Reframing the CPP Enhancement: A 122% Increase In Benefits
Whenever I write about the timing of Canada Pension Plan benefits, the response is enormous. It’s one of the most popular and polarizing retirement planning topics out there.
The usual way this conversation gets framed is around age 65. That’s considered the “normal” starting point, so you’ll often hear people say, “If you wait until 70 you’ll get 42 percent more.” That’s true, but it misses the bigger picture.
Financial Planner extraordinaire Aaron Hector recently highlighted something that really struck me. The CPP decision doesn’t start at 65. It starts at 60. And if you frame it that way, the difference between taking CPP at 60 and waiting until 70 isn’t 42 percent. It’s 121.9 percent. In other words, you more than double your monthly CPP by waiting.
That’s not a modest “bonus.” That’s life-changing, inflation-protected income.
How the CPP Enhancements Work
Here’s the basic math.
Start CPP as early as 60 and your payment is reduced by 0.6 percent for each month you take it before 65. That’s a 36 percent reduction if you start right at 60.
Delay past 65 and your payment grows by 0.7 percent per month, or 42 percent more if you wait all the way until 70.
There’s no benefit to delaying beyond 70.
So, if your age-65 CPP would be $1,000 a month, you’d only get $640 at 60. At 70 you’d get $1,420. That’s where the 121.9 percent difference comes in.
Why the Age-60 Lens Matters
Anchoring the conversation at 65 makes the “bonus” for waiting seem smaller than it really is. But if you start the clock at 60, the trade-offs are much clearer.
Imagine this choice at age 60:
- Take $640 a month now.
- Or wait 10 years and lock in $1,420 a month for the rest of your life.
That’s not a small enhancement. It’s a more than doubling of guaranteed, inflation-protected income.
The CPP Trifecta
Delaying CPP isn’t just about getting a bigger cheque. It creates what I like to call the trifecta of retirement benefits:
- More lifetime income – You buy yourself a larger, inflation-protected pension that lasts as long as you do. For couples, it also boosts the survivor benefit. That’s a huge hedge against longevity risk.
- More flexibility to draw down other accounts – By not taking CPP right away, you create space to draw from RRSPs, RRIFs, or LIFs in your 60s. That gives you more control over your taxable income and helps avoid the squeeze of mandatory RRIF withdrawals later.
- Lower lifetime taxes and fewer OAS clawbacks – Strategic withdrawals in your 60s can shrink the size of your RRSP before it turns into a RRIF. That reduces big taxable withdrawals in your 70s and 80s, which in turn lowers the risk of OAS clawbacks.
I see this play out in client plans all the time. Deferring CPP creates a smoother retirement income stream and often reduces the total amount of taxes paid over a lifetime.
Example 1: The Traditional Saver
Jane turns 60 and has maxed-out RRSP savings, no debt, and a decent workplace pension. If she starts CPP at 60 for $640 a month, she doesn’t really need the income. She could just save it or spend a little more.
But if she waits and draws from her RRSP instead, she gets two benefits. She smooths out her taxable income while she’s younger, and she locks in a CPP payment of $1,420 a month at age 70. That bigger base amount also increases the survivor benefit if her spouse outlives her.
Example 2: The Early Retiree
Keith retired at 60 and won’t make any more CPP contributions. He’s worried that waiting will hurt his benefit because of those “zero” years. This is a common concern.
But the way the math works, the age-adjustment factor from waiting more than makes up for those zeroes. Even with no additional contributions, his CPP at 70 would still be significantly higher than at 60. If Keith is in good health and has other savings to bridge the gap, waiting until 70 will give him the biggest lifetime payout.
Example 3: “Take It Early and Invest It”
This is the argument I hear all the time: “Why not take CPP at 60, invest the money, and come out ahead?”
On the surface it sounds clever, but there are three big problems:
- No guarantees – CPP offers something markets never can: a guaranteed, inflation-protected payment for life. Markets can go up, but they can also go down. There’s no investment product that gives you the same certainty as a larger CPP.
