Retiring at 56: Take CPP at 60 or Draw Savings Until 70?

A couple who stops working at 56 has four years before CPP can start and nine before Old Age Security can start. Whatever they decide about CPP, savings have to carry them alone for at least four years. The real question is what happens from 60 onward: start CPP right away, or keep drawing RRSPs and other savings and let CPP grow until 70.

Here are both paths for the same person. Same starting point, same horizon, same yardsticks: lifetime income, tax, and risk.

The inputs that drive the answer

CPP taken before 65 is cut by 0.6% for every month early, which works out to 36% at age 60. Taken after 65, it rises by 0.7% per month, or 42% at age 70. Both versions are indexed to inflation every year. Canada.ca puts the 2026 maximum monthly CPP at age 60 at $964.90. Most people receive less than the maximum, so your own Statement of Contributions from your My Service Canada Account is the number that matters.

One wrinkle hits early retirees directly. The years after you stop working count as zero-earning years in the CPP formula. Some can be dropped from the calculation, but waiting past 60 does not always deliver the full headline increase. Ask Service Canada for estimates at 60, 65 and 70 rather than applying percentages to a guess.

The arithmetic

This is illustrative only. Suppose a hypothetical person's CPP at 65 would be $1,000 a month in today's dollars.

The early starter collects $76,800 before the deferrer sees a cheque. The deferrer then receives $780 more every month. Dividing $76,800 by $780 gives about 98 months, so the deferrer catches up a little after age 78. Both amounts are indexed, so the comparison holds in today's dollars.

The sketch leaves out tax, investment returns and the zero-year effect above. Each of these moves the break-even point. None of them flips the basic trade.

The case for taking CPP at 60

• Money arrives when you are most active. The years from 60 to 70 are often the expensive ones: travel, renovations, helping kids. Income that shows up now is worth more to some households than larger income later.
• Your savings take less strain. Every CPP dollar is a dollar you do not have to sell from your portfolio. That matters if markets drop in your late 50s or early 60s.
• Health is a real factor. If you have serious health concerns or a family history of shorter lives, the break-even age near 78 may simply be too far away.
• Debt. Mortgage debt among Canadians approaching retirement has risen significantly, with more carrying balances into their 60s than in prior decades. If you will still have mortgage payments in your 60s, a steady cheque that lines up with them has practical value.

The case for drawing savings until 70

• It protects you if you live a long time. A 42% indexed boost for life cannot be bought this cheaply anywhere else. It protects most where it counts: in your late 80s and 90s, when savings may be running thin.
• Your low-income years can do useful work. Between 56 and 70, with no paycheque or CPP, you can withdraw RRSP money at lower tax rates. RRSPs must become RRIFs by the end of the year you turn 71. Shrinking them early means smaller forced withdrawals later.
• It helps with the OAS clawback. OAS is reduced once net income passes a set threshold. A smaller RRIF later can keep a couple under that line. TFSA withdrawals do not count toward it at all.

The costs on this side are real too. You spend down savings faster, a bad market early on hurts more, and if you die young, you collected less.

Which option fits whom

Taking CPP at 60 suits you if:

• Your health outlook is uncertain.
• Your savings are modest relative to your spending.
• You would otherwise be selling investments into a falling market.
• You carry fixed costs, like a mortgage, through your 60s.

Drawing savings until 70 suits you if:

• You are healthy and have family who lived long lives.
• You hold enough in RRSPs, TFSAs or non-registered accounts to fund the bridge comfortably.
• You have large RRSPs that could later push your income into the OAS clawback range.

A couple does not have to choose the same way for both partners. A common middle path is for one spouse to start CPP at 60 or 65 while the other waits until 70. That gives the household some guaranteed income early and a larger indexed floor later.

Get your actual CPP estimates first. Then map your RRSP withdrawals year by year from 56 onward. Once those two numbers are on paper, the right path for your household is usually much easier to see.