You've spent your life working hard. You've paid your taxes. You've contributed to the system. And now, finally, you're thinking about retirement and you're asking one of the most important questions that you will ever face. When should I start my CPP and my OAS? Should I start as soon as I can or should I wait and collect more later? And this is a deceptively simple decision with lasting, and I mean long lasting consequences. This is episode six of our second series, ACT. In this episode, I will explain how these government benefit plans work, how much you can expect to receive, the pros and cons of starting early versus delaying, and some common, very costly mistakes that you're going to want to avoid. I would like to thank Harvest ETS for partnering with us for this entire series. I'll be sharing a little bit more about Harvest later in this video. [Music] Let's start with the Canada Pension Plan. And a quick note here, this video is all about the CPP, but there is a similar program called the Quebec Pension Plan in Quebec. And the two work pretty much the same, but there are a few small differences. If you do want to dig into how the QPP compares to the CPP, you can scan the QR code on your screen or go to the official site. I will put a link in the description. So, what is the Canada Pension Plan? This is a retirement benefit program that you've contributed to throughout your working life. What you receive will depend on how much you contributed and for how long. Now, for the most part, every person aed 18 or older who works in Canada and earns more than a basic minimum amount must contribute to the CPP program. And the amount that you contribute will be based on your employment income. Let's break down how the CPP contributions work. First off, there's the contributory period. And this is what CPP uses to track your earnings and your contributions and then to calculate how much you will eventually get in retirement. And this contributory period forms the base of the CPP begins when you reach age 18. You also have two contributory periods for the CPP enhancement which will begin when you reach 18 or January 1st of the appropriate year. That's 2019 for the first part of the enhancement and 2024 for the second part of the enhancement whichever is later. Now, each of these contributory periods ends when you either start receiving your CPP retirement pension, you turn 70, or you die, whichever happens earliest. Now, thankfully, when calculating your CPP retirement benefit, not every lowinccome year counts against you. Let's break that down here. First of all, there is a general dropout provision, and the CPP will automatically drop out a certain number of your lowest earning years when they calculate their pension. And they do this to make sure that a few bad years like maybe being unemployed, being in school between jobs isn't going to drag down your benefit. There's also a provision for child rearing. If you took time off or you reduced your hours to raise young children, the CPP child rearing provisions might increase your CPP retirement pension. And these provisions are designed to protect your CPP during years when you had low or no earnings because you were focused on being a parent. Now, in this case, you might be eligible if you or your partner received the family allowance payments or you or your partner qualified for the Canada Child Benefit and you had low or no earnings while being the primary caregiver of a child under the age of seven. There is also a child rearing drop in and this applies to the enhanced CPP. This is the newer portion that was added in 2019. Now, instead of dropping months, CPP will add in pension credits for those years. If the credits are higher than your actual CPP earnings, they will use them instead, and that will give your pension a little bit of a boost. So, the bottom line here, if you step back from work to raise kids, CPP will factor that in. These provisions will help ensure that your parenting years don't hurt your retirement years. If you would like help applying for these benefits, I have put together a step-by-step guide. You can just follow the link in the video description to access the full process plus the application process for all of the other benefits that I will be covering in this video. If you have ever received the CPP disability pension, the Canada Pension Plan has also a built-in protection to help maximize your future retirement benefits. Here's how this works. First of all, on the base CPP, the original portion, CPP will exclude the months that you were receiving a disability pension from the calculation. Like with child care, there's the newer enhanced CPP program. They add credit for the times that you were disabled. Again, that will help boost the value of your enhanced CPP even if you weren't able to work during those months. That means that for your lower earning months, they're not going to drag down your average income, which helps increase your retirement pension. I want to shift gears now and I want to talk about pensionable earnings. This is an important component of the CPP program. First off, what counts as your pensionable earnings. You only pay CPP contributions on the money that you earn between a minimum and the maximum amount each year. The minimum amount is always $3,500. The max though, that changes every year. In 2025, the maximum earnings for regular CPP contributions is set at $71,300. That is the ceiling. So, how much you contribute? The total CPP contribution