Goodbye to Retiring at 65 – The New Age for Collecting OAS & CPP Changes Everything in Canada

For decades, 65 has been the golden number for retirement in Canada — the age when citizens could expect to collect full Old Age Security (OAS) and Canada Pension Plan (CPP) benefits. But as life expectancy rises, economic conditions shift, and labour shortages intensify, Canada’s retirement landscape is undergoing a historic transformation. The traditional notion of “retiring at 65” is rapidly fading, replaced by a more flexible, complex, and often delayed system that encourages Canadians to work longer and collect benefits later for maximum financial security.

The federal government’s adjustments to OAS and CPP in 2025–2026 mark a turning point that will redefine when and how Canadians retire. These changes are reshaping financial planning, intergenerational wealth transfer, and the very definition of what it means to age with dignity in one of the world’s most developed economies.

Why the Retirement Age Is Changing

The foundation of Canada’s retirement system — OAS and CPP — was designed in the mid-20th century, when the average life expectancy hovered around 71. Today, it exceeds 82. That means Canadians are living roughly two decades longer after retirement, placing enormous pressure on public pension funds.

The federal government projects that by 2035, one in four Canadians will be over 65. The ratio of working-age citizens to retirees, which was 7:1 in 1970, is expected to fall to just 2:1 by 2035. This demographic shift has forced policymakers to reconsider the sustainability of universal benefits and the timing of their distribution.

The move toward extending the effective retirement age beyond 65 is not about taking away benefits — it’s about adapting the system to reflect longer lifespans, changing work patterns, and the financial realities of the modern era.

Understanding OAS and CPP: The Core of Canada’s Retirement Income

To understand how the changes affect Canadians, it’s important to review the two pillars of the public retirement system:

Program
Description
Eligibility
Key Benefits (2025 Rates)
Notes

Old Age Security (OAS)
A monthly payment funded by general tax revenues, designed to provide a basic income for seniors.
Canadian residents aged 65+ with at least 10 years of residency after age 18.
Up to $713.34/month (ages 65–74); $784.67/month (ages 75+).
Indexed quarterly to inflation.

Canada Pension Plan (CPP)
A contributory, earnings-based pension plan that replaces part of pre-retirement income.
Must have contributed to CPP through employment/self-employment.
Average retirement benefit: $772.71/month; maximum: $1,364.60/month.
Benefit increases 0.7% per month for each month deferred past 65 (up to age 70).

Together, OAS and CPP form the foundation of retirement income, supplemented by personal savings, employer pensions, or private investments.

The New Retirement Reality: Working Longer, Collecting Later

Under the new model gradually taking shape, the “normal retirement age” is effectively shifting toward 67–70. Canadians now have a clear incentive to defer their benefits to receive significantly higher monthly payments.

For example, delaying CPP from age 65 to 70 increases your benefit by 42%. Similarly, deferring OAS for the same period boosts payments by 36%. These are substantial increases — enough to bridge the inflation gap and ensure better financial protection in late life.

Here’s how it breaks down:

Age You Start CPP
Percentage of Full Benefit
Monthly Example (If Full = $1,000 at 65)

60
64%
$640

65
100%
$1,000

70
142%
$1,420

Age You Start OAS
Increase from 65 Base
Monthly Example (If Full = $700 at 65)

65
0%
$700

67
+14.4%
$801

70
+36%
$952

These adjustments reward those who remain in the workforce or delay their claims — a necessary policy evolution given Canadians’ increased longevity and healthier later years.

Rising Costs of Living: The Silent Driver Behind Retirement Shifts

Even if Canadians wanted to retire at 65, inflation and cost-of-living pressures make it increasingly difficult. In 2025, the average monthly expenses for seniors in major cities like Toronto, Vancouver, and Ottawa have risen significantly due to housing, healthcare, and food inflation.

