Should You Defer CPP and OAS? Complete Guide 2025

Updated: March 2025 · 11 min read

Whether to take CPP and OAS early, on time at 65, or defer to age 70 is one of the most consequential decisions in Canadian retirement planning. The mathematics favour deferral for most people who expect to live into their mid-80s or beyond — but personal health, income needs, taxes, and portfolio size all factor in. This guide walks through the full analysis.

CPP Deferral: The Numbers

CPP adjustments are permanent and linear:

• Take it before 65: benefit reduced by 0.6%/month (7.2%/year). At 60: −36%.
• Take it after 65: benefit increased by 0.7%/month (8.4%/year). At 70: +42%.

Starting CPP at 70 versus 65 means receiving 42% more each month for the rest of your life. The cost is the 5 years of payments you forgo between 65 and 70.

Break-Even Analysis: CPP at 65 vs 70

Using approximate 2025 maximum CPP of $1,364/month at 65 and $1,937/month at 70:

If you live past 83, you come out ahead by having deferred from 65 to 70. Given that Canadian life expectancy at 65 is approximately 21 years for men and 23 years for women, the average Canadian who reaches 65 will live to roughly age 86–88 — well past the break-even age for deferral.

OAS Deferral: The Numbers

OAS can be deferred from 65 to 70 for a 0.6%/month increase, or 36% total at age 70. The break-even for OAS deferral (65 vs 70) is also approximately age 83.

OAS deferral is most valuable when:

• You are still working between 65 and 70 and don't need OAS
• Your income is above the OAS clawback threshold (~$90,997) — collecting OAS only to claw it back is counterproductive
• You have TFSA or non-registered assets to bridge the gap

Arguments FOR Deferring CPP/OAS to 70

• Longevity insurance — CPP and OAS are guaranteed for life, indexed to inflation. If you live to 95, deferral pays off enormously.
• Inflation protection — A higher base benefit means more inflation-indexed income for life.
• Tax efficiency — Taking CPP/OAS early while drawing RRSP between 60–70 allows RRSP meltdown at lower rates, reducing future RRIF minimums and clawback risk.
• OAS clawback avoidance — If you're above the threshold before 70, deferring OAS avoids paying tax on clawed-back income.
• Reduces portfolio withdrawal rate — Higher guaranteed income in later years reduces pressure on your portfolio when it may be less able to absorb a bear market.

Arguments AGAINST Deferring

• Poor health or short life expectancy — If your health is compromised, break-even may never be reached.
• Low savings / high income need — If you retire early and need income immediately, deferral may not be financially feasible.
• Certainty preference — Government programs could theoretically change. A dollar in hand today is certain; a larger dollar in 5 years is not (though CPP/OAS changes have been rare and grandfathered historically).
• GIS recipients — If you qualify for GIS, taking CPP early (while in low-income years) may be efficient since CPP reduces GIS dollar-for-dollar at 50 cents.

Bridging the Gap: What to Draw While Deferring

If you retire at 60 and defer CPP and OAS to 70, you have a 10-year window where you need income from other sources. Good options include:

• RRSP withdrawals — Draw from RRSP between 60–70, ideally filling your lowest tax brackets. This reduces RRIF minimums after 71.
• TFSA withdrawals — Tax-free and does not affect GIS or income-tested benefits.
• Non-registered accounts — Capital gains at 50% inclusion rate; can be spread over multiple years.
• Part-time work — Many Canadians work part-time in early retirement.

The RRSP Meltdown + CPP Deferral Strategy

One of the most powerful tax strategies for Canadians is: retire early (60–65), draw down RRSP at lower tax rates to fill up lower brackets, and defer CPP/OAS to 70. This results in:

1. Lower RRIF balance at 71 → lower mandatory withdrawals → less OAS clawback risk
2. Higher CPP/OAS for life → more inflation-protected guaranteed income
3. TFSA preserved for late retirement when income needs may be higher (healthcare, LTC)

Bottom Line

For most Canadians in reasonable health with adequate savings, deferring CPP and OAS to 70 produces better lifetime financial outcomes than starting early. The critical input is your health and family longevity history. A fee-only financial planner can model your specific scenario with your actual CPP statement, RRSP balance, and income projections.