Taking CPP at 60 is a decision
you can never take back.

If you’re wondering when to take CPP, whether to take CPP at 60 or 65, or whether deferring to 70 is worth it, this is the arithmetic behind the decision.

Around 95% of Canadians start CPP at 65 or earlier. About 1% wait until 70.

The reasoning is almost always the same: it feels like money on the table, and nobody knows how long they’ll live. Both are reasonable instincts. Neither is a calculation.

What the timing is worth

CPP can start any time between 60 and 70. Start before 65 and the payment is reduced by 0.6% for every month early, which is 36% less if you start at 60. Start after 65 and it increases by 0.7% for every month you wait, which is 42% more at 70.

OAS works similarly but only in one direction. You can’t take it before 65, and deferring adds 0.6% a month to a maximum of 36% more at 70.

What you give up, or gain, by moving the date

The difference compounds in a way that’s easy to underestimate. A payment started at 70 is more than double the one started at 60, indexed for life, paid for as long as you live.

The part that isn’t in the 42%

Here’s what most explanations leave out, and it makes deferral meaningfully better than the headline number suggests.

Your CPP is calculated from your earnings history, but those past earnings don’t stay at their original value. They’re updated to current levels using the Year’s Maximum Pensionable Earnings, which tracks Canadian wage growth rather than consumer prices. The longer you wait to start, the higher the YMPE level your whole earnings record gets measured against.

Wages have historically grown faster than inflation. So deferring gets you the 0.7% a month, and it gets you five years of wage-based adjustment applied underneath it.

That’s the version of the arithmetic almost nobody sees, and it’s done on a 1.1% real wage growth assumption, which is historical rather than optimistic.

OAS does not work this way. It’s indexed to the Consumer Price Index and is not wage-indexed during the deferral period. Deferring OAS gets you the 36% and nothing extra. Worth knowing, because the two decisions get discussed as though they’re the same mechanism and they aren’t.

Source: Canadian Institute of Actuaries, “The CPP Take-Up Decision: Risks and Opportunities,” July 2020. The 50% figure assumes 1.1% national real per capita wage growth and is expressed in constant dollars.

What people actually weigh

The conversation usually turns on longevity, and that’s the wrong frame.

CPP and OAS are not investments with a break-even date. They’re insurance against living longer than your money. The risk they cover isn’t dying early, it’s being 92 with the portfolio gone, and that risk gets cheaper to cover the longer you wait.

There are real reasons to start early. Poor health with a shortened life expectancy. Needing the income now because the alternative is debt. A low enough lifetime income that the amounts involved are small either way. Those are legitimate, and they’re different from “I might as well take it.”

The part that connects to everything else

Deferring CPP and OAS does something beyond the larger payment, and it’s the reason the decision can’t be made in isolation.

It keeps your taxable income low in exactly the years when low income is most valuable. Those are the years before RRIF minimums begin, when you still control what comes out of which account. Low income then means room to draw the RRSP down cheaply, which means a smaller forced minimum later, which means more space under the OAS threshold for the rest of your life.

Start both at 60 and you fill that bracket room with benefit income instead, leaving the RRSP to compound into a larger problem.

The timing decision, the withdrawal order, and the clawback are the same decision looked at from three angles. The full version of that argument is in the ten years that decide your retirement tax bill.

How to actually decide

Three things, in this order.

What does the income need to cover between now and 70? If deferring means drawing more from investments in the meantime, that’s a trade worth modelling rather than guessing at.

What’s your realistic longevity, and your spouse’s? Survivor benefits change the arithmetic, and a couple is planning for the second death rather than the first.

What does it do to your taxable income at 72 and beyond? This is the one almost nobody checks, and it’s often larger than the benefit difference itself.

Sources: Employment and Social Development Canada, Canada Pension Plan retirement pension and Old Age Security pension adjustment factors. Amounts are indexed and individual entitlements vary. This article is general information, not advice about your situation.

Common questions

When should I start taking CPP?
There is no single right age. Starting at 60 gives you 36% less for life. Starting at 70 gives you 42% more, plus the effect of wage indexation during the deferral. Deferral generally favours those in good health with other income to live on in the meantime.

How much less do I get if I take CPP at 60?
The payment is reduced by 0.6% for every month before 65, which works out to 36% less if you start at 60. The reduction is permanent and does not go away when you turn 65.

How much more do I get if I defer CPP to 70?
The payment increases by 0.7% for every month after 65, which is 42% more at 70. The Canadian Institute of Actuaries estimates the combined effect, including wage-based adjustment during the deferral, at roughly 50% more in constant dollars.

Why is deferring CPP worth more than 42%?
Your past earnings are revalued using the Year’s Maximum Pensionable Earnings, which tracks wage growth rather than consumer prices. Wages have historically grown faster than inflation, so deferring adds a wage-based increase on top of the deferral credit.

Can you defer OAS the same way?
OAS can be deferred from 65 to 70 at 0.6% per month, for a maximum of 36% more. Unlike CPP, OAS is not wage-indexed during the deferral period, so the deferral credit is the whole benefit.

What is the break-even age for deferring CPP?
Commonly cited break-even ages are around 74 for taking CPP at 65 versus 60, and around 81 to 82 for taking it at 70 versus 65. Break-even analysis understates the case for deferral, because the risk being managed is living a long time, not dying early.