Category
Average Monthly Cost (Single Senior, 2025)
Change Since 2020

Housing (Rent/Utilities)
$1,800
+29%

Food
$650
+34%

Healthcare & Prescriptions
$420
+25%

Transportation
$280
+19%

Miscellaneous/Leisure
$250
+12%

Total Monthly
$3,400
+26% overall

With these expenses, the average combined OAS + CPP benefit of around $1,500 per month covers less than half of a retiree’s basic needs — leaving many no choice but to continue working or rely on savings, family support, or the Guaranteed Income Supplement (GIS).

The Government’s Message: Flexibility and Financial Resilience

Ottawa isn’t officially “raising” the retirement age across the board — instead, it’s creating incentives that push Canadians to reconsider when to retire.

Federal officials have framed the shift as “empowering choice” rather than enforcing delay. Canadians can still start benefits as early as 60 (CPP) or 65 (OAS), but deferral now comes with significant long-term advantages.

Moreover, new digital tools like the My Service Canada Account (MSCA) retirement estimator help users calculate the impact of different retirement ages, encouraging informed decisions.

The Role of Private Savings and the Rise of “Phased Retirement”

Private and employer-based retirement savings are becoming crucial as government benefits alone fail to keep pace with living costs. According to Statistics Canada, fewer than 40% of working-age Canadians are covered by a registered workplace pension plan, meaning the rest must rely on RRSPs, TFSAs, and other savings vehicles.

To fill the gap, a growing number of employers are adopting phased retirement policies, allowing employees to gradually reduce their hours instead of fully exiting the workforce at once. This approach helps maintain income, social connections, and pension contributions — a win-win for both workers and employers facing labour shortages.

The Demographic Challenge: More Seniors, Fewer Workers

By 2030, more than 9.5 million Canadians will be over 65, compared to 6.8 million in 2020. The baby boomer generation, which began turning 65 in 2011, continues to swell the senior population, straining both public and private pension systems.

At the same time, the workforce is shrinking. The number of working-age Canadians per retiree is projected to fall sharply:

Year
Working-Age Canadians per Senior (65+)

1970
7.1

2000
4.5

2020
3.0

2035 (Projected)
2.1

This imbalance means fewer workers contributing to CPP while more retirees draw from it, intensifying fiscal pressures. The government’s adjustments aim to keep the system solvent without drastic tax increases or benefit cuts.

Key Changes to OAS and CPP for 2025–2026

While not a formal “increase in retirement age,” several policy adjustments effectively extend working years:

1. Enhanced Deferral Bonuses – Greater monthly incentives for delaying CPP and OAS to age 70.

2. Automatic Enrolment for Eligible Seniors – Simplified enrolment for those turning 65 to reduce administrative delays.

3. Stronger Income Testing for OAS – High-income seniors now face stricter clawbacks above $90,997 (2025 threshold).

4. CPP Enhancement Phase-In – Ongoing expansion of contribution rates (to 5.95%) and benefit accruals for higher earners.

5. GIS Modernization – Adjustments for seniors who continue part-time work to prevent benefit loss.

Real Stories: How Canadians Are Adapting

Across the country, older workers are rewriting the retirement playbook.

• Marjorie, 67, from Edmonton postponed OAS until age 68 to boost her monthly benefit. “With rent and groceries rising every year, the extra $100 a month really matters,” she says.

• David, 70, from Montreal, continues to work part-time as a consultant. “I enjoy staying active and earning CPP contributions for a higher benefit,” he explains.

• Raj and Lila, 64, from Toronto, both plan to delay CPP until 70. “We’ll rely on our RRSP for five years and enjoy higher lifelong payments later,” Raj says.

These stories reflect a growing trend: retirement is no longer a fixed date but a gradual, personalized process.

Gender and Inequality Factors

Retirement outcomes in Canada also vary significantly by gender, income level, and region.

Women, who often earn less and spend more years in unpaid caregiving, typically receive lower CPP benefits. According to federal data, the average CPP benefit for women is roughly 21% lower than that for men.

Meanwhile, Canadians in rural areas face higher travel costs for healthcare and fewer part-time work opportunities, making delayed retirement harder. Policymakers are increasingly urged to design gender-responsive and regionally balanced retirement policies.

