 $35,802.11 $0.00
70 $62,291.68 $43,908.88 $0.00
71 $67,280.46 $51,703.85 $11,068.86
72 $72,077.37 $59,199.02 $21,711.99
73 $76,689.78 $66,405.91 $31,945.78
74 $81,124.78 $73,335.61 $41,785.95
75 $85,389.22 $79,998.78 $51,247.66
76 $89,489.63 $86,405.68 $60,345.45
77 $93,432.34 $92,566.16 $69,093.33
78 $97,223.40 $98,489.70 $77,504.76
79 $100,868.65 $104,185.40 $85,592.66
80 $104,373.71 $109,662.05 $93,369.50
81 $107,743.95 $114,928.05 $100,847.22
82 $110,984.57 $119,991.52 $108,037.34
83 $114,100.54 $124,860.23 $114,950.92
84 $117,096.68 $129,541.69 $121,598.59
85 $119,977.57 $134,043.09 $127,990.58
86 $122,747.67 $138,371.36 $134,136.72
87 $125,411.22 $142,533.16 $140,046.48
88 $127,972.33 $146,534.89 $145,728.93
89 $130,434.93 $150,382.71 $151,192.83
90 $132,802.82 $154,082.53 $156,446.58
In this case, you'd want to delay as long as possible only if you expect to live to 89, and would take it as early as possible if you expect to live to 75 or less.
Obviously individual circumstances vary, and I have no idea what discount rate or assumptions are appropriate for anyone, and I'm not in any way a financial planner. I'm also not commenting on anyone's decisions, ultimately, if spending it now seems like the best plan, have at 'er.