CPP and OAS: Start Early, Delay, or Take Them When You Need Them?

Deciding when to begin the Canada Pension Plan (CPP) and Old Age Security (OAS) depends on your cash-flow needs, health, life expectancy, other income, and tax situation—not simply the size of the monthly payment.

If you need the income for essential expenses, start when you need to. Retirement should not mean going without necessities, borrowing at high interest rates, or selling investments at the wrong time just to delay a government benefit.

CPP: Early or Late?

CPP can start as early as age 60 or as late as age 70; age 65 is the standard start date. Starting early reduces the pension by 0.6% per month, up to 36% less at age 60. Delaying increases it by 0.7% per month, up to 42% more at age 70. There is no benefit to delaying past 70.

Starting CPP early may make sense if:

• You need cash for housing, food, transportation, debt payments, or other essentials.

• You have health concerns or expect a shorter retirement.

• You are no longer contributing significantly to CPP.

• The income helps you avoid debt or financial stress.

  
  

The disadvantage is that the reduction is permanent. Early CPP may also increase taxable income while you are still working or withdrawing from registered plans.

Delaying CPP may make sense if:

• You have enough income from work, a pension, investments, or savings.

• You expect a long retirement and want more guaranteed, inflation-indexed income later.

• You want to reduce the risk of outliving your savings.

• Deferring helps you manage taxable income and preserve lower tax brackets.

The trade-off is that you must fund the gap from other resources.

OAS: Age 65 to 70

OAS cannot begin before 65, but it can be deferred to age 70. Each month of deferral increases the payment by 0.6%, or 7.2% per year, for a maximum increase of 36% at age 70.

Delaying OAS can be attractive if you have other income and expect a long retirement. However, OAS is income-tested through the Old Age Security clawback. If deferring pushes future income into the clawback range, some or all of the extra benefit may be lost.

If You Need the Cash, Start When You Need To

Financial security comes first. If CPP or OAS is needed for basic living costs, start it when you need it. A larger deferred pension is less valuable if you must borrow, draw heavily from savings during a downturn, or create stress in early retirement.

For many people, starting both CPP and OAS at 65 is a sensible default. But the best timing is personal: those with substantial savings and longer life expectancy may benefit from delaying, while those with immediate needs may be better served by starting earlier.

Bridging the Gap

If you can wait, other income sources can bridge the years before CPP or OAS begins:

• RRSP or RRIF withdrawals: A planned “melt-down” can use lower tax brackets and reduce future mandatory RRIF withdrawals, which are taxable and rise with age.

• TFSA withdrawals: Tax-free withdrawals do not increase taxable income or generally affect income-tested benefits.

• Non-registered investments: Flexible, though interest, dividends, and capital gains may be taxable.

• Workplace pension income: Provides predictable cash flow, if available.

• Part-time or consulting income: Can reduce withdrawals from registered plans.

• Home equity or credit: Use cautiously, as these can increase debt and interest costs.

  
  

Coordinating withdrawals can spread taxable income more evenly over retirement, reduce lifetime tax, preserve benefits, and avoid large forced RRIF withdrawals later at higher tax rates.

Putting It All Together

Ask yourself:

• Do I need the income now? If yes, start CPP and OAS at 65 if eligible.

• Can I fund the gap comfortably? If yes, delaying may create more secure income later.

• What will my taxable income be each year? Coordinating CPP, OAS, pension income, RRIF withdrawals, and TFSA or non-registered withdrawals can reduce lifetime tax.

• How long might I live? Longer life expectancy generally favours delaying.

• Will OAS be clawed back? Higher retirement income may reduce the benefit.

  
  

A balanced approach for many retirees is to use RRSP/RRIF withdrawals, TFSA savings, pension income, or part-time earnings in early retirement; start CPP when cash flow requires it; and begin OAS at 65 unless deferral clearly fits the plan.

The goal is not to maximize CPP or OAS in isolation. It is to create dependable after-tax income throughout retirement while preserving flexibility, protecting benefits, and minimizing unnecessary tax.

Disclaimer

This information has been prepared by Devon Ethier who is an Investment Advisor for iA Private Wealth Inc. Opinions expressed in this article are those of the Investment Advisor only and do not necessarily reflect those of iA Private Wealth Inc. iA Private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Canadian Investment Regulatory Organization. iA Private Wealth is a trademark and business name under which iA Private Wealth Inc. operates