CPP and OAS Decoded: How Much Will the Government Actually Give You?
Most Canadians will receive some combination of CPP and OAS in retirement — but few understand exactly how the amounts are calculated, when to start, and how the two programs interact. Let's fix that.
Meet the couple this article follows
David and Linda, both age 62, live in Vancouver. David worked full-time for 38 years and expects a maximum CPP benefit. Linda took 10 years off to raise their children and expects about 65% of maximum CPP. They plan to retire together at 65 but are wondering: should they start CPP right away, or wait? And what about OAS? This article walks through their exact situation.
How CPP Works
The Canada Pension Plan (CPP) is a mandatory, contributory pension program. Both you and your employer contribute 5.95% of your pensionable earnings each year (up to a yearly maximum). Self-employed Canadians pay both shares — 11.9%.
Maximum CPP (2024)
$1,364
/month at age 65
Average CPP (2024)
$758
/month (new recipients)
Contribution Rate
5.95%
employee + employer each
Your CPP amount is calculated based on your best 39 working years (out of a maximum 47 years between ages 18–65). Low-income years can be "dropped out" automatically — including child-rearing years and any years you were disabled. This is why Linda still earns a meaningful CPP despite 10 years off.
David and Linda's Estimated CPP at Age 65
David (38 full-time years, high income)
$1,250/mo
Linda (28 contributing years, avg income)
$640/mo
Combined household CPP: $1,890/month
The Timing Decision: 60, 65, or 70?
CPP can start as early as age 60 or as late as age 70. The adjustment is permanent and significant:
| Start Age | Adjustment | David Monthly | Linda Monthly | Breakeven vs Age 65 |
|---|---|---|---|---|
| Age 60 | −36% | $800/mo | $410/mo | ~Age 74 (vs. waiting to 65) |
| Age 65 | Standard | $1,250/mo | $640/mo | Baseline |
| Age 70 | +42% | $1,775/mo | $909/mo | ~Age 82 (vs. starting at 65) |
What's "breakeven" mean?
If David takes CPP at 60 instead of 65, he gets more money earlier but less per month. The "breakeven" age is when cumulative income from the later-start option finally catches up. Taking CPP at 60 beats waiting to 65 if David lives only to age 74 or less. For David, who is healthy, age 70 likely pays more over his lifetime.
Lifetime Cumulative CPP Income: Starting at 60 vs. 65 vs. 70
Assumes average Canadian CPP of $878/month at 65. Crossovers show breakeven ages.
Breakeven at ~74 (60 vs. 65) and ~82 (65 vs. 70). If you live past these ages, waiting pays more total income.
OAS: What the Government Pays Just for Being Canadian
Old Age Security (OAS) is Canada's most universal retirement benefit. Unlike CPP, it doesn't depend on how much you worked or earned — only how long you've lived in Canada. The maximum full pension in 2024 is $707.68/month for ages 65–74, and $778.45/month for ages 75+.
Eligibility Requirements
- Age 65 or older
- Canadian citizen or legal resident
- 10+ years residency in Canada after age 18 (for partial)
- 40+ years for full OAS pension
The OAS Clawback
If your net income exceeds $90,997 (2024), you repay 15 cents of OAS per dollar above the threshold. OAS is fully clawed back at income ~$148,179.
Smart TFSA drawdowns and income splitting can help avoid the clawback.
OAS Monthly Benefit by Deferral Age
Deferring OAS past 65 adds 0.6%/month. Max at 70: +36% more per month, forever.
David and Linda's Full Retirement Income Picture
David and Linda plan to retire together at 65. They decide to take CPP at 65 (not early, not deferred) and apply for OAS right away. Here is their combined government income at age 65:
Combined Monthly Government Income at Age 65
That $39,672/year forms their guaranteed income foundation — inflation-indexed, for life. They'll supplement it with RRSP/RRIF withdrawals and TFSA drawdowns to reach their target retirement budget of $75,000/year.
What If David Waits to Age 70?
If David defers CPP to 70, he gives up $1,250/month for 5 years ($75,000 in total foregone payments) but gains $525/month more — permanently. His CPP becomes $1,775/month instead of $1,250/month.
| Scenario | Monthly CPP at 70 | Foregone (65–70) | Breakeven age |
|---|---|---|---|
| David starts at 65 | $1,250/mo | — | — |
| David waits to 70 | $1,775/mo | $75,000 | ~Age 82 (if in good health) |
David is healthy with no family history of early mortality. Waiting to 70 is likely the financially superior choice for him — the question is whether he has enough savings to bridge the income gap from 65 to 70.
Bonus: GIS and the Pension Credit
Guaranteed Income Supplement (GIS)
If your annual income is below ~$20,952 (single, 2024), you may qualify for GIS — a non-taxable monthly top-up to OAS. David and Linda won't qualify, but lower-income retirees should apply.
Age and Pension Income Tax Credits
At 65+, you're eligible for the Age Amount credit (~$8,790 in 2024) and Pension Income Amount credit ($2,000). These reduce your federal tax owed — don't miss them on your T1.
Key Takeaway
CPP and OAS together can provide a meaningful guaranteed income floor in retirement. For healthy Canadians, deferring CPP to 70 is usually the most financially optimal choice — but it requires other savings to bridge the income gap. For David and Linda, maximizing deferred CPP and combining it with RRSP drawdowns and TFSA income gets them to their $75K/year target without triggering OAS clawback. Understanding these programs before age 60 gives you time to build the right strategy.
Model your CPP and OAS income alongside your personal savings