rate in 2025 is 11.9%. Now, that includes 9.9% for the original base amount and it includes 2% for something called the CPP enhancement. This is a new layer that started back in 2019. If you are an employee, you don't pay the full amount. You don't pay the full 11.9% that is split 50/50 with your employer. So, each of you contributes 5.95% for you, 5.95% for your employer. However, if you are self-employed, you're on the hook for the full 11.9%. That is based on your net business income after expenses, not your gross revenue. The maximum contributions in 2025 for employees, it's $4,3410. Employers, it's the same amount. Now, if you are self-employed, the maximum amount is $8,68.20. Now, starting in 2024, the CPP added a second layer of contributions called the second additional CPP. And they did this to allow for contributions on higher earnings. In 2025, if you make between 71,300 and 81,200, that portion of your income gets hit with an extra CPP contribution. Here's what that looks like. First off, employees and employers each pay 4% on those extra earnings. Self-employed individuals will pay the full 8%. Again, there are caps on these. The maximum employee contribution right now, $396. That's the same for the employer max as well. self-employed, your maximum contribution is $792. But here's the key point here. You're only going to pay the second CPP contribution if your income goes above that $71,300 level in 2025. So, lot of information. A quick recap here. CPP contributions start at $3,500 in annual earnings. You contribute up to $71,300 for the base CPP. The contribution rate 11.9% total. that is split if you're employed. If you earn more than $71,300, you're also going to pay that second layer of CPP up to $81,200. If you are self-employed, again, you pay the full amount. Now, the table on your screen here shows how these numbers have changed over the past 10 years. If you're watching this video in the future, you can get updated numbers on the canada.ca website. Okay, let's move on to the fun part now, or maybe not so much. How much money can you expect to receive when you start collecting your CPP? The answer might surprise you. As of 2025, first off, the maximum payment that you can get is $1,433 a month. Now, the average amount for new beneficiaries in April of 2025 is $84453. So, that is a surprisingly low amount for many. The postretirement benefit at age 65, the average there is $2259. and the maximum is $49.39. Now, you can get a detailed record of your very own CPP contributions, your pensionable earnings and an estimate of what your CPP pension amount will be. To get those personal amounts, you can visit the link in the description of this video or the QR code on your screen. There you'll be able to view your payments, your contributions, and get an estimate of your benefits. You can start collecting your benefits as early as age 60, or you can delay until age 70. And the timing does affect your benefit. If you start early, there is a reduced amount of 0.6% a month or 7.2% a year. So, if you start at age 60, there's a 36% reduction. If you delay past 65, you increase your benefit by 0.7% per month or 8.4% per year. That's up to a 42% boost if you wait till age 70. Let's meet Alex. He is turning 60 and he's eligible for $1,000 a month at age 65. Now, if he chooses to start at age 60, there will be that 36% reduction. So, he'll get $640 a month. If he delays it to age 70, he will get a 42% boost. So, he'll get $1,420 a month more. So, that is a $780 difference in today's dollars. And I will be sharing more to help you make your decision a little bit later in this video. Yes, the CPP is indexed to inflation. Now, I do want to look at a few other important nuances or what I would call CPP need to know items. First of all, working while collecting your CPP. So, this is when the CPP postretirement benefit comes in. If you are still working after you start collecting your CPP retirement pension, you might still be eligible for something extra. It's called the postretirement benefit or the PRB. Now, for this, you will qualify if you're between 60 and 70. you're still working, even if it's part-time, and you're contributing to the CPP. Here's how that works. For each year that you work and contribute, you automatically earn an additional lifetime benefit. These topups begin the following year and they are indexed to inflation. The PRB is paid for life and is added to your base CPP. Couple of rules here. If you're under the age of 65, CPP contributions are mandatory if you are working. from ages 65 to 70 you can choose to opt out of CPP contributions and at age 70 contributions will stop automatically even if you are still working. Now there is also a survivor benefit and if your spouse or your common law partner passes away again you may be eligible for a monthly CPP survivors pension. That's a benefit that's meant to provide ongoing support after the death of a loved one. Now, to be eligible for the CPP survivors pension, you must be either the legal spouse of the deceased or the common law partner, which means that you have lived together in a conjugal relationship for at least one year. Now, even if you were separated from your legal spouse, you might still qualify as long as the deceased does not have a common law partner at the time of their death. Couple of special situations here. If you received the CPP credit split that was approved in January 2025 or later, you may not be eligible. But if you reunited and lived with your