Should You Claim CPP and OAS While Still Working in Your 60s?

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I have lived in Canada for 24 years and I’m 65 years old now. I am still working at a company making a $78,000 salary. Since my health condition is OK, I am going to continue to work for two to four years. My question is: In my situation, is it better for me to apply for OAS and CPP now or delay applying for them?
—Simon

Collecting CPP and OAS while working in your 60s

You can start receiving your Canada Pension Plan (CPP) retirement pension as early as age 60 or defer it until age 70. At age 65, qualifying for the maximum CPP typically requires about 39 years of maximum contributions. With only 24 years of contributions so far, there is a clear case for continuing to contribute while you are still working and considering deferral of your CPP pension to increase future payments.

CPP pensionable earnings and your contributions

Your current salary of $78,000 exceeds the 2022 maximum pensionable earnings of $64,900, which means this year you will make the maximum CPP contribution—about $3,500—with your employer making a matching contribution. That additional contribution increases your CPP benefit because the CPP calculation at age 65 relies on your best years of contributions; in practical terms, contributing the maximum now can raise your eventual pension amount.

With the extra contribution, you would be entitled to roughly an additional 1/39th of the maximum CPP retirement pension, which translates to about $386 per year in today’s dollars based on the article’s example. If you instead invested that $3,500 at a 5% return and withdrew $386 per year (indexed to inflation in the same way CPP would be), that sum would be exhausted in about 11 years—well before life expectancy for many people. For a 65-year-old man, there is roughly a 50% chance of living to age 89, so the long-term value of those extra CPP contributions should be part of your decision.

Does continuing CPP contributions while working make sense?

Given your contribution history, continuing to contribute to CPP while you work is generally advantageous. At 65 you have the option to stop contributing, but because you have not yet reached the years needed for a full maximum pension and because your employer matches contributions, staying enrolled tends to increase your eventual CPP payments.

Conversely, if you were already at the maximum CPP contribution level for many years, there could be reasons to pause contributions or to begin your pension and allow any future contributions to qualify as post-retirement benefits instead. Your specific situation—years contributed, expected retirement age, health and other income—should guide that choice.

Collecting OAS while still employed

Old Age Security (OAS) is another component to consider. To qualify for the maximum OAS pension you generally need about 40 years of residency in Canada after age 18. With 24 years of residence, you will not be eligible for the full OAS amount. You can claim OAS as early as 65 or defer it up to age 70 to increase the monthly amount.

OAS clawback and the impact of working income

OAS has an income-tested recovery known as the clawback. In 2022 the threshold was $81,761, and OAS benefits are reduced by $0.15 for each dollar of income above that threshold. With a $78,000 salary, starting OAS now would likely result in a partial clawback, meaning a substantial portion of any OAS you receive could be offset. In effect, once clawback and income taxes are combined, your OAS could be subject to an effective rate that significantly reduces the net benefit, depending on your province of residence.

Because of that clawback and the fact you are in good health and plan to keep working, deferring OAS while maintaining employment income can be advantageous. Delaying OAS and CPP increases the monthly amounts you will receive later, and can produce greater lifetime income if you live into your mid‑80s or beyond.

How much do CPP and OAS increase if deferred?

Both programs offer increases for deferral: CPP increases by 8.4% for each year you delay after age 65, and OAS increases by 7.2% per deferred year. Both pensions are also indexed annually for inflation. Because of these increases, deferring can yield higher cumulative lifetime payments—even though you will receive benefits for fewer years—if you live long enough to benefit from the larger monthly amounts.

There are scenarios where taking CPP or OAS earlier is appropriate, such as when a retiree needs immediate cash flow, has little in savings or investments, or is managing high-interest debt. However, given your situation—steady employment, employer CPP matching, reasonable health and a plan to keep working for a few more years—there are both pension-enhancement and tax advantages to deferring CPP and OAS until you stop working and possibly delaying as late as age 70.

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