Who would turn down a 42 per cent pay raise? That is effectively the choice facing Canadians deciding when to collect their Canada Pension Plan (CPP).
Waiting until 70 rather than starting at 65 increases monthly payments by 42 per cent. The catch? Five years without collecting a penny.
Clients frequently ask me whether they should begin collecting CPP as early as age 60, wait until 65 or defer until 70, and when they should start Old Age Security (OAS). Many instinctively favour taking the money early. But the better question is how these decisions fit into their overall financial plan.
Do you actually need the income?
Consider two retirees, both aged 65. One has a workplace pension, substantial investments, and no immediate need for additional income. Deferring CPP could strengthen financial security later. The other relies on investment withdrawals to pay everyday expenses. Collecting earlier might reduce the need to sell investments during a market downturn.
The same pension rules can produce very different answers. A comprehensive financial plan can project cash flow, compare investment withdrawals, and identify the trade-offs of waiting, including forgone returns and potential taxes.
Taxes can change the calculation
Both CPP and OAS are taxable, but only OAS faces an income-tested recovery tax, commonly called the clawback.
For the 2026 income year, the OAS clawback starts above $95,323 in individual net income, with 15 cents recovered for each additional dollar. This generally affects recoveries from July 2027 through June 2028. At a net income of $120,000, including OAS, roughly $3,700 would be recovered. For recipients aged 65 to 74, the benefit can be fully clawed back at $155,320.
CPP has no comparable clawback, although receiving it can increase taxable income and, consequently, OAS repayments. The broader retirement income picture is crucial: someone retiring before mandatory withdrawals from a registered retirement income fund (RRIF) begin may benefit from drawing down savings in a registered retirement savings plan (RRSP) during lower-income years while deferring benefits. Someone expecting substantial RRIF income later might face larger OAS clawbacks even after waiting.
Coordinating pension income, registered account withdrawals and income-splitting opportunities can change which starting dates are most tax-efficient.
The financial reward for waiting
CPP can start at 60, with payments reduced by 36 per cent relative to 65. After 65, payments increase by 0.7 per cent for each month deferred, reaching 42 per cent at 70.
OAS can start at 65. Waiting increases payments by 0.6 per cent monthly, or 36 per cent at 70. Neither benefit increases further for deferral beyond 70.
Someone entitled to $1,000 monthly in CPP at 65 would receive $1,420 at 70, before future inflation adjustments. The maximum monthly OAS payment for aged 65 to 74 is $762.50 in late 2026. A 36 per cent increase would lift that base payment to approximately $1,037, before indexing. Both benefits are inflation-adjusted, and OAS rises automatically another 10 per cent at 75.
How long must you live to come out ahead?
Delaying $1,000 monthly in CPP from 65 to 70 means forgoing $60,000, then receiving an additional $420 monthly. On a simple cumulative-payment basis, the higher benefit catches up near age 82. For OAS, the comparable break-even is around age 83, accounting for the 10 per cent increase at 75 applicable to both starting ages. Taxes, inflation, and investment returns can change these results.
According to the Office of the Chief Actuary’s 32nd CPP report, a Canadian man aged 65 in 2025 is projected to live another 21.6 years, reaching approximately age 87; for women, the projection is 24.1 years, reaching approximately age 89.
These averages cannot predict individual outcomes. Health, lifestyle, and family history should inform longevity assumptions. For those who live into their 90s, higher inflation-adjusted benefits may reduce pressure on portfolios later in life. Individuals eligible for the Guaranteed Income Supplement should generally not defer OAS because doing so delays access to that supplement.
A total wealth planning decision
There is no universally correct age to begin CPP or OAS. Spouses may benefit from different starting dates, and taking one benefit earlier while deferring the other may make sense.
Before deciding, Canadians should prepare or update a comprehensive financial plan that models different scenarios for income needs, tax exposure, portfolio sustainability, and estate objectives.
The goal is not simply to collect sooner or secure the largest monthly cheque. It is to make these decisions within a broader total wealth plan that supports after-tax income and lasting financial security.
