Delaying CPP and OAS payments

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Delay collecting Canada Pension Plan and Old Age Security if you are worried about running out of money.

I know some of you will not think this is not a great idea because it increases the risk that you will die before you get your fair share of CPP and OAS. After all, when you reach age 65, you’ll have been paying into the CPP plan for decades. Same goes for OAS.  Although there is no direct deduction from your pay cheque for OAS, you’ve been paying for others’ OAS through your taxes since you first started working.
But if you change the way you look at CPP and OAS, and then consider how much piece of mind waiting to collect until you are 70 may bring, you may reconsider (there is no benefit to waiting after age 70).

If you consider CPP and OAS to be insurance against the risk of living longer than your savings, then waiting may make sense for you. For every year after age 65 that you delay collecting CPP, your payment increases by 8.4%. So if you wait until age 70, your payment is 42% more than if you started collecting at age 65.

The average Canadian’s CPP payment at age 65 is a little less than $700/month or $8400/year. If you waited to age 70, the payment increases to $1000/month or $12000/year.  You don’t have to keep working past age 65. You just have to delay collecting your CPP.  So between age 65 and 70, you’ll need to have other ways to support yourself, like company pension plans, RRSPs and other savings.

It’s a similar story with OAS. Practically everyone gets $6600 a year at age 65 but this will grow 36% to about $9000/year if you wait until you are 70.

So combined at age 70, an average CPP and OAS payout would be $21,000/year. You amount will vary depending on your CPP payment. A married couple could have $42,000/year from only these 2 sources of income, guaranteed for life with full inflation indexing.

Something worth considering if you have a high chicken index or didn’t quite save enough for a long retirement.

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