spouse again for at least 12 months before their death, you may still qualify. Couple of other quick points here. If you lost your survivor's benefit in the past due to remarage before 1987, contact the CPP. You may be eligible again under the new rules. And if you've been widowed more than once, CPP will only pay the larger of the survivor's pensions. They're not going to pay you both. If you remarry, your survivor's pension does continue. Remarage does not cancel your benefits. Now, some other benefits that you may qualify under this program. Let's cover those off here. Starting with the CPP death benefit, and this is a one-time taxable payment that is made on behalf of a deceased CPP contributor. It is typically paid to the estate, but in some cases, eligible individuals such as a spouse, a next of kin, or a funeral service provider can apply if no estate exists. Now, to qualify for this, the deceased must have contributed to the CPP for at least onethird of the years of their contributory period with a minimum of 3 years or at least 10 calendar years. Now 2025 update to that there is a top up amount and for deaths that are occurring on or after January 1st 2025 the death benefit may include a top up that is doubling the maximum potential payment. This is if the deceased never received CPP retirement disability or postretirement disability benefits and there is no surviving spouse or common law partner who is eligible for a survivor's benefit. The death benefit now that will include a basic amount of $2,500. then that possible top up of $2,500 as well. That brings the total maximum to $5,000. Next, there is the CPP disability benefit. For this, you may qualify if you are under the age of 65, you have contributed enough to the CPP, you have a mental or physical disability that regularly stops you from doing any type of substantially gainful work, and B is long-term and of indefinite duration or is likely to result in death. As part of this program, there is also a CPP postretirement disability benefit. For this, you may qualify if you are between 60 and 65. You're already receiving CPP retirement pension and you have contributed enough to the CPP and you have been receiving the CPP retirement pension for more than 15 months or become disabled after starting to receive the retirement benefits. Some of the key facts here, this is not the same as the regular CPP disability benefit. That's only for those who have not yet started their CPP retirement program. It ends at age 65 when you're then transitioned into the normal retirement benefits. Now, there is also the CPP children's benefit and your dependent children may qualify for a monthly payment if you are receiving the CPP disability benefit and the child is under 18 or between 18 and 25 and attending school full-time or part-time. Now remember here that these are guidelines and the service Canada representative will review your case and determine your specific eligibility. [Music] Let's move on now to the old age security or the OAS. And this is different. This is not based on your contributions. OAS is funded from general tax revenue and it is based on your residency. So, that means that you can receive the OAS pension even if you've never worked or are still working. I'm going to break this down depending on where you live. If you're living in Canada, you must be 65 years or older. You must be a Canadian citizen or a legal resident at the time that your OAS application is approved. You must have resided in Canada for at least 10 years since the age of 18. Now, if you are living outside of Canada, you must be 65 years or older. You must be a Canadian citizen or a legal resident of Canada on the day before you left Canada. You must have resided in Canada for at least 20 years since the age of 18. To get the full OAS, you must have lived in Canada for at least 40 years after the age of 18. Now, with 10 years of residency, you will receive a partial pension. for 10 to 39 years of residency. The formula is the years of Canada residency divided by 40 times the full OAS amount. As of 2025, here's what you can expect to receive. OAS, ages 65 to 74 up to $713 a month. Ages 75 plus up to $784 a month. Now, like the Canada Pension Plan, you will get more if you delay. You can delay your OAS up to age 70 and you get an additional 0.6% 6% up to a maximum of 36% a year. OAS benefits are reviewed four times a year. They're adjusted to inflation. Your benefits will not decrease, however, if the cost of living goes down. Now, if you are a Canadian who's working outside of the country for a Canadian employer, like the Canadian Armed Forces, a Canadian bank, a government agency, your time abroad might still count as if you were living in Canada when it comes to your Old Age Security Pension. But to make that happen, you came back to Canada within 6 months after your job ended. You turned 65 while still working abroad and you kept your official residence in Canada during that time. Now, in some cases, your spouse, your partner or dependent may also have their time outside of Canada count and Canadians working for international organizations may qualify, too. Now, some good news here. Even if you haven't lived in Canada long enough to qualify for your full or even a partial OAS pension, you may still be eligible through Canada's international social security agreements. Here's how that works. You might qualify for OAS or even a foreign pension if you lived or worked in a country that has a social security