Did you know that you can start your CPP as early as age 60?  Well, you can also delay CPP and OAS to start as late as age 70.

The implications of starting CPP early is that every year you start before 65, the benefit you would have received at 65 is reduced by 7.2%/year.  This means if you start at 60, you receive 64% of what you would have received at age 65 (or 36% less).

If you start CPP later than age 65 your benefit is increased by 8.4%/year up until age 70.  This means that if you started at 70 you’d received 142% more than what you would have received at age 65.

If you start OAS later than age 65 your benefit is increased by 7.2%/year up until age 70.  This means that if you delay OAS until age 70 you’ll receive 136% more than what you would have received at age 65.

What’s your CPP/OAS Strategy?

Assuming you would have received the maximum amounts, here are the monthly income numbers in August 2020.

  CPP OAS
Starting Age 60 $752.53
Starting Age 65 $1,175.83 $613.53
Starting Age 70 $1,669.68 $834.40

 

When is the right time to start?  Well if we all knew our life expectancy then that would be an easy calculation.  Since we don’t, we have to figure out the best strategy for us.  It depends on our current financial situation.

  • Are you still working?
  • Do you have other resources you could use before relying on the government benefits?
  • Are you earning a high income or expecting a high-income year and your OAS would be clawbacked

On the one hand, those increases are guaranteed and there is nothing comparable for a guaranteed rate of return if you wait.  On the other hand, some folks like having the guaranteed monthly income coming in as soon as possible.

Fidelity did a study trying to quantify the payback of starting early compared to waiting.  Here are their numbers from 2017:

Source: Fidelity Investments Canada Inc 2017

This means that if you live past age 73 it would be better to start CPP at 65 than 60 because you’ll end up with more money.  If you live past 78 you would also be better to wait to start CPP at 70 rather than age 60.

Let me know if you have any questions.

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