Delayed retirement is a growing trend, and it's not just about staying in the workforce longer. It's about making the most of those extra years, financially and otherwise. As Christopher Liew, a financial expert and former advisor, points out, delayed retirement can be a strategic move that significantly improves your financial situation and overall well-being. Here's a deeper dive into why and how this approach can benefit you.
The Numbers Speak
Statistics Canada reveals a fascinating shift in retirement trends. In 2025, the labour force participation rate for Canadians aged 65 and older hit a record high of 15.2%, with nearly 1.2 million seniors contributing to the workforce. The average retirement age climbed to 65.4 years, up from 60.9 in 1997, and self-employed individuals retire even later, at 68.4 years on average. This trend is driven by various factors, including higher living costs, longer life expectancy, and a desire to continue doing what they love.
Financial Benefits of Delayed Retirement
1. Boosting CPP and OAS
One of the most significant advantages of delaying retirement is the potential to increase your Canada Pension Plan (CPP) and Old Age Security (OAS) benefits. According to the Government of Canada, delaying your CPP retirement pension past 65 increases your payment by 0.7% per month, reaching a permanent 42% boost at 70. Similarly, OAS increases by 0.6% per month, resulting in a maximum 36% permanent increase at 70. This is a powerful incentive for those who can afford to work a few extra years, as it significantly enhances their retirement income.
2. Avoiding the OAS Clawback
Earning a good income past 65 can lead to a significant tax benefit. The OAS clawback kicks in when your net income exceeds $93,454, disappearing entirely around $152,000 for individuals aged 65 to 74. By deferring OAS to 70, you avoid this clawback during your highest-earning years and receive a larger, inflation-indexed cheque later when your income drops. This is a strategic move for those who want to maximize their tax efficiency.
3. Maximizing RRSP and TFSA Contributions
Working longer provides an opportunity to contribute more to your Registered Retirement Savings Plan (RRSP) and Tax-Free Savings Account (TFSA). You can contribute to your RRSP until the end of the year you turn 71, and your TFSA limit accumulates regardless of your work status. This means that every extra year of earnings allows you to top up these accounts, potentially adding tens of thousands in tax-sheltered savings before retirement.
4. Pension Income Tax Credit
Seniors aged 65 and older can claim a non-refundable federal tax credit on up to $2,000 of eligible pension income, plus a matching provincial credit. This credit is often overlooked because recipients are still drawing a paycheck. By generating at least $2,000 in eligible pension income annually, you can effectively save on taxes, making it a valuable benefit for those who continue working past 65.
5. Phased Retirement
Instead of a sudden retirement, many Canadians are opting for a phased approach. Part-time work, consulting, or seasonal gigs in the late 60s can provide a smoother transition and test your retirement budget. Wage growth for workers 55 and older outpaced other age groups in March 2026, indicating that older workers are not just hanging on but being rewarded for their continued contribution.
Conclusion
Delayed retirement is not just about extending your working years; it's about strategic planning. By deferring CPP and OAS, maximizing RRSP and TFSA contributions, and considering a phased retirement, you can significantly enhance your financial situation and retirement experience. As Liew suggests, if you're going to work a few extra years, you might as well get paid twice for them. This approach allows you to build a stronger pension, a more robust portfolio, and a smoother transition into retirement, ultimately leading to a more secure and fulfilling future.
