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Ben Felix - Why Taking CPP Early Is (Usually) A Mistake

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Author: Ben Felix
Categories: Personal Finance
Tags: finance
Views: 2 · Last viewed: 2026-10-16 09:29 UTC

Short Summary

Main recommendation: For most Canadians with sufficient bridging funds from RRSPs or RRIFs, deferring CPP to age 70 is usually the better choice rather than claiming early at 60 or 65. Ben Felix argues that early claiming is often a mistake because the benefit grows through both a statutory increase and wage-growth indexing, and it is an inflation-protected, guaranteed annuity.

Key Points

  • The statutory adjustment is 0.6% less per month before age 65 (up to a 36% reduction at 60) and 0.7% more per month after 65 (up to a 42% increase at 70).
  • Deferral also raises the benefit through wage growth, since the initial benefit is based on maximum pensionable earnings, which historically grow about 1% faster than inflation. In the example given, a benefit of about $16,000 (in today's dollars) at 65 rises to about $24,000 at 70.
  • A 2020 Canadian Institute of Actuaries and Society of Actuaries paper found that with a risk-free return of 1% above inflation, anyone expecting to live past 80 should defer to 70. Only about a fifth of female and a quarter of male recipients die before 80 under current tables.
  • Even under a risky portfolio assumption (4% return, 4% standard deviation), the paper found a 73% chance that a 65-year-old male with high longevity would receive less lifetime income by claiming at 65 instead of 70, and 81% for women.
  • Break-even analysis tends to understate CPP's value; the 2020 "lifetime loss" approach better captures the guaranteed, inflation-indexed annuity.

Details Worth Noting

  • Concrete instructions: Before choosing a claiming age, confirm you have enough savings from RRSPs or RRIFs to cover the years between 60 or 65 and 70 so you do not need to draw down investments at a bad time. Estimate your own life expectancy carefully, since people tend to underestimate it. If you are a lower-income Canadian eligible for the Guaranteed Income Supplement, or your deferral would trigger Old Age Security clawback, model the effective tax rate (which can exceed 50%) before deferring; claiming at 60 may be the right move in these cases. Model the decision with a planning tool that accounts for taxes, government benefits, and variable returns rather than relying on rules of thumb.
  • The 2022 example shows exceptions: because inflation was high and wage growth low that year, someone aged 69 would have been better off claiming in 2022 than waiting until 70 in 2023.
  • A 2018 Government of Canada survey found only 36% of Canadians aged 40 to 64 knew they could defer CPP for an increase, and only about 5% of Canadians deferred to 70 as of 2023.
  • A 2023 Retirement Management Journal paper using U.S. Social Security data found households advised by commission-based advisers claimed earlier than those with hourly or fee-based advisers.
  • Enhanced CPP will add a second earnings ceiling and raise the replacement rate from 25% to 33.33% of MPE, with full implementation by 2064; the effect on people retiring in 2024 is small.

Bottom Line

Deferring CPP is usually worth it for those who can bridge the gap and expect a normal or long lifespan, but the right age depends on longevity, bridging funds, and tax or benefit clawback effects.