She Lost Her Savings in the Divorce. Starting CPP at 65 Would Be a Mistake.
Jennifer turned 64 with $180,000 in her TFSA and nothing else. The marriage had ended two years earlier. The RRSPs, the house equity, the joint accounts, all split or sold. She works part-time now, $28,000 a year stocking shelves at a pharmacy in Oakville, and the plan, such as it was, involved taking CPP at 65 because that's what people do.
It's the wrong plan.
The Math Nobody Does
CPP at age 65 pays a maximum of $1,507.65 a month in 2026, though the average new recipient collects closer to $925. Jennifer's estimate, based on her Service Canada statement, sits at $940. If she waits until 70, that number climbs to $1,334, a 42% increase, compounding at 0.7% per month for every month past 65.
The question most retirees ask is whether they'll live long enough to break even. The answer, for someone in average health at 64, is yes. The break-even age for delaying CPP from 65 to 70 sits around 82. Canadian women who reach 65 have a life expectancy of 87. Jennifer is betting she will outlive her savings, which is the actual risk.
A $180,000 TFSA withdrawing $1,500 a month, with 3% real growth, depletes in roughly twelve years. She turns 76. If CPP starts at 65, she has $940 a month in inflation-protected income at that point. If she delayed to 70, she has $1,334. The gap is $394 a month, $4,728 a year, indexed to inflation, for the rest of her life.
This is longevity insurance that cannot be purchased at any price in the private annuity market. The extra $394 monthly starting at 70 buys her a guaranteed income stream no commercial product can replicate at any cost.
The GIS Complication
Delaying CPP does carry one genuine downside for low-income retirees. The Guaranteed Income Supplement, available to Old Age Security recipients with low incomes, reduces by 50 cents for every dollar of CPP above a modest threshold. A retiree with very little income at 65 might actually be better off taking CPP early and maximizing GIS during those years, because the clawback later erases much of the delay premium.
Jennifer does not qualify. Her part-time income, combined with TFSA withdrawals (which do not count as income for GIS purposes), puts her over the eligibility line. Running out of money at 78 is her problem.
The Bird-in-Hand Myth
The hesitation most people feel about delaying CPP is rooted in two beliefs, neither of which holds. The first is that the program might not be there. The CPP Investment Board's 2025 actuarial report projects the fund remains sustainable for at least 75 years, even under conservative assumptions about demographics and returns.
The second belief is opportunity cost. If Jennifer takes CPP at 65, she can stop drawing from the TFSA, let it grow for five more years, and have more capital at 70. The arithmetic does not support this. The additional $394 a month she gains by waiting compounds faster than the TFSA she would preserve by taking CPP early, especially when you account for sequence-of-returns risk in a modest portfolio.
Credit Splitting Is Automatic
One detail Jennifer missed until her daughter mentioned it: CPP credit splitting. Contributions made by both spouses during the marriage can be divided equally, regardless of who earned what. For many divorced women who spent years out of the workforce raising children, this provision materially raises their CPP entitlement. Service Canada processes the split upon request, and it applies even if the separation agreement says nothing about pensions.
Jennifer's final CPP statement, post-split, came in higher than she expected. Waiting until 70 now puts her monthly payment above $1,300. At 87, that difference is worth $94,000 in inflation-adjusted dollars compared to taking it at 65. She still works the pharmacy shift, still lives in the same one-bedroom apartment. The CPP decision, for once, is the easy part.
Jennifer turned 64 with $180,000 in her TFSA and nothing else. The marriage had ended two years earlier. The RRSPs, the house equity, the joint accounts, all split or sold. She works part-time now, $28,000 a year stocking shelves at a pharmacy in Oakville, and the plan, such as it was, involved taking CPP at 65 because that's what people do.
It's the wrong plan.
The Math Nobody Does
CPP at age 65 pays a maximum of $1,507.65 a month in 2026, though the average new recipient collects closer to $925. Jennifer's estimate, based on her Service Canada statement, sits at $940. If she waits until 70, that number climbs to $1,334, a 42% increase, compounding at 0.7% per month for every month past 65.
The question most retirees ask is whether they'll live long enough to break even. The answer, for someone in average health at 64, is yes. The break-even age for delaying CPP from 65 to 70 sits around 82. Canadian women who reach 65 have a life expectancy of 87. Jennifer is betting she will outlive her savings, which is the actual risk.
A $180,000 TFSA withdrawing $1,500 a month, with 3% real growth, depletes in roughly twelve years. She turns 76. If CPP starts at 65, she has $940 a month in inflation-protected income at that point. If she delayed to 70, she has $1,334. The gap is $394 a month, $4,728 a year, indexed to inflation, for the rest of her life.
This is longevity insurance that cannot be purchased at any price in the private annuity market. The extra $394 monthly starting at 70 buys her a guaranteed income stream no commercial product can replicate at any cost.
The GIS Complication
Delaying CPP does carry one genuine downside for low-income retirees. The Guaranteed Income Supplement, available to Old Age Security recipients with low incomes, reduces by 50 cents for every dollar of CPP above a modest threshold. A retiree with very little income at 65 might actually be better off taking CPP early and maximizing GIS during those years, because the clawback later erases much of the delay premium.
Jennifer does not qualify. Her part-time income, combined with TFSA withdrawals (which do not count as income for GIS purposes), puts her over the eligibility line. Running out of money at 78 is her problem.
The Bird-in-Hand Myth
The hesitation most people feel about delaying CPP is rooted in two beliefs, neither of which holds. The first is that the program might not be there. The CPP Investment Board's 2025 actuarial report projects the fund remains sustainable for at least 75 years, even under conservative assumptions about demographics and returns.
The second belief is opportunity cost. If Jennifer takes CPP at 65, she can stop drawing from the TFSA, let it grow for five more years, and have more capital at 70. The arithmetic does not support this. The additional $394 a month she gains by waiting compounds faster than the TFSA she would preserve by taking CPP early, especially when you account for sequence-of-returns risk in a modest portfolio.
Credit Splitting Is Automatic
One detail Jennifer missed until her daughter mentioned it: CPP credit splitting. Contributions made by both spouses during the marriage can be divided equally, regardless of who earned what. For many divorced women who spent years out of the workforce raising children, this provision materially raises their CPP entitlement. Service Canada processes the split upon request, and it applies even if the separation agreement says nothing about pensions.
Jennifer's final CPP statement, post-split, came in higher than she expected. Waiting until 70 now puts her monthly payment above $1,300. At 87, that difference is worth $94,000 in inflation-adjusted dollars compared to taking it at 65. She still works the pharmacy shift, still lives in the same one-bedroom apartment. The CPP decision, for once, is the easy part.
Sources
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