What's the Best Age to Retire in Canada?

When people think about the best time to retire, they might be tempted to say "as early as possible." Here, we provide some answers to the question of the best age to retire by looking at the different benefits Canadians receive in retirement, defining when you can claim those benefits, and providing tips for preparing your finances before retirement.

For most people, the best age to retire in Canada is when you're 65 or older because when you turn 65, you can receive all your benefits from your Canada Pension Plan (CPP). Let's dive into the CPP a little more.

What is the Canada Pension Plan?

According to the Government of Canada, the Canada Pension Plan (CPP) retirement pension is a monthly, taxable benefit that replaces part of your income when you retire.¹ The amount you receive from the CPP depends on your average earnings throughout your career, your contributions to the CPP, and when you decide to retire.

There are a few other benefits of the CPP that Canadians can apply for, including:

• Post-retirement benefit
• Disability pension
• Post-retirement disability benefit
• Survivor's pension
• Children's benefit
• Death benefit

All these benefits are designed to help you create a steady monthly income in retirement. You need to be at least 60 to start taking out these benefits, and the average age that people start utilizing their CPP is when they're about 65 years old.

An important note about taking your CPP before you turn 65 is that while you can start taking the CPP as early as 60 (or as late as 70), most financial professionals don't recommend doing this because the earlier you begin receiving CPP payments, the less you'll receive every month. According to Canada Life, your payments will decrease by 0.6% each month (7.2% per year) if you start getting your CPP before age 65.²

Receiving your CPP payments is just one part of your whole retirement planning picture; to answer the question about the right age to retire, you also need to look at the rest of your financial circumstances. Here are some things to look at:

Your Income Streams

When you're projecting when to retire, consider what income streams you'll have. Build up multiple income streams when possible so you can still make money without working. For example, you might have income from your CPP, dividends in your portfolio, and a short-term rental property you manage. The idea here is to create multiple income streams and diversify your earnings.

Your Investments

Another thing you should do as you plan to retire is updated your investments to align with your retirement goals. Now that retirement is right around the corner, you may want to invest in more lower-risk investments to provide a potential income source in retirement.

Your Retirement Budget

Lastly, building a budget will help you live more comfortably in retirement; you can customize your budget according to when you're going to retire. Someone retiring at 65 will have a much different budget than someone retiring in their 70s. The better you can budget and plan out your expenses, the better you'll be able to determine the best age to retire.

The best age to retire depends on your unique situation, expenses, and needs. We recommend waiting until you're at least 65 years old, but it's important to retire at a time right for you.

1. https://www.canada.ca/en/services/benefits/publicpensions/cpp.html
2. https://www.canadalife.com/investing-saving/retirement/pension-plans/canada-pension-plan-cpp/taking-cpp-early.html

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