For decades, age 65 has been viewed as the traditional retirement milestone in Canada. It marked the point when most people stopped working, began collecting Canada Pension Plan (CPP) benefits, and became eligible for Old Age Security (OAS). Today, that long‑standing benchmark is being reexamined.
Recent CPP and OAS reforms, combined with longer life expectancy and strong incentives for delayed claiming, are changing how Canadians think about retirement. Many retirees can now increase their monthly income significantly by waiting longer, with some receiving combined CPP and OAS payments approaching $1,700 per month or more.
Why Age 65 Became the Traditional Retirement Age
When Canada’s public pension system was designed, life expectancy was much shorter. Most people retired fully at 65 and collected benefits for a limited number of years. CPP and OAS were built around this assumption, making age 65 the natural reference point.
At the time, early retirement was less common, and extended retirements lasting 20 to 30 years were rare. The system worked well for decades under these conditions.
Longer Life Expectancy Is Changing the Equation
Canadians now live significantly longer than previous generations. Many people spend two to three decades in retirement, placing greater pressure on both personal savings and public pension programs.
This demographic shift has led policymakers to encourage later retirement, not by forcing people to work longer, but by rewarding those who delay benefit claims.
Overview of Key Canada Pension Plan Reforms
One of the most important developments in recent years is the introduction of Enhanced CPP. This reform gradually increases the share of pre‑retirement income that CPP replaces, leading to higher retirement benefits for future retirees.
Higher Maximum Pensionable Earnings
CPP reforms also raised the maximum pensionable earnings ceiling, allowing higher‑income workers to contribute more. These higher contributions translate directly into larger retirement payments, increasing the potential maximum CPP benefit.
Strong Incentives for Delaying CPP
CPP now offers a powerful incentive to delay claiming beyond age 65. Each month of delay increases the benefit permanently.
- Claiming at 60 results in a 36 percent reduction
- Claiming at 65 provides the standard amount
- Delaying to 70 increases benefits by 42 percent
This makes delayed claiming far more attractive than it once was.
Major Changes to Old Age Security Rules
OAS has also changed in important ways. Canadians can now delay OAS up to age 70, earning a permanent increase of 0.6 percent per month, or 36 percent in total.
Higher OAS Payments for Late Claimers
For those who delay OAS to age 70, monthly payments can rise substantially, especially after annual inflation indexing. This higher OAS amount combines with delayed CPP to produce much larger total income.
Inflation Indexing Protects Purchasing Power
Both CPP and OAS are indexed to inflation, ensuring that benefits rise as living costs increase. Over time, indexation plays a major role in boosting monthly payments, particularly for retirees who delay claiming.
How Combined CPP and OAS Can Reach $1,700 Per Month
High earners who delay CPP until age 70 can receive monthly CPP payments approaching or exceeding $1,500 after enhancements and indexing.
At the same time, delayed OAS can exceed $800 per month, depending on rates. Combined, these two benefits can approach or surpass $1,700 per month for some retirees.
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Who Can Actually Reach This Level of Income
Reaching $1,700 per month is not typical for all retirees. It usually requires:
- A long contribution history near maximum earnings
- Delaying both CPP and OAS to age 70
- Full OAS eligibility without residency gaps
While this level is not universal, it is increasingly achievable for higher earners with stable careers.
Why Retirement Timing Is Shifting Away From 65
Delaying retirement permanently increases monthly income, providing stronger protection against longevity risk, healthcare costs, and inflation.
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Flexibility in Modern Retirement
Retirement today is no longer all‑or‑nothing. Many Canadians choose phased retirement, part‑time work, or flexible arrangements after 65. This flexibility makes delayed claiming more practical.
Policy Direction Encouraging Later Retirement
Rather than raising the official retirement age, Canada has chosen to reward delayed claiming. This preserves individual choice while nudging Canadians toward later retirement through financial incentives.
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Comparing CPP at Ages 60, 65, and 70
Claiming CPP at 60 provides early income but permanently reduces benefits by 36 percent.
Claiming at 65 offers the standard unreduced benefit.
Delaying to 70 produces the largest monthly payment, increasing income by 42 percent compared to 65.
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OAS Claiming Differences
OAS begins at 65 with no early‑claiming penalty. Delaying to 70 increases payments significantly, making it a valuable option many retirees overlook
Why Early Claiming Can Still Make Sense
Claiming earlier does not always mean lower lifetime income. Life expectancy matters. Individuals with health concerns or shorter expected lifespans may receive more total income by claiming earlier.
Value of Early Cash Flow
Early benefits can reduce pressure on savings and provide better cash flow in early retirement, which may be strategically important
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Survivor Benefit Considerations
Delaying benefits increases survivor income for spouses. Higher CPP and OAS payments provide better long‑term household protection.
New Retirement Planning Strategies Emerging
Many retirees now delay both CPP and OAS while using RRSPs and TFSAs first. This strategy can increase lifetime income and reduce overall taxes.
Managing Taxes Through Timing
Delaying benefits can keep taxable income lower in early retirement, improving after‑tax outcomes over time.
Who Benefits Most From the New Rules
High earners with long careers, healthy individuals with long life expectancy, and married couples planning survivor income benefit the most from delayed claiming.
Who May Still Prefer Age 65 or Earlier
Those with health concerns, limited savings, or physically demanding jobs may still prefer earlier claiming. Flexibility remains essential.
Taxation of Higher CPP and OAS Payments
Both CPP and OAS are fully taxable income. Higher benefits increase tax exposure and may trigger the OAS recovery tax for high‑income seniors.
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Impact on Government Finances
Later retirement reduces government costs and improves long‑term sustainability without forcing mandatory age changes.
What Canadians Should Do Now
Review your CPP statement, use retirement calculators, plan as a couple, and seek professional advice. Small decisions can have large lifetime effects.
Common Retirement Planning Mistakes
Assuming 65 is always best, ignoring OAS delay options, and focusing only on monthly amounts instead of lifetime income can be costly errors.
Long‑Term Outlook for Retirement in Canada
Age 65 is becoming a guideline rather than a rule. Enhanced CPP and delayed claiming incentives mean future retirees will likely retire later with higher incomes.