What Canadians Need to Know About Government Benefits, Breakeven Ages, and Balancing Security with Flexibility

Government Benefits: A Reliable Foundation, Not the Full Plan

A common question clients ask me is, “How much will CPP and OAS cover in my retirement?”  It’s a fair question.

After contributing for decades, many expect these programs to fund a large part of their lifestyle. But for most Canadians, CPP and OAS are a helpful base, not the full solution.

These government benefits are inflation-protected and guaranteed for life, which makes them attractive. But unless you know what you’re actually entitled to, it is hard to know where you stand.

Check Your Personal Entitlements

One of the most important steps in planning for retirement is confirming your actual CPP and OAS amounts through your My Service Canada Account.

The maximum 2025 benefits are $15,678.84 annually from CPP and $8,674.68 from OAS. Combined, this could mean up to $24,353.52 per year for an individual or $48,707.04 per year for a couple.

Do not assume you will receive the maximum. Many people receive less than the maximum CPP or OAS for reasons that are not always obvious. Here are a few:

• You earned dividends instead of salary from a corporation. CPP is only paid on employment income.
• You took maternity or paternity leave and had years of lower earnings.
• You experienced periods of illness or disability that limited your ability to work.
• You were self-employed and contributed at a lower rate or had variable income.
• You lived or worked outside of Canada, which can affect OAS residency requirements.

If you qualify for less than the maximum, you will need to account for a larger shortfall from personal savings.

The Trade-Off: Guaranteed Income versus Flexibility and Liquidity

Some people choose to delay CPP or OAS to receive a higher monthly payment later. CPP increases by 8.4 percent per year if delayed beyond age 65, and OAS increases by 7.2 percent per year. That can result in significantly more income for life if you live well into your 80s or beyond.

However, deferring these benefits comes with a trade-off. You will need to rely more heavily on your personal savings in the early years of retirement. This reduces your flexibility later, especially if you draw down your RRSPs or investment accounts more quickly than planned.

It can also affect your ability to respond to unexpected needs or opportunities in the future.

Breakeven Age and the Fear of “Leaving Money on the Table”

A common concern I hear is, “What if I delay CPP and then pass away early? Will I lose out on everything I paid into it?”

This is where the concept of a breakeven age becomes useful. The breakeven age is the point where the total value of delaying your benefits surpasses the total you would have received by taking them earlier.

For CPP, the breakeven age is often between 75 and 77. For OAS, it tends to be a bit earlier, around age 74. If you live longer than that, delaying can lead to more income over your lifetime. If you pass away earlier, you may receive less overall.

Clients also worry about what happens to these benefits if they pass away. It is important to know:

• CPP includes survivor benefits, but your spouse will not receive the full amount you were entitled to. It is based on their age and contribution history, and the total benefit is capped.
• OAS has no survivor benefit. It stops upon death.

For individuals who want to maximize household income security, these limitations are important to consider. Delaying may make sense in some cases, but not if it puts your spouse or estate in a more vulnerable position.

Bridging the Gap with Personal Savings

Once you know how much CPP and OAS will contribute to your retirement income needs, you can calculate how much is to come from other sources.

These sources could include:

• RRSPs or RRIFs
• TFSAs
• Non-registered investments
• Rental or real estate income
• Corporate funds or retained earnings
• Part-time work or consulting income

If CPP and OAS only cover 30 to 50 percent of your lifestyle needs, then your personal investments will need to reliably generate the remaining 50 to 70 percent. Knowing this early allows you to plan your savings, tax strategies, and withdrawal approach with much more precision.

Know Your Risk Comfort Zone

Retirement planning is not just about numbers. It is about matching your strategy to your personality.

If you are more risk-averse, you may prefer to maximize guaranteed income through deferral strategies, annuities, or fixed-income allocations. You might also prefer to build a larger cash reserve to avoid relying on market returns for essentials.

If you are more comfortable with investment risk, you may focus on portfolio growth and use your investments to generate income in the early years. This offers more flexibility but also requires more active management and the ability to weather market fluctuations.

There is no right or wrong answer.  The best answer is the approach that fits your goals, your values, and your peace of mind.

Final Thoughts: Build Your Plan Around Real Numbers

Too many people make retirement decisions based on assumptions. They guess at what they will receive from CPP or OAS and hope their savings will last. But clarity is far more powerful than guesswork.

When you know the actual numbers, you can build a plan that reflects your reality, not just a “best-case” scenario.

Whether you prioritize flexibility or guaranteed income, the best retirement plan is one that is built around what you know, what you value, and what makes you feel secure in the years ahead.

I help DIY investors in Atlantic Canada gain financial confidence.  Contact me today to schedule a free consultation and start your journey towards financial independence.

Connect with David on LinkedIn.

Disclaimer: Our content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment and tax-related decisions. You should seek independent financial advice from a financial advisor near you.