The option to take CPP starting at age 60 is not serving most Canadians well. Most people who have no defined-benefit pension do not have enough savings to retire comfortably when they turn 60. But since people know that CPP can start at 60, this creates an anchor in their minds for when they want to retire.
The maximum CPP benefit for those starting at age 60 is about $8000 per year. Most Canadians will get quite a bit less than this. For a single person hoping for a modest $36,000 per year income in retirement, CPP isn’t adding much. This leaves at least a $28,000 per year shortfall until age 65, and once OAS kicks in, about a $21,000 per year shortfall thereafter. Covering this shortfall requires savings in the range of half a million dollars or more. I think I just heard some readers say “HA!” at the thought of having half a million dollars saved.
The problem is that the lure of not having to work any more is powerful. But for the typical Canadian, discussing CPP at age 60 just brings false hope. Combine this false hope with some fuzzy thinking about the numbers and many Canadians take the retirement plunge at age 60 even though they are ill-prepared financially.
I tend to favour giving people the choice to make their own decisions. But I can’t help but think that typical Canadians would have more realistic retirement expectations if they couldn’t start their CPP benefits until age 65 or later.