When to start taking CPP/QPP and OAS benefits
Retirement income planning involves many important decisions, and one of the most significant is when to start government pensions such as Canada Pension Plan (CPP)/Quebec Pension Plan (QPP) and Old Age Security (OAS) benefits. The natural instinct might be to take them as early as possible; however, delaying the start of these benefits means you’ll be rewarded with higher monthly payments for life.
Ultimately, the optimal age to take these benefits will depend on the structure of your overall retirement plan.
How they work
CPP and QPP are public pensions that you contribute to throughout your working life. Your eventual payment depends heavily on your years of contribution and your earnings during those years. OAS is a monthly benefit payment that’s determined by how many years you’ve lived in Canada after age 18. All three of these benefits are taxable, but they’re also indexed to inflation.
For 2024, the maximum monthly CPP/QPP payment for a new beneficiary starting at age 65 was $1,364.60. The maximum monthly OAS payment for recipients aged 65 to 74 was $727.67. The top payment for OAS recipients above 75 (the payment increases by 10% at 75) was $800.44.
Understanding your options
CPP/QPP
- Early start (age 60)—Starting as early as age 60 reduces your monthly benefits by 0.6% for each month before age 65, up to a 36% reduction.
- Delayed start (up to age 70)—For each month you delay past age 65, your benefits increase by 0.7%, up to a 42% increase at age 70. In the case of QPP, you can now defer to age 72, which represents a total 58.8% increase.
OAS
- Standard start (age 65)—Benefits begin at age 65 (no early start).
- Delayed start (up to age 70)—Deferring OAS increases your monthly payment by 0.6% for each month you delay, up to a 36% increase at age 70.
What this means
For CPP/QPP, if we assume a starting point of a $1,000 monthly benefit taken at age 65:
- Taking the benefit at age 60 would mean the lifetime benefit payment is reduced to $640 per month.
- Delaying the benefit to age 70 would raise the monthly payment to $1,420.
- For QPP, delaying to age 72 would raise the payment to $1,588.
For OAS, if we assume a maximum monthly payment (for 2024) of $727, delaying the benefit to age 70 would increase the lifetime monthly payment to $990.
Things to consider
Financial needs
Consider your immediate needs, retirement goals, and lifestyle plans. If you have sufficient income from other sources such as pensions, savings, or investments, you might choose to use a pension deferral strategy for a higher payout later. However, if you plan significant activities such as travel or large purchases early in retirement, you might need more income sooner, even if it is reduced.
Inflation and investment risks
CPP/QPP and OAS are adjusted for increases in the cost of living using the Consumer Price Index (CPI). Delaying these government benefits will allow you to increase the overall inflation protection in your retirement plan, protecting you against rising costs.
The higher guaranteed income of delaying could also allow for a more conservative approach with your other investments. Starting benefits earlier might require taking on more investment risk to compensate for lower monthly payouts.
Longevity risk
Calculating the best time to take these benefits depends heavily on how long you’ll need them. A longer life expectancy might mean that delaying benefits will yield a higher total payout over your lifetime.
If this is unlikely due to health and family history, it may make sense to take them earlier.
Tax implications
As these are taxable benefits, consider how starting CPP/QPP and OAS will affect your overall taxable income. Delaying might reduce taxable income in earlier years, which could be beneficial if your marginal tax rate is higher during those years.
Keep in mind that OAS is subject to a clawback if your income exceeds a threshold, which is $93,454 for 2025. If you have a higher income early in your retirement, it may be beneficial to delay the benefit.
Working with an advisor
Deciding when to take CPP/QPP and OAS benefits is a complex and personal decision. Consulting with a Manulife Wealth advisor can ensure that your choice aligns with your retirement goals and overall financial plan.
