Should you take CPP at 61 or wait until 70? Ask a few people and you’ll probably get completely different answers. One person will tell you to take the money while you can. Another will tell you that delaying CPP means a much bigger monthly payment.
Both arguments have merit. But neither tells you what happens to the rest of your retirement plan.
Your CPP decision affects how much you need to withdraw from your RRSP, how much tax you pay, whether you lose Old Age Security (OAS), and ultimately what you leave behind. Let me show you why that matters.
Meet David: 61, retired, and unsure when to take CPP
David is 61, single, and lives in Ontario. He recently retired after more than 30 years in commercial construction. He has been a disciplined saver, but he’s getting conflicting advice about CPP.
Here’s what David has saved:
- $1.2 million in his RRSP
- $200,000 in his TFSA
- $1.1 million in non-registered investments
That’s $2.5 million in investments. He also owns a home worth roughly $900,000, mortgage-free, but he has no plans to downsize, so we’re leaving it out of the calculations.
David wants to spend $8,000 per month after tax, plus another $30,000 per year on travel until age 70. That’s approximately $126,000 per year during those travel years. We’re planning to age 90.
If David starts CPP at 61, his estimated payment is about $1,000 per month. Waiting until 70 would increase it to more than $2,000 per month. He can also start OAS at 65 or delay it until 70. These are David’s estimated benefit amounts, not the amounts everyone will receive.
The good news? David can comfortably afford his retirement in all three versions of the plan. The question isn’t whether he runs out of money. It’s how much unnecessary tax he might pay along the way.
Scenario 1: Take CPP now and leave the RRSP alone
First, let’s follow the advice David keeps hearing from his friend Gary: take CPP at 61, start OAS at 65, and pay for retirement from his non-registered investments and TFSA. Leave the RRSP untouched for as long as possible.
At first, this sounds reasonable. Why create taxable RRSP withdrawals when you have other accounts available?
But David’s RRSP keeps growing. By age 65, it’s worth just under $1.48 million. By age 71, it’s nearly $2 million.
An RRSP must be converted to a RRIF by the end of the year you turn 71. Once David is 72, his required RRIF withdrawal in this scenario is just over $104,000. That income is added to his CPP, OAS, and taxable investment income.
The result is higher income tax and a clawback of his OAS. Over the modelled retirement, David loses approximately $132,000 in OAS benefits.
Scenario 1 results: 139% funded in the planning model; $1.31 million in lifetime tax; $3.55 million in after-tax estate value.
The problem isn’t that David runs out of money. It’s that his decision to avoid RRSP tax today creates a much larger taxable account later.
Scenario 2: Wait until 65 and make some RRSP withdrawals
Now David waits until 65 to start CPP and OAS. He also realizes he should be drawing something from his RRSP before mandatory RRIF withdrawals begin.
He targets roughly $80,000 of annual taxable income, combining his RRSP withdrawals with taxable income from his non-registered investments. It’s an improvement, but he’s choosing that target without really knowing whether it’s the right number.
By 71, his RRSP is just under $1.46 million. His first required RRIF withdrawal at 72 is just over $77,000, considerably less than in scenario one.
He still loses some OAS because his taxable income rises above the recovery threshold in certain years, but the damage is smaller.
Scenario 2 results: 148% funded; $55,000 in lifetime OAS lost; $1.28 million in lifetime tax; $3.92 million in after-tax estate value.
That’s a meaningful improvement. But notice what changed: it wasn’t just the CPP start date. David also began drawing down his RRSP earlier.
Scenario 3: Delay CPP and OAS to 70, and draw down the RRSP deliberately
This is the version we would recommend for David, given the assumptions in this example. He delays both CPP and OAS to age 70 and uses the years before those benefits begin to withdraw more from his RRSP.
Instead of guessing, the plan targets approximately $150,000 in taxable income in the early years. That may sound strange after seeing how a $104,000 RRIF withdrawal caused problems in scenario one.
But the size of the withdrawal isn’t the only thing that matters. What other income is it being added to?
Before CPP and OAS begin, David has more room to make deliberate RRSP withdrawals without stacking them on top of those government benefits. The withdrawals also reduce the amount left in his registered account for later years and, potentially, for his final tax return.
By 65, the RRSP is down to about $889,000. By 71, it’s roughly $460,000. His required RRIF withdrawal at 72 is now only a little over $24,000, and the plan includes an additional voluntary withdrawal of approximately $7,000.
With much smaller required RRIF withdrawals later in life, the model shows no OAS recovery tax.
Scenario 3 results: 149% funded; no lifetime OAS clawback in the model; $1.07 million in lifetime tax; $4.32 million in after-tax estate value.
Comparing the three retirement plans
| Measure | CPP at 61; RRSP untouched | CPP at 65; modest RRSP draws | CPP/OAS at 70; planned RRSP draws |
|---|---|---|---|
| Funded level | 139% | 148% | 149% |
| Lifetime OAS lost | $132,000 | $55,000 | $0 |
| Lifetime taxes | $1.31M | $1.28M | $1.07M |
| After-tax estate | $3.55M | $3.92M | $4.32M |
Illustrative results from David’s retirement model, not guaranteed outcomes. The funded percentages are the model’s measures of plan capacity, not investment returns.
Look at scenarios two and three. The funded levels are almost identical: 148% and 149%. Yet scenario three leaves roughly $400,000 more after tax for David’s estate.
He didn’t need to spend less, work longer, or take on more investment risk to produce that difference in the model. The major change was how his RRSP withdrawals were coordinated with his CPP and OAS start dates.
Does that mean everyone should delay CPP and OAS until 70?
No. Delaying CPP and OAS is not automatically the best choice. You have to consider your health, family history, cash-flow needs, and how much you value receiving benefits earlier.
Imagine David dies at 72. After delaying his pensions to 70, he would have collected only about two years of the larger CPP and OAS payments. OAS has no survivor pension. CPP has separate survivor and death benefits, subject to eligibility rules; for someone already collecting CPP, the standard death benefit is generally $2,500.
For someone in poor health, or someone who needs income sooner, an earlier CPP start date may make much more sense. And for someone with a spouse, the survivor-benefit picture can be different.
David is single, financially secure, and expects to live long enough to benefit from deferral. That’s why this particular strategy is attractive for him.
The bigger question isn’t when to take CPP
David started out asking a simple question: should he take CPP now or wait? But the most valuable part of his retirement plan wasn’t the CPP decision by itself. It was what that decision allowed him to do with his $1.2 million RRSP.
The money in an RRSP is generally taxable when withdrawn. And if a substantial RRSP or RRIF remains at death, the fair market value is generally included in the final income tax return unless a qualifying rollover or other exception applies.
That’s why I’d rather see someone plan their RRSP withdrawals deliberately than simply avoid tax for as long as possible. The years after work ends but before CPP, OAS and required RRIF withdrawals begin can be valuable planning years.
If you’re weighing your CPP start date, look at the whole plan: income from every account, future RRIF minimums, OAS recovery tax, lifetime taxes, and the after-tax estate. The right CPP age is the one that fits those numbers, not just the biggest monthly cheque.
For more on the account withdrawal side of this decision, read Should You Withdraw From Your RRSP First in Retirement?. You can also review our CPP timing guide and the Government of Canada’s guidance on when to start CPP and OAS recovery tax.
These figures are illustrative results from the retirement plan discussed in the video. Actual results depend on investment returns, inflation, tax rules, benefit entitlements, life expectancy, and other personal circumstances.
