Should I Delay Taking Cpp And Oas If I Have Chronic Health Issues?

Q. My wife, Rina, and I are both 63 years old, and will retire at age 65. I know there are many advantages to delaying Canada Pension Plan (CPP) and Old Age Security (OAS) until 71, as you get higher monthly payments for life. But our parents all died in their late 70s. I also have some chronic health issues. Should I take OAS and CPP at 65, forgoing the larger payments at age 71? My wife plans to take her CPP and OAS at age 65, with her CPP being about half of a full CPP. Our assets include $350,000 in registered retirement savings plans (RRSPs) split equally at $150,000 each, as well as $100,000 each in our tax-free savings accounts (TFSAs). We have a paid off house worth $700,000 and need about $50,000 net a year to live comfortably. We have no company pensions. —Thanks, Francesco and Rina

FP Answers: Francesco, the advice to delay government benefits has become almost automatic in some retirement conversations. Wait longer, collect more and you will be better off. It sounds smart, mathematical and disciplined. The problem is that retirement does not unfold on a spreadsheet. It unfolds in real life with health issues, market cycles, family history, spending needs and the very human desire to enjoy the early, active years of retirement.

In your case, I’m going to speak to OAS first, and then tackle CPP.

For OAS, I would not delay it and take it at 65. That may surprise people who have been told delaying is always the sophisticated answer. But after more than three decades of advising retirees, I can tell you the better answer is not the one with the largest future payment, it is the one that gives the retirement plan the highest probability of working.

CPP and OAS are often discussed together but they are fundamentally different. CPP is a contributory pension tied to your working years and can provide survivor benefits to a spouse, subject to program rules. It forms part of the household’s long-term income structure. OAS is different. It is based largely on residency, not contributions, and it generally stops when you die. It does not transfer in the same meaningful way as CPP. That distinction matters.

When you delay OAS, you are not strengthening a survivor benefit for Rina. You are making a personal longevity bet.

If you delay from 65 to 70, you forgo five years of payments in exchange for a higher monthly amount later. The challenge is that you must live long enough to recover what you gave up, often well into your early 80s before the math begins to favour the decision.

That is a meaningful assumption. In your situation, it is not one I would be eager to make. You mentioned that your parents both died in their late 70s, and that, combined with your own chronic health issues, is important to acknowledge as it does influence how you think about your long-term health, and how a planner should plan for it, because these aren’t minor details. These two points are quite central to planning because they do not guarantee a shorter retirement, but they also weaken the case for delaying OAS.

Your asset base also matters. Between you, there is roughly $350,000 in RRSPs and $200,000 in TFSAs, plus a paid-off home. That is a solid foundation, but not one that easily absorbs five years of deferred government income.

You are targeting about $50,000 per year after tax to live comfortably. With no company pensions, CPP and OAS become critical components of your income.

If you delay OAS, that income must come from your portfolio. On paper, that may look manageable, but it is important to remember that real markets do not move in straight lines. This is where sequence risk becomes important. Sequence risk (or sequence of returns risk) is the danger of facing poor investment markets early in retirement. If you retire at 65, delay government income and encounter weak markets early while drawing more heavily from your portfolio, you risk doing lasting damage. You are selling assets when they are down, leaving less capital to recover when markets improve. This is one of the most underappreciated risks in retirement. Taking OAS at 65 reduces that pressure. It provides immediate, predictable income when employment income stops. It allows your investments more breathing room and reduces the likelihood of drawing too aggressively at the wrong time.

That is why, in your situation, I would take OAS at 65 and not overcomplicate that decision.

Now, let’s tackle CPP. Because CPP offers survivor benefits and increases meaningfully when delayed, there are many cases where deferring makes sense, particularly for healthy retirees with strong longevity and significant assets. But planning must also fit the realities of the household, and therefore CPP deserves more thought before executing.

In your case, delaying CPP would create the same strain as delaying OAS. You would give up income today in exchange for a larger payment later, a benefit that only pays off if you live long enough and if your portfolio holds up during the early withdrawal years.

Given your health profile, family history, lack of pensions and moderate savings, I would lean toward taking CPP at 65 as well. Some planners may argue for delaying at least one of the couple’s CPP benefit. I understand that perspective. But in this case, I believe stability today matters more than a larger future cheque that may never fully deliver.

There is also a lifestyle consideration that should not be ignored. The years from 65 to 75 are often the most active in retirement. This is when people travel, renovate, help family, pursue hobbies and enjoy their time while health permits. Creating unnecessary financial tightness in those years to improve projections at age 85 misses the point.

Good retirement planning is about living well, managing risk and ensuring the income plan is durable. So, I recommend you take OAS at 65 and strongly consider starting CPP at 65 as well. Use those benefits to create a reliable income floor. Be thoughtful with RRSP withdrawals. Preserve TFSAs for flexibility and tax efficiency. Keep home equity as a backstop, not a primary plan.

If your health improves, spending is lower than expected or investments perform strongly, you can adjust over time. But I would not begin retirement by giving up guaranteed income on the assumption that future math will work out.

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It’s important to be practical in retirement, which means prioritizing certainty and flexibility, and reducing pressure on the portfolio.

Mark Dumanowski, B. Comm, CIM, FCSI, is a senior wealth adviser and portfolio manager with The Dumanowski Investment Group with National Bank Financial Wealth Management. Reach him at mark.dumanowski@nbc.ca or www.markdumanowski.com.

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