The Canada Pension Plan (CPP) and Old Age Security (OAS) serve as the foundation of retirement income for Canadians. Think of them as your retirement paycheque—one that you can choose to collect early at a but at a reduced amount or delay for a significant increase.
Making an informed decision on when to start can have a lasting impact on your financial security. As always, please feel free to reach out for additional insights on how best you can maximize your CPP & OAS payments.
Below we outline 5 of the major takeaways to consider:
1. Unlocking Your Retirement Paycheque
Understanding CPP and OAS is essential for making the most of your retirement income. While many Canadians start collecting as soon as they’re eligible, delaying can significantly boost benefits.
2. The CPP Paycheque: Collect Now or Get a Raise Later?
CPP is a contributory pension plan that provides retirement, disability, survivor, and death benefits. Key considerations include:
- Eligibility starts at age 60, with flexible start options until age 70.
- The amount received depends on lifetime contributions.
- Early collection (before 65) reduces benefits by 0.6% per month (7.2% annually). Collecting at age 60 results in a 36% reduction.
- Delaying past 65 increases benefits by 0.7% per month (8.4% annually), leading to a 42% boost by age 70.
Example: If the maximum CPP benefit at 65 is $1,433/month, collecting at 60 would reduce it to $1,088.90/month, while delaying to 70 would increase it to $2,480.48/month, a $13,837/year difference.
Source: Marnoa Private Wealth Counsel
3. The OAS Paycheque: Timing for Maximum Value
OAS is a government-funded benefit available at age 65, based on residency rather than work history.
Key points include:
- Eligibility requires at least 10 years of Canadian residency after age 18.
- Payments can be deferred up to age 70, increasing by 0.6% per month (7.2% annually), for a 36% total increase.
- Seniors aged 75+ receive an additional 10% increase.
- OAS is subject to a clawback for high-income earners, starting at $93,454 (2025 threshold).
Example: If the maximum OAS benefit at 65 is $727.67/month, delaying to 70 increases it to $1,092.63/month, a $4,215/year difference. With the additional 10% boost at 75, those who delayed OAS would receive $1,326.99/month, compared to $975.73/month for those who took it at 65.
Source: Marnoa Private Wealth Counsel
4. Paycheque Growth: The Power of Delay
Despite the benefits of delaying, over 95% of Canadians take CPP at 65 or earlier, often without considering long-term financial advantages. Deferring these benefits provides:
- Higher lifetime income – crucial for longevity risk (outliving savings).
- Protection from market downturns, ensuring stable, inflation-adjusted income.
- Tax efficiency, as strategically delaying withdrawals can reduce OAS clawbacks and optimize retirement income streams.
- Enhanced survivor benefits for a spouse in case of early passing.
Source: Marnoa Private Wealth Counsel
5. The Paycheque Puzzle: Key Factors in Your Decision
- Tax Impact – Both CPP and OAS are taxable. High-income retirees should factor in OAS claw backs.
- Other Retirement Income Sources – Balancing RRSP/RRIF withdrawals with CPP/OAS can create tax-efficient income.
- Health & Longevity – Those with longer life expectancy benefit more from delayed collection.
- Market Risk – Delaying government pensions allows personal investments to grow while securing a larger guaranteed income.
6. Making the Smartest Withdrawal: Your Next Steps
Deciding when to collect CPP and OAS is a personal choice influenced by health, financial needs, and lifestyle goals. Deciding when to collect CPP and OAS is a personal choice influenced by health, financial needs, and lifestyle goals.
Should you have any questions about when to take CPP or OAS, please reach out to the Marnoa Private Wealth Planning team for personalized guidance.
Sincerely,
Tracy Andrade, CFP®, CIM®
Associate Wealth Advisor and Financial Planner
(519) 707-0050
[email protected]
marnoa.ca
