Afraid You'll Lose Out by Deferring CPP and OAS?
Let's start with something that's simply a fact, not an opinion: deferring CPP and OAS to age 70 is one of the most powerful tools Canadians have to protect themselves against the risk of living too long. Both benefits come with a guaranteed increase for every month you wait past 65, up to age 70 — CPP grows by 0.7% a month, OAS by 0.6%. That increase is locked in, government-guaranteed, and indexed to inflation for the rest of your life. If your biggest financial concern in retirement is outliving your money, deferring your CPP and OAS is one of the few tools built specifically to address it.
And yet, I hear the same hesitation from people who understand all of this perfectly well: “What if I defer, and then I die before I ever collect it? Don’t I just lose to the government?”
It's a completely understandable worry sitting right alongside a completely sound strategy. Deferring means turning down money you're entitled to today, in exchange for a larger, guaranteed amount later. If “later” never comes, it can feel like you made the wrong bet — like you handed the government a gift you'll never get back, all while drawing down more of your own savings in the meantime to cover the gap, leaving less behind for the people you care about. It's a fair worry to sit with, and it deserves a real answer rather than simply a reassurance. So let's look at it honestly — because it turns out the real picture is more nuanced, and more encouraging, than most people assume.
Why This Fear Feels So Real
There's a natural human tendency to weigh a potential loss more heavily than an equivalent gain. Passing up a benefit payment today feels like a loss happening right now, in a way that “a larger, more secure income for the rest of your life” doesn't quite match, even when the second one is worth more on paper. Deferral asks you to accept a concrete, immediate loss in exchange for an abstract, future benefit — and our instincts aren't naturally built to make that trade comfortably, even when it's the right one.
So the question worth asking isn't “does this fear make sense?” It surely does. The better question is: what do the numbers actually say about how much is at risk, and when?
What the Numbers Actually Show
Let's walk through a hypothetical scenario to illustrate the point — not real clients, just a model to help us see how this plays out. The husband is 63, the wife 61, both freshly retired. Between them, they hold $400,000 each in RRSPs, $120,000 each in TFSAs, and a joint non-registered investment portfolio worth $500,000. I compared two versions of their plan. In the first, they start CPP and OAS as soon as they each turn 65, drawing from their non-registered portfolio first and topping up from their RRSPs as needed to support their income. In the second, they defer both CPP and OAS to age 70. In both cases, they defer converting their RRSP to RRIF until 71.
At age 65, the difference in their estate, if both had passed away, was almost nothing — a few thousand dollars, not the dramatic loss the fear implies. But the risk isn't spread out evenly. It builds as retirement goes on, and it peaks right around age 70 — the year the deferred government benefits would have actually started arriving. If this couple had passed away at that point, deferring CPP and OAS would have left their after-tax estate about $100,000 smaller than if they'd simply started their benefits at 65. That's the real version of the fear: not “any early death costs you,” but specifically, “dying in the stretch right before your bigger cheques start is the costliest possible timing.”
But here's where it gets encouraging. I ran the same age-70 scenario a third way — still deferring CPP and OAS to 70, but this time coordinating withdrawals deliberately in the meantime. Instead of leaving the RRSP untouched and withdrawn as needed, this version draws from both the RRSP and the non-registered portfolio together to cover living expenses, with extra each year to maximize TFSA contribution room — all while keeping income below a specific marginal tax bracket, rather than letting it drift upward by accident. The result: rather than a $100,000 behind, this couple's after-tax estate came out about $50,000 ahead of the version that never deferred the government benefits at all. At the exact moment the fear is most justified, a coordinated withdrawal strategy didn't just close the gap — it turned a real loss into a real gain, a swing of roughly $150,000.
And what happens if this couple lives a long life? Past their early-eighties, even the simplest deferral-CPP-and-OAS-only plan pulls ahead of not deferring at all. And the gap keeps growing the longer they live. And interestingly, if they live well into their nineties, the more patient, defer-CPP-and-OAS-and-hands-off-RRSP approach eventually edges back ahead of the deliberate withdrawal strategy, by a modest amount. That's not a case against coordinated withdrawals — it's just a reminder that how long you and your spouse live is always going to be part of this equation, no matter which path you choose.
Why This Isn't a Formula
And I want to be careful here, because this was one modelled household, with its own assets, income sources, and assumptions. Your numbers — how much is in your RRSP versus your TFSA versus other savings, what your income looks like today, whether you have a spouse who might inherit your RRSP tax-deferred — will shape this differently. The lesson isn't “defer and melt down your RRSP, and you'll be fine.” It's that the fear of dying too early to benefit from deferral is concentrated in a specific window, and that window can often be addressed directly, rather than avoided by skipping deferral altogether.
A Few Practical Habits
Locate your own regret window. Rather than reacting to a general fear, ask what your own numbers show. The riskiest years are rarely the whole retirement — they tend to cluster right before deferred benefits begin.
Don't let the RRSP sit idle by default. If you're deferring CPP and OAS, that gap in guaranteed income is often exactly the right time to be deliberate about coordinating withdrawals from your RRSP and other savings — not because emptying your RRSP quickly is always the goal, but because doing nothing has a cost too.
Let the modelling answer the fear, not the other way around. A decision this important deserves your actual numbers, not a mental shortcut built around the worst-case story.
A Simple Next Step
Wanting some assurance that a big financial decision won't backfire if things don't go as planned is not an unreasonable thing to want — it's just being human. But that assurance is available. It just comes from modelling your own numbers, not from avoiding the decision. If the fear of “losing out” has kept you from deferring your CPP or OAS, or from thinking carefully about your RRSP in the meantime, let's sit down and look at what your own timeline actually shows. Sometimes the most reassuring thing a plan can do is show you exactly where the real risk is — and exactly how small it can become once you address it directly.
The comments contained herein are a general discussion of certain issues intended as general information only and should not be relied upon as tax or legal advice. Please obtain independent professional advice, in the context of your particular circumstances. This newsletter was written, designed and produced by Vincent Lam, CFP®, Financial Planner with Intentional Retirement Planning and Investia Financial Services Inc., and does not necessarily reflect the opinion of Investia Financial Services Inc.
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