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Contributions to the Canada Pension Plan while you are working are sensibly arranged so that they are made without you having to do a thing.

Retirement is different. It’s up to you to contact the federal government’s Service Canada offices to start CPP retirement benefits. If you forget or are distracted for an extended period by events, you could potentially lose thousands of dollars in benefits.

There is no automatic enrolment for CPP retirement benefits until age 70, Employment and Social Development Canada (ESDC) says. If you haven’t applied by age 70, Service Canada will enroll you as long as it has sufficient information on your age, CPP contributions and tax filings in hand. Otherwise, it’s on you to apply.

You’re not entirely on your own in starting CPP retirement benefits. ESDC says a letter is sent to all CPP contributors at age 59 to tell them that they can start receiving their pension as soon as age 60. Another letter is sent at age 64, ahead of the standard CPP starting age of 65. These letters include information on the CPP and include instructions on how to apply online or with a paper form.

You can apply for CPP retirement benefits up to 11 months ahead of your preferred start date, but three to six months is generally enough time. Federal government numbers show that 32 per cent of women starting CPP in 2022 did so age 60, a roughly similar number started at 65 and 4 per cent at 70 and up. For men, 32 per cent started at 65, 30 per cent at 60 and 5 per cent at 70 or more. These percentages don’t add up to 100 because people apply at other ages between 60 and 70.

Starting CPP as early as 60 means you get less than you would at 65. Delaying from 65 to as late as 70 gives you an additional 8.4 per cent in benefits for each year you wait, to a ceiling of 42 per cent if you begin at 70.

There’s a huge financial incentive to delay as late as 70 for people who anticipate living into their later 80s and beyond and who value the higher inflation-protected income. If you need retirement income or have health issues that might limit your life expectancy, starting at 65 or earlier makes sense.

Among CPP contributors aged 70 and up, more than 99 per cent are receiving a retirement pension. But if your job comes to an end because of a restructuring at work or you face a health crisis, it’s easy to be distracted when entering retirement. You might just push off a CPP application or forget about it temporarily.

There is some leeway for delayed applications. You can apply for CPP retirement benefits after retirement and receive payments retroactively for up to 12 months – 11 months plus the month the application was received by Service Canada.

Delay longer and you put yourself in the position of not getting all the CPP you’re entitled to based on your contributions. CPP won’t nearly cover all your retirement income needs, but it does deliver a monthly pension of $760.07 on average as of April and a maximum of $1,306.67 for 2023 for those who start collecting the benefit at the age of 65.

With Old Age Security, the government will auto-enroll people at age 65 if it has the required personal details in hand. You’ll find out if you’ve been selected for auto-enrollment in a letter sent after you turn 64. If not, there are instructions on how to apply online or on paper.

As with CPP, you can delay OAS to as late as age 70 to get higher payments. If you want to take advantage and are set up for OAS auto-enrollment at 65, you’ll need to inform Service Canada that you prefer to wait. When you do decide to start OAS, you’ll need to submit an application.

As part of OAS auto-enrollment, the government will see if you’re eligible for the guaranteed income supplement provided to low-income retirees. If you’re in line to receive GIS in this case, you’ll be automatically set up.

There’s no incentive in the form of higher payments for starting OAS and CPP past 70, but financial planner David Field said there is a situation where such a delay makes sense. He explained by e-mail that someone with a high income at age 70 might delay CPP and OAS up to 11 months so they can receive all the retroactive payments in the next calendar year.

The net result is that this person is in a position to receive regular and retroactive CPP and OAS while in a lower tax bracket.

Are you a young Canadian with money on your mind? To set yourself up for success and steer clear of costly mistakes, listen to our award-winning Stress Test podcast.

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