CPP: To delay or not to delay

When it comes to government benefits it pays off to hold off

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From the Summer 2015 issue of the magazine.

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Q: If you’re working part-time in retirement, what are the advantages of deferring Canada Pension Plan (CPP) and Old Age Security (OAS) payments beyond age 67? —Darren Akai, Toronto

A: I understand the merits of delayed gratification, in theory. But in practice, I want the entire bag of cookies… Right. This. Very. Minute. That being said, when it comes to government benefits, it can actually pay off to hold off. Matthew Ardey of T.E. Wealth explains that “once you reach age 65, you receive an increase in your CPP of 0.7% per month or 8.4% per year, to a maximum of 42% by age 70.” So, if your annual CPP benefit was $10,000 at age 65, it would jump to $14,200, if you held off and took it at age 70. For OAS, the deferral is slightly lower, at 0.6% per month or 7.2% per year, to a maximum of 36%. This is a big increase in your payments when you do decide to take your government pensions. But that’s not all. Deferring may also get you a tax benefit too. Depending on your taxable income once you cease part-time work, your marginal tax rate may be less than at that time when you were working. Patience pays. And if you have any extra, send it my way.

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4 comments on “CPP: To delay or not to delay

  1. It only pays if you’re still around to collect it. A bird in the hand is still better than two in the bush. I’d rather figure out how to spend the extra cash then not receive it at all.


  2. Valid argument for waiting but what about the ‘missed’ income for all the years you defer?


  3. Don’t forget about the OAS clawback if you delay and whether a the larger pensions may put you in clawback territory.


    • CPP is a life only pension. It ends on your death provided you have started it.. In general, I would start it at least by age 65. If you do not need the money, put what you can into your TFSA and then whatever it earns can compound tax-free in the TFSA and pass to your beneficiary tax-free.

      If you take CPP at 65 you may be still healthy enough to enjoy it, but some people (or their partner) are not so lucky at 70.. Take a trip? Travel to see your grandchildren? Or supplement your other sources of income when needed. Just because the government provides an option doesn’t mean it is in your best interest. The decision is not just based on the dollar amount. @IamSandraFoster


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