The CPP Deferral Decision: Why Waiting Until 70 Could Be Worth It
A straightforward guide to one of retirement planning's most consequential, and most misunderstood, decisions
For many Ontarians approaching retirement, the Canada Pension Plan (CPP) decision feels deceptively simple: you've been paying into it your entire career, so why not start collecting as soon as you can?
It's a reasonable instinct, but for those with significant assets and a longer time horizon, it is often the wrong one. Deferring your CPP to age 70 can mean tens of thousands of dollars more in guaranteed, inflation-protected income over your retirement. For the right person, it is one of the highest-returning, lowest-risk financial decisions available.
This article breaks down the mechanics of CPP timing, the math behind deferral, and the specific circumstances where waiting makes the most sense.
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How CPP Timing Works
You can begin collecting CPP as early as age 60 or as late as age 70. The standard starting age is 65, and the benefit adjusts significantly based on when you begin:
Taking CPP before 65: Your benefit is permanently reduced by 0.6% for each month before your 65th birthday. Taking it at 60 means a 36% permanent reduction.
Taking CPP at 65: You receive the standard benefit based on your contribution history.
Deferring CPP after 65: Your benefit increases by 0.7% for each month you delay past 65. Waiting until 70 means a 42% permanent increase over your age-65 amount.
These adjustments aren't temporary, they apply for the rest of your life, and they apply to the indexed amount. Because CPP is indexed to the Consumer Price Index (CPI), a higher starting benefit compounds in your favour over time.
The Numbers: A Side-by-Side Comparison
The table below illustrates the approximate impact of CPP timing, using rough estimates based on someone who has contributed to CPP for most of their career. Your actual benefit will vary based on your contribution history, and you can find your personal estimate through your My Service Canada Account.
| Take at 60 | Take at 65 | Defer to 70 | |
|---|---|---|---|
| Monthly benefit* | ~$832 | ~$1,300 | ~$1,846 |
| Annual benefit | ~$9,984 | ~$15,600 | ~$22,152 |
| Adjustment vs. age 65 | −36% | Baseline | +42% |
| Lifetime income by age 85** | ~$249,600 | ~$312,000 | ~$332,280 |
Approximate figures for illustration. Actual benefit based on individual contribution history.
* Assumes no indexing for simplicity.
The key takeaway: deferring from 65 to 70 adds roughly $546/month, or $6,552/year, in permanent, guaranteed, inflation-indexed income. Over a 20-year retirement, that difference in lifetime income can be substantial.
The Break-Even Point
The most common objection to deferral is: 'What if I don't live long enough to make it worthwhile?' This is a legitimate question, and it has a clear answer.
The break-even age, the point at which deferring to 70 produces more total lifetime income than taking CPP at 65, is typically around age 83 to 84. If you live past that age, deferring wins. If you don't, taking it earlier wins.
Key Insight
Statistics Canada data shows that a Canadian who reaches age 65 has a life expectancy extending well into their early-to-mid 80s, and a meaningful number of couples will see at least one partner reach 90. For anyone in reasonable health, there is a high probability of living past the CPP break-even point. The math strongly favours deferral for most healthy retirees.
For couples, the calculus tilts even further toward deferral. The higher-earning spouse deferring to 70 means that if they predecease their partner, the survivor may receive a higher CPP survivor's benefit, providing an additional layer of financial security.
Why Affluent Ontarians Have a Special Advantage When Deferring
Here's what most generic CPP articles don't mention: deferral is especially compelling for those with significant investable assets. Here's why.
The conventional concern about deferring CPP is that you need income to live on in the meantime. But if you have $1M+ in a portfolio, you have the flexibility to bridge that gap from your own assets, drawing down RRSPs, TFSAs, or non-registered accounts, while letting CPP grow by 8.4% per year (0.7% per month).
There are few guaranteed investments that offer a real 8.4% annual return. CPP deferral is one of them.
Better still, drawing down your RRSP in your early retirement years, before CPP and OAS kick in, can be a smart tax strategy in its own right:
Your income may be lower in those early years, meaning you pay tax on RRSP withdrawals at a lower marginal rate.
