Should I Delay CPP Benefits If I’m No Longer Contributing?

An applicant can begin their Canada Pension Plan (CPP) retirement pension as early as age 60 or delay it until age 70. Starting CPP earlier reduces the monthly payment, while deferring increases the monthly amount but shortens the total number of payment months over your lifetime. The decision to delay should consider how gaps in contributions—such as stopping work at 60 and having 10 years with no contributions—affect your calculated pension amount.

Retiring at 60 or earlier

If you stop working at age 60, your CPP contributory period typically begins at age 18, giving a theoretical maximum span of about 42 years. That span can be reduced by special provisions: periods of disability or eligible child-rearing years may be excluded from the calculation. What matters is not only the length of the contributory period but also how many years you made maximum or near-maximum contributions. If you did not make the maximum contributions during your contributory period, you generally won’t receive the maximum CPP retirement pension.

What most people receive from CPP

Most people receive far less than the maximum CPP. For context, the average monthly CPP retirement pension payment at age 65 as of January 2024 was $831.92, compared with a maximum of $1,364.60. That means the average recipient is receiving under 61% of the maximum benefit. This gap reflects lower lifetime earnings, part-time work, career breaks, and other factors that reduce contribution history.

General dropout and zero-income years after 60

The CPP calculation includes a general dropout provision: 17% of your contributory years are excluded. For someone who stops working at 60 with no other dropouts, that general dropout equals about seven years. Using a practical example: if you are 60 and defer taking CPP to 61 while not working, that added zero-income year may increase the number of contributory years considered after the general dropout to 36. One year divided by 36 equals roughly 2.78%—an approximate reduction in your CPP benefit because of that zero-income year.

On the other hand, deferring CPP before age 65 increases your pension by 0.6% per month, which is 7.2% per year, regardless of your contributory history. In the example above, deferring one year produces a 7.2% increase in the monthly pension but also carries about a 2.78% reduction due to the additional zero-income year. The net effect in this scenario is still a roughly 4.42% increase in your monthly pension, plus any annual inflation adjustments that apply.

In short, for someone who has less-than-maximum contributions and stops working between 60 and 65, a year of no income slightly reduces the advantage of deferring CPP—but deferring can still raise the monthly amount in many typical cases.

Deferring CPP after 65

If you delay CPP past age 65, the rules are more favorable for years with no earnings. You can drop up to five additional years from your contributory record that fall between ages 65 and 70. That means any zero-income years after 65 will generally not reduce your CPP benefit when you defer in that later window. The deferral bonus after age 65 is higher: CPP increases by 0.7% per month, or 8.4% per year, plus annual inflation adjustments.

Relatively few people take CPP at age 70. Recent figures show that in recent years fewer than 5% of recipients waited until 70. Deciding whether to defer beyond 65 should account for the greater monthly increase as well as personal circumstances and priorities.

How to weigh the decision: practical considerations

Timing CPP is a personal decision that depends on several key factors:

• Contributory history: The number of years you contributed and the size of those contributions directly influence your pension calculation.
• Life expectancy: If you expect to live many years, deferring can yield higher lifetime income, especially for healthier individuals or those with a family history of longevity.
• Investment and income needs: If you have other retirement income or investments that cover living costs, deferring CPP can boost guaranteed income later. Those with low tolerance for investment risk may especially value the predictable increase from deferral.
• Spousal and survivor considerations: Your decisions may affect spousal benefits or survivor provisions, depending on your overall plan.

In particular, healthy seniors—especially women who statistically live longer than men—may benefit from deferring, as the higher guaranteed monthly pension helps protect against longevity risk. Conversely, people who need income immediately or who have short life expectancy concerns may prefer to start CPP earlier.

Practical example and recommendation

Using the earlier example: stopping work at 60 and deferring to 61 while not contributing can reduce the calculated benefit by roughly 2.78% for that year of zero earnings, but deferral provides a 7.2% boost in monthly benefits before age 65—netting an approximate 4.42% gain for that year. After 65, the extra dropout years and higher monthly boost make deferring even more attractive for many people with gaps in earnings after age 65.

Ultimately, weigh your contribution history, health and longevity expectations, other retirement income sources, and risk tolerance. If you want personalized results, consider running scenarios with a retirement calculator or speaking to a financial planner who can model the effect of contribution gaps and deferral choices on your expected CPP income.

More from Jason Heath:

• How the 2024 budget will affect your finances
• How annuities work in Canada
• How to change a past tax return
• Should you buy insurance to pay estate taxes?

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