- Most retirees need to spend, not invest – The idea that you’ll take CPP early and squirrel it away in investments doesn’t reflect reality. Most people use their pensions and savings to fund their lifestyle. In practice, the money gets spent, not invested.
- You lose the tax-planning window – This is the hidden cost. Many of the people I talk to in their seventies who are frustrated with high minimum RRIF withdrawals and OAS clawbacks are the same ones who took CPP at 60. They may have invested it, but by doing so they missed the chance to withdraw strategically from their RRSPs in their 60s. Now the tax window is closed.
Delaying CPP isn’t just about maximizing the pension. It’s about creating that window in your 60s to draw down other assets and shape your tax profile. That opportunity is gone if you start CPP early.
When It Makes Sense to Take CPP at 60
With all that said, taking CPP at 60 can still be the right decision in some cases:
- You need the money to cover living expenses and don’t have other resources.
- You have a serious health condition or expect a shorter life expectancy.
- Your CPP entitlement is already quite low and waiting won’t make a meaningful difference.
- You retired very young and would rather preserve other savings while letting markets recover.
There’s no shame in taking CPP at 60 if it genuinely supports your lifestyle or health needs. The key is to make the choice with eyes wide open rather than defaulting because “that’s what everyone does.”
Why 65 Isn’t Optimal
Here’s the funny thing: age 65 ends up being the least attractive option. At 60 you maximize years of collecting payments. At 70 you maximize the monthly amount. At 65 you land somewhere in between and miss out on both.
That doesn’t mean nobody should ever take CPP at 65. For many, it feels like the default age because it lines up with retiring, leaving work benefits behind, or qualifying for OAS. But mathematically, it’s not the sweet spot.
Reframing the Question
So instead of asking, “Should I wait until 70 to get 42 percent more than at 65?” the better question is:
“Do I want to more than double my CPP income compared to age 60 by waiting until 70?”
That reframing makes the trade-offs much clearer.
The Big Picture
When I build retirement income plans, I look at CPP as one of the most powerful tools available. It’s guaranteed. It’s inflation-protected. It lasts as long as you do. And if you can delay it, you often unlock better tax efficiency, smoother cash flow, and less stress about running out of money.
For most healthy Canadians with decent savings, delaying CPP – ideally to 70 – is one of the best moves you can make.
For those who need the income sooner, or who have health concerns, taking it at 60 can still be a perfectly valid decision.
What I don’t recommend is defaulting to 65 without running the numbers. That middle-ground option rarely comes out on top.
Final Thoughts
CPP is too important to leave to gut instinct or rules of thumb. Run the projections. Consider your health, your savings, your spending goals, and your tax picture. Think about it from the lens of 60, not 65.
If you can afford to wait, the payoff is huge: more lifetime income, more flexibility to manage your other assets, and fewer taxes and clawbacks down the road. That’s the CPP trifecta.
And once you’ve locked in that bigger cheque at 70, you’ll have the peace of mind that comes with knowing one of your most important income streams is maximized for life.
All good info. What is never pointed out is if both spouses do this and one passes away the survivor will not receive 60 percent of the deceased benefits but the max. benefit which will be close to the survivors CPP amount of they were receiving the maximum. So a number of things happen the survivors income cuts almost in half ( little or no deceased spouses CPP and loses OAS of deceased). To get to this point the survivor has drawn or melted down high percentage of RRSPs. It comes with risk unless each party has life insurance payable to the survivor to replace the income. Sadly most financial planners neglect to mention this or strategies to mitigate the risk
Hi Scott, thanks for your comment. While true that the CPP survivor benefit can only top-up to one person’s 100% max CPP, this loss of income is often not detrimental to the plan.
First, we want to make sure the couple has sufficient resources before recommending CPP deferral.
While RRSP/RRIF meltdown is encouraged during the delay, we typically want enough in the RRSP/RRIF so that it’s not completely drained by the time CPP/OAS kicks-in.
Spending tends to drop by 30-33% for the surviving spouse.
And, yes, insurance can help bridge that income gap in the event of an early unexpected death.