The Psychological Shift: Redefining “Retirement”

Beyond finances, there’s a profound cultural shift happening. Canadians are reimagining retirement not as the end of work, but as a transition to new forms of purpose and flexibility.

Sociologists describe this as the “third age” — a phase of continued learning, part-time work, volunteering, and entrepreneurship. The surge in self-employment among Canadians over 60 underscores this trend.

Year
Self-Employed Canadians Over 60
% of Total Workforce

2000
312,000
5.8%

2010
420,000
6.7%

2025 (Est.)
620,000
9.2%

This evolution reflects a blend of necessity and aspiration: many work longer for financial stability, while others stay engaged for fulfillment.

Comparing Canada to Other Countries

Canada’s gradual shift mirrors trends in other developed nations facing aging populations:

Country
Standard Pension Age
Incentive to Delay
Notes

Canada
65 (effective shift to 67–70)
+0.7% CPP/month deferred
Voluntary delay encouraged

United States
67 (full SSA benefits)
+8%/year delayed
Similar deferral model

UK
66, rising to 67 by 2028
N/A
State Pension Age legally increasing

Australia
67 by 2026
Deferred Age Pension option
Tied to superannuation system

Germany
67 by 2031
Incremental rise
Mandatory increase

Canada remains one of the few countries allowing flexible retirement choices rather than enforcing a universal higher age — but the financial design clearly favors later claims.

Financial Planning Implications

With OAS and CPP changes reshaping the landscape, experts recommend a proactive approach to retirement planning.

Key Strategies:

• Estimate income needs using inflation-adjusted tools.

• Consider delaying benefits to maximize lifetime payouts.

• Optimize tax efficiency through RRSP-to-RRIF conversion timing.

• Balance withdrawal rates with investment returns.

• Reassess insurance, healthcare, and estate plans regularly.

Financial advisors increasingly emphasize longevity planning — preparing for a 30-year retirement horizon rather than the 15–20 years once assumed.

The Future of Retirement in Canada

Looking ahead, the idea of “retiring at 65” may soon feel as outdated as rotary phones. The future will likely bring:

• More hybrid work-retirement lifestyles.

• Stronger incentives for delayed benefits.

• Enhanced digital pension management.

• Greater integration between public and private savings.

• Expanded education around financial literacy for aging Canadians.

In essence, retirement will evolve into a dynamic phase of life — flexible, individualized, and often extending well into the 70s.

Conclusion

The phrase “Goodbye to retiring at 65” isn’t just a slogan — it’s the new reality for millions of Canadians. The age that once symbolized rest and reward is now the beginning of a new chapter defined by choice, adaptability, and extended longevity.

As OAS and CPP continue to evolve, Canadians must rethink not just when they retire, but how. The next generation of retirees will need to balance financial prudence with personal fulfillment, planning for a longer, more active, and more uncertain future.

Canada’s retirement system is not collapsing — it’s transforming. And while the adjustment may be challenging, it offers something previous generations didn’t have: the freedom to design retirement on your own terms.

Frequently Asked Questions (FAQ)

When will the new OAS and CPP changes take effect?

Most of the adjustments to OAS and CPP incentives are being phased in between 2025 and 2026, with increased deferral bonuses and higher income thresholds already in place.

Is the retirement age officially increasing from 65 to 67 in Canada?

No. The government has not officially raised the retirement age. However, new incentives encourage Canadians to delay collecting OAS and CPP until 67–70 to receive higher monthly payments.

Can I still start CPP or OAS at 65?

Yes. You can still begin collecting benefits at 65, but delaying them increases your monthly amount — up to 42% more for CPP and 36% more for OAS if deferred to age 70.

Why is Canada encouraging later retirement?

Canadians are living longer, and the ratio of workers to retirees is shrinking. Working longer and delaying benefits helps maintain the financial sustainability of pension programs.

What happens if I continue working after 65?

You can still contribute to CPP while working, which increases your future pension amount. OAS may be subject to income clawbacks if your annual income exceeds certain thresholds.