A smaller RRSP balance when you convert to a RRIF at 71 means lower mandatory minimum withdrawals, which can help you stay below OAS clawback thresholds.
Drawing down your estate's RRSP/RRIF balance during your lifetime reduces the tax hit your estate would otherwise face. Since the full remaining RRSP/RRIF balance is taxed as income in the year of death.
Real-World Example
A 65-year-old with $1.2M in a RRSP and no other income could draw $50,000/year from their RRSP at a relatively low marginal tax rate for five years, then begin CPP at 70 with a benefit 42% higher than at 65. This approach simultaneously shrinks a future tax liability on their estate while locking in a larger guaranteed income stream for life. Win-win.
When Taking CPP Early Might Make Sense
Deferral is not the right answer for everyone. There are legitimate situations where taking CPP earlier (at 65, or even before) may make more sense:
You have a serious health condition that materially reduces your life expectancy. If you have reason to believe you may not reach your mid-80s, taking CPP earlier can maximize your total lifetime receipt.
You have no other income sources and genuinely need the cash flow to cover living expenses. Deferral requires the ability to fund your lifestyle from other sources.
Your spouse has a significantly lower income and you want to begin pension income splitting as early as possible. CPP is not eligible for the pension income splitting rules that apply to RRIF income but use a different set of rules and criteria.
You can achieve a real rate of return greater than 8.4%. In such a situation it makes mathematical sense to take CPP early. However, CPP deferral is a nearly risk free return while any alternative investment return would not be and would require a premium for the risk taken.
OAS: A Similar Decision, With a Clawback Wrinkle
Old Age Security (OAS) follows a similar deferral logic. You can begin OAS at 65 or delay up to age 70, receiving a 0.6% increase for each month of deferral, a maximum 36% boost if you wait until 70.
For high-income Ontarians, however, OAS comes with a critical complication: the OAS clawback (technically called the OAS Recovery Tax). In 2025, OAS begins to be clawed back at a rate of 15 cents per dollar of net income above approximately $93,454. The benefit is fully eliminated at approximately $151,668 of net income.
This means that if your retirement income (from RRIF withdrawals, pension, investment income, and other sources) regularly exceeds the clawback threshold, you may receive little or no OAS regardless of when you start collecting. In that case, deferring OAS may make less sense than deferring CPP, since the incremental benefit is eroded anyway.
Planning Tip
Strategic income planning, including drawing down RRSPs before OAS begins, using TFSAs to generate tax-free income, and managing capital gains timing, can sometimes reduce net income below the clawback threshold and allow you to keep more of your OAS. This is a core part of what a Wealth Advisor does.
The Bottom Line: It Depends on Your Whole Picture
The CPP deferral decision is not made in isolation. It intersects with your tax situation, your RRSP/RRIF drawdown strategy, your OAS planning, your spouse's income, your estate goals, and your health.
For most healthy Ontarians with significant assets, deferring CPP to 70 is likely the right call, and the financial case for doing so is compelling. But the best answer for your situation requires a full retirement income analysis, not a rule of thumb.
The good news: this is exactly the kind of analysis that a Wealth Advisor can do for you, and it often produces meaningful, quantifiable improvements to your lifetime income and tax efficiency.
Wondering Whether to Defer Your CPP?
We model CPP timing scenarios for our clients as part of a comprehensive retirement income plan. Showing you, in clear numbers, what each option means for your lifetime income, tax bill, and estate.
Contact us today for a complimentary consultation.
Disclaimer
This publication is for informational purposes only and has been prepared from public sources which are meant to be reliable. None of the information in this should be construed as investment advice. Speak to your Investment Advisor to learn if this product is right for you. Designed Securities Ltd. (DSL) is regulated by the Canadian Investment Regulatory Organization (CIRO), and a Member of the Canadian Investor Protection Fund (www.cipf.ca). Christopher Burke is registered to advise in securities to clients residing in Ontario. The views expressed are those of the author and not necessarily those of DSL. This report does not constitute an offer or solicitation in any jurisdiction in which such offer or solicitation is not authorized or to any reliable person to whom it is unlawful to make such offer or solicitation. Content is accurate as of the date of publication, and subject to change without notice.
