Taking CPP at 70 Isn’t Automatically Smarter: Here’s the Number I’d Check First

Delaying CPP until 70 produces a much larger payment, but retirees give up five full years of income.

Key Points
  • CPP rises 0.7% for each month you delay after 65, reaching a 42% increase at 70.
  • A simple age-65-versus-70 calculation produces a break-even age around 82.
  • Hydro One offers regulated earnings and dividend growth for the long-term portion of a retirement portfolio.

Waiting until 70 to take the Canada Pension Plan (CPP) can make the monthly payment look spectacular. That said, it doesn’t automatically make the decision a great one.

CPP rises by 0.7% for every month you delay after 65, reaching a 42% increase at 70. That guaranteed, inflation-adjusted income can be enormously valuable later in retirement.

The catch is obvious once you look at what happens before 70. You’ve given up five years of payments. Before delaying, I’d check one number first: your break-even age.

Senior uses a laptop computer

Source: Getty Images

Find the crossover

Suppose your CPP would be $1,000 monthly at 65. Waiting until 70 would increase that payment to roughly $1,420, ignoring any other changes to your CPP calculation. Here’s the trade-off.

START CPPMONTHLY PAYMENTCPP COLLECTED BY AGE 70
Age 65$1,000$60,000
Age 70$1,420$0

After 70, delaying gives you an extra $420 monthly. It would take roughly 143 months for those larger payments to recover the $60,000 you skipped. That’s almost 12 years, and your simple break-even age lands around 82.

That calculation ignores taxes, annual CPP inflation adjustments, investment returns, and changes to your personal CPP entitlement. Yet it gives retirees a useful starting point. If you live well into your 80s or 90s, delaying can become increasingly valuable. If longevity is shorter, the larger monthly payment may never compensate for the income you didn’t collect earlier.

What funds the gap?

This is where the decision gets personal. Someone still working at 67 may have little need for CPP and could benefit from waiting. Someone who retires at 65 may need to pull an additional $12,000 or $15,000 annually from an RRSP to replace CPP they deliberately delayed. Those extra withdrawals can shrink the portfolio during the exact years when retirees want it to keep compounding.

Taxes count too. CPP is taxable income, so a larger payment later can combine with Registered Retirement Income Fund (RRIF) withdrawals, Old Age Security (OAS), pensions, and other income.

Delaying remains attractive because CPP payments are indexed annually to inflation and continue for life. I’d just compare that benefit with the actual cost of funding ages 65 through 70. That’s a much better retirement calculation than automatically declaring age 70 the winner.

Keep long-term money working

Money specifically needed during those five bridge years shouldn’t depend entirely on the stock market. I’d keep enough cash and fixed income available for near-term spending, while allowing the portion of a retirement portfolio meant for later decades to continue to hold equities. One stock I’d consider for that long-term portion is Hydro One (TSX: H).

Hydro One operates Ontario’s electricity transmission and distribution network. Nearly all of its business is regulated, meaning approved investments expand the asset base on which it can earn returns.

Second-quarter earnings per share rose to $0.62 from $0.54 a year earlier. Hydro One also invested $812 million during the quarter as Ontario’s electricity system continues expanding and replacing aging infrastructure.

Slow growth can work

Hydro One currently pays $0.35 quarterly, or about $1.41 annually. At $51.06, that’s a dividend yield near 2.8%. It’s not the highest yield among Canadian dividend stocks. The attraction is potential growth. Hydro One has been targeting roughly 6% annual earnings-per-share (EPS) and dividend growth through 2027.

The stock isn’t cheap at roughly 21 times forward earnings. Higher financing costs, regulatory decisions, and expensive grid projects could also pressure returns. Therefore, I’d buy gradually for long-term income growth rather than use shares to fund next year’s grocery bill.

Retirees with available contribution room could also hold suitable investments inside a TFSA, where eligible withdrawals won’t add to taxable retirement income.

Bottom line

Waiting until 70 gives CPP a powerful 42% boost versus starting at 65. However, that doesn’t settle the decision.

Using a simple example, the delayed pension may not catch the age-65 option until around age 82. Your taxes, health, portfolio size, work plans, and retirement spending could shift the calculation further.

I’d therefore start by checking the break-even age. Then decide whether the bigger cheque at 70 is worth the five years you spend waiting for it.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Energy Stocks

some investments are riskier than others
Energy Stocks

3 High-Yield Dividend Stocks Worth the Risk Right Now

These three high-yield dividend stocks offer income and different risk profiles across pipelines, banking, and Canadian real estate.

Read more »

dreaming of financial success
Energy Stocks

Government Bonds Are Paying More: I’d Still Buy This Canadian Dividend Stock for the Next 10 Years

Government bonds now offer competitive income, but a growing dividend can become more valuable over a long investing horizon.

Read more »

golden sunset in crude oil refinery with pipeline system
Energy Stocks

TC Energy Is Selling its Mexican Pipeline for $560 Million: What Investors Need to Know

TC Energy keeps its broader Mexican network, trades about 17% below analyst targets, and yields roughly 4.2%. Notably, the stock…

Read more »

senior couple looks at investing statements
Energy Stocks

Your GIC Just Matured: Should You Lock the Money Up Again?

Lower GIC rates make maturity a useful moment to reconsider how much money really needs a guaranteed return.

Read more »

you're never too young or old to start investing in stocks
Energy Stocks

Can You Help Your Kids Without Falling Behind on Retirement?

Parents can help fund their children’s future without sacrificing the retirement savings they’ll eventually need themselves.

Read more »

holding coins in hand for the future
Energy Stocks

This Quiet Canadian Company Has Been Paying Shareholders for Decades

This Canadian dividend stock has raised its dividend for 54 straight years, and a $12 billion regulated investment plan could…

Read more »

AI image of a face with chips
Dividend Stocks

AI Needs More Than Chips: These Canadian Stocks Have Something it Needs

AI data centres need far more than processors, creating opportunities in natural gas and electrical infrastructure.

Read more »

data center server racks glow with light
Energy Stocks

Who Makes Money From AI After the Chips Are Sold?

AI spending doesn't stop with processors as data centres also need electricity, grids, substations, and engineering.

Read more »