The counter-factual is that one or both spouses takes CPP earlier. So they had some income prior to early death, perhaps avoided some modest RRSP/RRIF withdrawals during that time, and now are in the same position with a CPP survivor benefit only topping up to one person’s CPP max, losing one OAS payment, and needing to survive on the remaining assets.
Robb, thanks for your comments. I agree with your analogy. The benefit of deferring is clear, it’s important though a planner give the additional info like you just did. A full plan by someone like yourself demonstrates whether it is or isn’t a benefit with the full financial situation of the couple. The plan is best done by someone like yourself paid on a fee for service basis rather than one that is compensated by the couple’s portfolio.
However. Just because your CPP and your Survivor CPP add up to more than the maximum, you do not automatically get the max. If you are collecting Survivor CPP and not your CPP, when you begin CPP the Survivor is recalculated based on your age. If you start you CPP before 65 the survivor CPP is then recalculated again when you turn 65. On both occasions the Survivor CPP is reduced.
The only way to know is to request calculations from Service Canada.
Don’t assume.
My spouse took CPP at 65 and I’m waiting 2 yrs for 70. We figured we’d hedge our bets. Turns out we could have both waited til 70.
RRSPs are getting no smaller despite taking 10% each year since I retired (at 58) and paying some tax then shoving the max into TFSAs annually. Making sure to stay below the OAS clawback but just.
According to Doug Runchey, what Scott said is not true:
https://retirehappy.ca/cpp-survivor-benefits/
The CPP survivor benefit amount is calculated as though both spouses took CPP at 65. Any capping at the maximum is done at this point. So, a survivor who took CPP at 70 can then get more than what we think of as the usual maximum.
Do I have to file with the govt to start getting my CCP??
Hi Marilyn, yes – go to your My Service Canada Account online to apply – or contact Service Canada directly by phone. It’s not automatic.
Before starting CPP prior to age 65 due to ill health, explore if you qualify for the disability pension plan (DPP) under CPP.
In many cases, the monthly amount under DPP is higher than what you would receive if you start CPP before age 65.
Definitely worth at look if it applies to your situation.
When you receive DPP, you currently are switched to CPP at 65.
Great point, Sandra – thanks! And note that while CPP-D automatically switches over to regular CPP at 65 you can still delay regular CPP to 70 if it made sense to do so.
Isn’t this calculation understated for the difference from 60 to 70? The 36% reduction is based on the standard payment at 65. If you don’t take your pension until 70, the 42% increase isn’t calculated on the same $1K rate it was when you were 60. With annual increases over 5 years it could grow to say $1,150 which would be your base to calculate the +42%, right? I’ve always wondered if the bonus is calculated on the amount you would have received if you took it at 65 or if it’s added to the rate at the time of application…?
It is understated due to the inflation adjustment (adjusted by wage inflation while you delay, and then price inflation when you’re taking CPP).
I retired at 54 and I also had 16 years of child rearing 5 kids so no real income during those years. I’m now 59 and cpp sent me a letter asking me to apply this coming year. My benefit is only 319 at 60 and 499 at 65. I do need the money so I’m planning to take it at 60. I think I need to do something about the child rearing provision because the benefit seems awfully low
Hi Maro, talk to Service Canada about your child-rearing years when you apply. They’ll exclude low-income child rearing years from the CPP benefit calculation.
Good information.
If you wait until age 70, you have missed receiving
About 75000.
How many years will it take to make up for that?
Also would be interesting to know ,
what percentage of people that wait until age70 ,
to collect their benefits and either pass away or are bedridden and have missed out.
Hi Scott, we don’t really use break-even ages anymore but my old break-even calculator said that taking CPP at 60 is optimal if you die before age 69. Taking CPP at 70 is optimal if you live to age 85 and beyond.
If you know when you’re going to die then you can make an optimal decision. If not, the smart play (assuming you have other resources) is to defer.
Also I’ll push back on the idea of “missing out”. We’re not telling you to delay living your best life in early retirement – we’re just saying to get the money from somewhere else (ideally an RRSP and/or LIRA) while you let your CPP bake in the oven a while longer.
There are some drawbacks to waiting to take CPP if you continue to work past 65. You must continue to contribute to CPP if you are working unless you actually start taking CPP.