agreement with Canada or you paid into that country's public pension or social insurance program. Now, these agreements, they let Canada combine periods of residence or contribution of both countries to help meet a a 10-year minimum to receive partial OAS and or the 20-year threshold needed to keep receiving OAS while you're living abroad. Now, what if you retire abroad, though? To receive OAS while you're living outside of Canada, you generally need to have lived in Canada for at least 20 years after you turn 18. Now, if you don't meet that threshold, OAS will stop after six consecutive months abroad unless you return and reestablish your residency. Now, these social security agreements, they may help you reach that 20-year requirement, but they don't increase your OAS amount. Your payment will still be based on the number of years that you lived in Canada, again, up to that maximum of 40. Canada currently has agreements with over 50 countries. If one of these applies, Service Canada will coordinate directly with that foreign country's pension office. So, if you or your spouse ever lived or worked outside of Canada, it is worth checking because these agreements, they could help you maximize your retirement benefits by keeping your OAS flowing even if you plan to live abroad. A quick note here on your old age security payments. These benefits are taxable and they are subject to a clawback if your income is too high. Now, as of 2025, that clawback begins when you have a net income of $90,997. After that point, you lose 15 cents of OES for every dollar above that. Now, OES is fully clawed back if you have $148,541 of net income if you're under the age of 75 or $154,196 if you are 75 or older. Now, if you want to dig deeper into how this clawback works and how to avoid it, I will put a link here for another episode in this series that gives you a full breakdown of this topic. [Music] Related to the OAS program is the guaranteed income supplement referred to as GIS. Now, if your income is low in retirement, you may qualify for the GIS. This is a non-T taxable monthly payment. It's available to Canadians who are 65 years or older and who receive the OAS. The GIS is designed to top up your income if you're living on modest means. This means you must be at least 65 years old living in Canada and receiving the OAS pension and you have income below certain thresholds. Now, as of July to September 2025, the maximum GIS you can receive will depend on your marital status and on your income. On your screen right now, you will see a table that shows the different GIC amounts based on your situation. Feel free to pause the video and take a moment to find the row that applies to you. These amounts are non-t taxable and they're adjusted quarterly based on inflation. Your spouse or common law partner might also receive the benefit even if they're not yet 65. In order to qualify, your partner must be 60 to 64 years old, be a Canadian citizen or a legal resident, have lived in Canada for at least 10 years since age 18, and you must have combined household income below the threshold for the allowance. If your spouse or common law partner has passed away and you haven't remarried or repartnered, you may be eligible for the allowance for the survivor. In this case, you must be 60 to 64 years old. You must be living in Canada and have an income below the maximum threshold for the benefit. So, this is a lot of information, but this benefit can make a meaningful difference for lowerincome seniors. Even if you're not sure whether you qualify, it's probably worth checking with Service Canada. Okay, now on to the big decision. When should I start taking my benefits? There is lots of controversy here. There are lots of opinions and yes, there's lots of confusion. Now, one of the options that we're going to talk about is delaying your benefits to increase and lock in your future payments. But if you do delay, you may need to generate some extra income to hold you over in the meantime. Now, on that note, I do want to thank Harvest ETFs for supporting this entire series. And their income covered call ETFs can play a key role in helping you bridge any gap that you may have. Covered call funds. These are designed to provide consistent, sustainable and tax efficient income and they help investors create a dependable cash flow strategy through the covered call approach. They enhance your yield while reducing volatility and that can give retirees more predictability and peace of mind. Two particular funds that come to my mind as a solution are the harvest diversified monthly income ETF, the ticker is HDIF and the Harvest Balanced Income and Growth ETF, ticker is HBIG. Now, HDIFF, this is a one ticket portfolio of harvest equity income ETFs with modest leverage to boost monthly income. HBIG, this offers more of a traditional 60/40 blend of equities and fixed income, and it's focused on balance and stability. Now, to put everything into context, a $200,000 investment in HDIF that could generate an estimated $1,818 per month for HBIG, it's around 1373. both delivering meaningful income while you wait. So, if you're concerned that your CPP or your OAS benefits will fall short of providing enough monthly income to meet your retirement needs, then Harvest ETFs like HDIFF or HBIG can help close that gap with that consistent taxfree cash flow. To learn more, visit harvestets.com or scan the QR code on your screen. [Music] Okay, let's move on now to this big decision. Like I say, controversial, uh, confusing