Can you change your mind about taking CPP early?

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Q. I am 62 years, 10 months of age, and still working but plan to retire (early) at the end of November 2021 with an unreduced employer pension. I have been collecting CPP for 28 months because I needed the extra money at the time, but I am in a better financial position now. Can I ask to stop collecting my CPP for a couple of years to “grow” those funds and pick it up again a few years later, or is it that once you draw CPP you must continue? –Rena A. Canada Pension Plan (CPP) retirement pension is a government pension calculated based on your contributions from employment and self-employment income. A recipient can apply for their CPP as early as age 60. If you start CPP before age 65, your pension is reduced by 0.6% per month, or 7.2% per year. That would mean a 36% reduction in your pension at age 60. Canadians can also opt to delay CPP until age 70 and, in contrast, there is a 0.7% monthly enhancement after 65, or 8.4% per year, for a maximum 42% increase at age 70. If someone has relatively good health, they may receive more lifetime income by deferring their CPP, but there are many factors to consider. Rena, it sounds like you started CPP early due to cash flow concerns; you needed the extra income. As you’re still working, you will notice on your pay stub that you’re still contributing to CPP, as is your employer. (There is a matching CPP contribution made by employers for employees, while self-employed people pay the employee and employer contributions.) Your CPP will have increased each year due to both inflation adjustments and your contributions through payroll deductions for the previous year. The CPP is adjusted annually for increases in the Consumer Price Index (CPI). If someone is under age 65 and still working, they must continue to make contributions based on their earnings, and those earnings may increase their CPP pension calculation. You cannot opt out of CPP contributions until you are at least 65 years of age. It sounds like you will retire prior to age 65, Rena. I appreciate that you may no longer need or want your CPP pension right now, but once you have been receiving your pension for twelve months, you do not have the opportunity to stop or pause it. You will be entitled to another government pension called Old Age Security (OAS). This pension can start as early as age 65 or as late as age 70. For each month of deferral after 65, it increases by 0.6% per month, or 7.2% per year. It is not as lucrative as CPP to defer OAS to after age 65, but in your case it will be an opportunity to keep some of your additional pension income for the future. If you now have more cash flow than you need, Rena, there may be other alternatives given you cannot stop CPP. If your income is relatively high, and is likely to be lower in retirement, you could consider Registered Retirement Savings Plan (RRSP) contributions, if you have any room. You may not have much after 20 years in a pension plan, given pension plan members have a pension adjustment that reduces their RRSP room. But you may have RRSP room from prior to joining your current employer. You could also use your extra cash flow to contribute to your TFSA. Although tax-free savings accounts do not result in a tax deduction, they help with tax savings. Contributed amounts grow tax-free and withdrawals are tax-free as well. CPP, OAS and employer defined benefit (DB) pensions, once started, cannot be stopped. It is important to plan ahead when you have pensions to determine if the time is right to begin collecting. If you start a pension and change your mind, although there may not be a way to stop the payments, there may be ways to reduce income tax or do something else with the extra cash flow to invest it for the future. Jason Heath is a fee-only, advice-only Certified Financial Planner (CFP) at Objective Financial Partners Inc. in Toronto. He does not sell any financial products whatsoever.

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About Jason Heath, CFP

Jason Heath is a fee-only, advice-only Certified Financial Planner (CFP) at Objective Financial Partners Inc. in Toronto. He does not sell any financial products whatsoever.

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Comments Cancel reply

Bart Blom says:

August 10, 2021 at 2:20 pm

You can actually stop your CPP payouts in the first six months I believe. But once passed this period you cannot.
My wife applied, got approved, but then decided to work longer. She cancelled, paid back the payout and got a new start date.
I had something similar happening when an error was made in my application, either by me or Service Canada. I did not need the money yet when I got it. I cancelled my CPP, paid back the payout, and got a new start date (and a larger pension).
If you work longer, and keep contributing to your CPP, you will get a larger payout based on the contributions you made. This may make sense even after 65, if you expect to live longer. Plus it is indexed!

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Debra Sherman says:

August 10, 2021 at 2:42 pm

OAS can be cancelled within the first 6 months of receiving it.

https://www.canada.ca/en/services/benefits/publicpensions/cpp/old-age-security/while-receiving.html

“If you have been receiving Old Age Security for less than 6 months, you can ask us to cancel or delay your first payment. Write to us within 6 months of receiving your first payment.

From the date your request is granted, you have 6 months to repay any amounts that you received and any related benefits you and/or your spouse or common-law partner received.

You can re-apply at a later date and receive an increased Old Age Security pension.”

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shangara bhatti says:

December 7, 2021 at 9:49 pm

hi my name s bhatti i toke cpp at age 61 and employer and my i still pay 65 and after i retire then all most full 4 year last two year i work part time still but i the pay same

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1. MoneySense Editors says:
  
  December 9, 2021 at 9:37 am
  
  Due to the large volume of comments we receive, we regret that we are unable to respond directly to each one. We invite you to email your question to [email protected], where it will be considered for a future response by one of our expert columnists. For personal advice, we suggest consulting with a qualified advisor.
  
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Auddis W says:

January 21, 2022 at 1:30 pm

In your site, it is mentioned that an individual have up to 6 months to stop receiving further CPP benefits after he/she started their CPP benefit. However, the CRA is showing 12 months, can you clarify this?

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1. MoneySense Editors says:
  
  February 3, 2022 at 11:29 am
  
  “Thanks for letting us know. We have updated the article to reflect that you can cancel your CPP retirement pension up to 12 months after you start receiving it. We do our best to fact check all our content before it gets published, but some things may get missed. We would like to remind our readers to do their own fact checking before making any personal finance decisions.”
  
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Grant McLeod says:

January 8, 2023 at 6:33 am

I am just over the 6 months, is there any way I can still cancel my oas? I will pay it all back, my wife had some VERY SERIOUS HEALTH ISSUES, and I have let it slip a couple weeks past the 6 months. The money is sitting waiting to go back if I can cancel, I have no intention of retiring at this time, I can’t.

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