I was at my maximum contribution level at 65 but still working so my annual contributions would not increase my future CPP payments. I was already maxed out. Furthermore because I’m self employed I have to contribute both the employee and employer amounts each year, a considerable sum. And CPP is ramping up contribution levels in coming years.
The only way to avoid contributing if you are still working is to start taking CPP payments. When I looked at the numbers I estimated that it would take to age 82 to recoup to my extra contributions to CPP from the increase in CPP payouts due to deferring CPP until age 70 considering that I I would also have forgone 5 years of benefits.
I decided to start CPP at 65, stop making contributions and continue working.
Now with the Canadian Dental Care Plan (CDCP), there is another consideration. If you wait until age 70 to collect your CPP, you may find that the additional income will disqualify you from benefitting from the CDCP.
Sorry to say but your over simplistic, non real world, analysis doesn’t take into consideration the yearly indexed increase of CPP benefits. From age 60-70 would include 11 yearly increases indexed to inflation. I can’t find the increase figures for the last 11 years but I’ll bet they come close to leveling the benefit of waiting till 70.
Hi Doug, you’re conveniently forgetting that indexing applies to the deferred amount as well. And, guess what? The deferred pension is indexed to wage inflation, while those receiving CPP receive inflation adjustments based on changes to CPI. Wage inflation has typically exceeded price inflation by 1% (there have been exceptions, but on average).
So, you’re right. My overly simplistic article has actually underestimated the benefit of delaying CPP.
“And, guess what? The deferred pension is indexed to wage inflation” Are you certain on this? The print outs of my potential benefits from CRA made no mention of any indexing, just the cold numbers based on my contributions.
Indeed it’s true. CPP benefits rise with wage inflation before the benefits start but with price inflation after they start.
https://www.theglobeandmail.com/investing/personal-finance/retirement/article-when-should-i-start-my-cpp-pension-that-depends-on-wage-and-price/
As it happens, a friend of mine, Rick, is turning 70 in less than a month. He started CPP at 60. With inflation increases, he now gets about $850 per month. If he had waited until now to start CPP, he would be starting to get nearly $2000 per month. It’s the opposite of what some people hope — that inflation increases on their CPP at 60 will “catch up” with the amount they would have got starting at 70.
If one spouse has lower income after retirement, you are able to split income from the other spouse. My wife retired at 62 and, for the last 8 years, we have lived on my pension and RRIF withdrawals melting down my RRIF to almost nothing. I started my CPP and OAS 3 years ago at 70.
With her OAS and smaller CPP and withdrawals from her (Spousal) RRIF, we will have nearly equal incomes and stay below the clawback threshold.
Stan, well done – this is the way!
Happy CPP Day to me! I turn 65 today! More seriously, though, there are numerous considerations as you mention, no one size fits all.
I will take mine now as I have a DB pension which covers most of my basic needs. I also invested inheritance money received a couple of decades ago in Canadian safe-stuff—banks, utilities, real estate. I never did well with “the flyers.”
I have a small-ish RRSP as my DBP limited what I could put there. And I am extremely grateful to be in the position that my investment income will likely cause most OAS to be clawed back.
But my big “deciders” for me were health reasons and the consideration that although the increase is indexed to inflation, what will it buy 10 years from now, compared to today?
(Plus, right or wrong, I have never been unemployed , so there is some psychological “birthday cake” in finally getting some money back that I have paid into CPP and EI throughout my regular working life.)
If you have any Quebec readers, like me, you may want to point out that we can defer QPP until 72.
Your analysis doesn’t consider the cost of the CPP contributions. The math is a little different for self-employed individuals who have to remit both the personal and employer contribution amount.
Another excellent article.
I am 67 and started to take CPP at 61 for fear of my longevity.
Hindsight is 20/20 but I wish I would of waited and drawn down my RRSPs first.
Thanks for all you do
So I turn 65 in 8 months and I had planned on taking my CPP then because I need the funds. Does that mean I should start taking it now to take advantage of those extra few payments? Sounds like I should have taken it much earlier.