perhaps. First of all, I want to look at some of the reasons why you may elect to take your CPP early. Probably the most important reason here that you're going to decide to take your benefits early is simply that you need the income. There are a lot of Canadians who retire before age 65, but they don't start receiving workplace pensions until a little bit later. So drawing CPP early in this case can help bridge that gap. It can help you avoid high interest debt like credit cards or lines of credit to hold you over while you're waiting for extra income to kick in. Also, it may allow you to delay drawing down your RRSPs or your TFSAs. That can preserve some tax sheltered growth if that is a suitable option for you. Starting CPP can offer peace of mind, financial independence if you're no longer working but still have other expenses, perhaps mortgage payments or helping your adult children. Now, also poor health or life expectancy. If you have a chronic health issue or you have a family history of early mortality, it may make sense to take your benefits a little bit sooner. If you don't expect to live that long, early CPP is often a better deal. Even if you're unsure about longevity, poor health may reduce your ability to enjoy your later retirement years. And in cases like this, taking CPP earlier allows you to access those funds. In this more active retirement phase, CPP can fund your 60s when you're more likely to spend money on travel, hobbies, or helping your family. Also, your 60s are often the most energetic and travel friendly years of your retirement. So, starting CPP early, that can boost your cash flow during this active phase when lifestyle spending is typically highest. Now, also, you may want to help grandchildren with education costs or support your adult children. Again, using CPP early allows you to preserve your investment capital while you're still enjoying your retirement. Another reason that some people might choose to take their benefits early is because they are concerned about possible policy changes. And these are unlikely, but locking in the benefits today can offer a psychological peace of mind for some people. Now, when we look at the changes to the CPP rules, they are very rare. They typically apply only to future contributors, but some retirees may just prefer that certainty. If you lock in your benefit at age 60 or whatever age you choose, that protects you from future adjustments that might lower your payments or change your eligibility. That psychological comfort does matter for some people. A smaller but reliable income stream can reduce financial anxiety. If you're receiving your CPP monthly, even if it's that reduced amount, it can help with budgeting, steady income planning, and if you have a fixed stream of income, that reduces your reliance on volatile investments, especially during market downturns. Now, also here, regular income deposits can help maintain discipline and reduce the temptation to overspend from your savings. For some people, just knowing that you're going to receive that guaranteed amount every single month does provide emotional security, especially for those who are uncomfortable in managing large sums. Remember though, starting early permanently reduces your payments and your survivors benefits as well. [Music] Let's talk now about why you may want to delay the take up of your benefits. And a lot of experts advocate for delaying your CPP or your OAS if you can. In addition to this video, there are lots of others online that explain the potential benefits of delaying your CPP or your OAS for as long as you can. And I will put a link right here so you can learn more about that. I will also link some of the other better videos on this topic in the description of this video. For now, let's look at some of the reasons why this might make sense. Probably the most important reason that retirees choose to delay is guaranteed inflation protected income for the rest of your life. The CPP, the OAS, they are indexed. So if you delay, that locks in a bigger lifetime pension. Remember CPP increases by 0.7% for each month that you delay after age 65 up to 42% by the time you hit age 70. The OAS increases by 0.6% per month if delayed after 65. Again, up to 36% by age 70. The key here is that these increases are permanent. They're indexed to inflation and that helps protect the long-term purchasing power. So in an uncertain economic environment, if you have that larger predictable governmentbacked pension, you can't put a price on that for many many people. Now the second reason here is long life expectancy and delaying CPP and OAS will often pay off if you expect to live well into your later years. There are some helpful rules of thumb out there, but the right choice still depends on your personal health, your lifestyle, and your family history. In general, the longer you live, the more valuable a larger CPP or OAS becomes over time. Delaying does help you hedge the risk of outliving your savings, which is increasingly common these days with the longer lifespans that we're seeing. Statistically, of course, women live longer than men and therefore they will benefit more from delayed inflationadjusted income. Also, delayed CPP that can reduce reliance on investments later in life when for some people managing the portfolios may become more challenging. The third reason you may want to delay is the tax and clawback strategies. Delaying CPP can help you smooth out your RRSP withdrawals. As