CPP: To delay or not to delay

via MoneySense | July 20, 2015

Q: If you’re working part-time in retirement, what are the advantages of deferring Canada Pension Plan (CPP) and Old Age Security (OAS) payments beyond age 67? —Darren Akai, Toronto

A: I understand the merits of delayed gratification, in theory. But in practice, I want the entire bag of cookies… Right. This. Very. Minute. That being said, when it comes to government benefits, it can actually pay off to hold off. Matthew Ardey of T.E. Wealth explains that “once you reach age 65, you receive an increase in your CPP of 0.7% per month or 8.4% per year, to a maximum of 42% by age 70.” So, if your annual CPP benefit was $10,000 at age 65, it would jump to $14,200, if you held off and took it at age 70. For OAS, the deferral is slightly lower, at 0.6% per month or 7.2% per year, to a maximum of 36%. This is a big increase in your payments when you do decide to take your government pensions. But that’s not all. Deferring may also get you a tax benefit too. Depending on your taxable income once you cease part-time work, your marginal tax rate may be less than at that time when you were working. Patience pays. And if you have any extra, send it my way.

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