I mentioned earlier, OAS clawbacks start around $90,000 of income. So, delaying your OAS can help manage your taxable income. taking your RRSP withdrawals in your early 60s before the OAS or CPP starts. That can help keep you in a lower tax bracket. In many cases, delaying that CPP will give you room to convert your RRSPs or your risk more gradually. That can reduce minimum withdrawal stress in your 70s. Now, for some, strategically timed withdrawals can also help maximize the guaranteed income supplement eligibility for lower income retirees. Now, four, more flexibility later in life. Higher income at 70 plus will help you manage any medical costs that come up, perhaps assisted living or any reduced decision-making capacity. As you age, you may require more help either at home or in assisted living facilities. The higher guaranteed monthly payments will provide a cushion for unexpected healthcare or personal support costs. If you do lose the ability or the desire to actively manage investments, government pensions become more and more critical there. The bottom line here is this. Larger CPP NOAS payments reduce the need to make any complex financial decisions later in life. [Music] Okay, let's look at some common mistakes that you need to avoid. Mistake number one, we just talked about it. Taking CPP ROAS out too early without proper analysis. And no doubt it is tempting to start CPP ROAS as soon as you're eligible, especially at age 60. But if you do this without running the numbers, that can cost you tens or in some cases even hundreds of thousand dollars in lifetime income. Remember, this reduction for starting early is permanent. You can't change it once you've started. Early income can definitely be helpful in some situations, as we've talked about, but it can also lead to lower survivor benefits, reduced inflation protection, and certainly less flexibility later in life. This is one of the most important financial decisions that you're going to make in retirement. So, it's definitely worth getting it right. I would suggest a quick consultation with a certified financial planner that can help you understand whether early access fits into your broader plan. Now, mistake number two is triggering OAS clawbacks. And OAS, as we mentioned, starts to get clawed back when your income hits that $91,000ish number, at least in 2025. For every extra dollar of income after that, you lose 15 cents of your benefit. And this can add up pretty quickly, especially if you combine it with RIFF withdrawals, capital gains, perhaps rental income, or even some part-time work. Again, if you don't have a clear income strategy, it's easy to accidentally bump yourself into the clawback territory. Not uncommon that you would lose thousands of dollars in benefits there. Again, this comes down to proper planning. This strategy can help you stay below the threshold. It can smooth out income across the years and avoid giving any OAS back unnecessarily. Tools like the RRSP withdrawals before age 72, income splitting, TFSA strategies can all play a major role there. Now, mistake number three, ignoring spousal coordination. Retirement planning definitely works best as a team effort, and you want to coordinate your CPP, your OAS, and other income streams with your spouse. That can lead to significant tax savings, greater financial flexibility over time. Just as an example, CPP pension sharing allows you to share your CPP income for tax purposes. That reduces your overall tax bill. It doesn't change how much you're going to receive as a couple, but it can help smooth out income differences between the spouses. Now, after age 65, you can also split RIFF and other eligible pension income with up to 50% allocated to your spouse for tax purposes. One spouse might benefit by starting early while the other delays. So having a coordinated plan can improve cash flow, can reduce taxes, provide better protection for you as you age. For more real life examples, click on the link on your screen. Now, mistake number four is underusing your TFSAs. And a lot of retirees, understandably, they focus on RRSPs. They focus on their pensions, but they overlook the tax-free savings account. And this is one of the most powerful tools available to us as Canadians. You can withdraw funds at any time for any purpose. It's not going to affect your taxable income or trigger an OAS clawback. That makes it a perfect bucket for discretionary spending for emergency cash or for tax-free investment growth. One smart move in many cases. You might want to start drawing down your RRSPs early in retirement. Then move that money into your TFSA each year. That will reduce future RIFF minimums, manage your tax bracket. It'll give you more flexibility again as I mentioned later on. So, should you take your CPP and OAS early or should you wait? The answer is it depends. It depends on things like your health, your income sources, your tax bracket, your family situation, and your goals. But at least now you have a clear picture of how the system works and how the timing of your benefits can shape the rest of your retirement. If you missed our earlier episodes on RSP strategies, income sequencing, or retirement healthcare, amongst others, you can check those out next. I will put a link on your screen. Now, if this episode helped you, give it a like, subscribe, maybe share it with someone who you think needs to see it. As always, I say thank you for watching this video. Look forward to seeing you in the next one. [Music]