Delay CPP and OAS with a Reverse Mortgage: Is It Worth It?

"Should I take CPP at 60 and get less, or wait until 70 and get 42% more — but how do I pay my bills for the next five years?" This is the defining retirement timing question for hundreds of thousands of Ontario homeowners. The math on delaying Canada Pension Plan (CPP) and Old Age Security (OAS) is overwhelmingly positive for those who can afford to wait. The problem is that most retirees cannot afford five years without income. A reverse mortgage changes that equation entirely — it creates a tax-free bridge that lets you defer both CPP and OAS to age 70, potentially adding tens of thousands of dollars in lifetime benefits.

This article is for educational purposes only and does not constitute financial advice.

How CPP Deferral Works — and Why the Numbers Are So Compelling

The standard age to begin receiving CPP is 65, but you can start as early as 60 or as late as 70. The financial incentive to wait is significant: CPP is reduced by 0.6% per month (7.2% per year) for each year you take it before 65, and it is increased by 0.7% per month (8.4% per year) for each year you delay after 65.

That means deferring CPP from 65 to 70 increases your monthly benefit by a permanent 42%.

CPP Start Age	Adjustment	Monthly Benefit (if max at 65 = $1,364)	Annual Benefit
60	−36%	$873	$10,476
62	−21.6%	$1,069	$12,828
65	0% (standard)	$1,364	$16,368
67	+16.8%	$1,593	$19,116
70	+42%	$1,937	$23,244

The difference between taking CPP at 65 versus 70 is $573 per month — or $6,876 more per year, every year, for life. Over a 20-year retirement from age 70 to 90, that deferral adds approximately $137,520 in additional CPP income (not accounting for inflation indexing, which makes the real number even higher).

According to Service Canada, the CPP retirement pension is adjusted for inflation annually using the Consumer Price Index, meaning the 42% increase from deferral compounds further each year through cost-of-living adjustments.

OAS Deferral: Another 36% Permanent Increase

Old Age Security follows a similar logic. OAS can begin at age 65, but you can defer it until age 70. The increase is 0.6% per month, or 7.2% per year — resulting in a permanent 36% increase if you wait the full five years.

OAS Start Age	Adjustment	Monthly Benefit (if max at 65 = $727)	Annual Benefit
65	0% (standard)	$727	$8,724
66	+7.2%	$779	$9,352
68	+21.6%	$884	$10,610
70	+36%	$989	$11,863

Deferring OAS from 65 to 70 adds $262 per month, or $3,139 per year. Combined with CPP deferral, you gain $835 per month — over $10,000 per year — for life.

According to the Government of Canada, OAS benefits are reviewed quarterly and adjusted to reflect increases in the Consumer Price Index, providing built-in inflation protection that makes deferral even more valuable for long-lived retirees.

The Bridge Problem: Five Years Without Benefits

The math for deferral is clear. The problem is practical: if you stop working at 65, you need income to live on from 65 to 70 while you wait for the enhanced CPP and OAS to begin.

Without CPP and OAS from 65 to 70, you forgo approximately:

Benefit	Monthly Amount (at 65)	5-Year Total Foregone
CPP (average)	$800	$48,000
OAS (maximum)	$727	$43,620
Combined	$1,527	$91,620

You need to find roughly $91,000 to $125,000 (depending on your actual benefit amounts) to cover the five-year gap. Traditional approaches — drawing down RRSPs, selling investments, or taking on part-time work — each have drawbacks. RRIF withdrawals are fully taxable and can trigger the OAS clawback when you eventually begin receiving OAS. Part-time work may not be feasible or desirable. Selling investments depletes your portfolio permanently.

Why a Reverse Mortgage Is the Ideal Bridge

A reverse mortgage from HomeEquity Bank (CHIP), Equitable Bank, or other lenders like Bloom Financial solves the bridge problem with several unique advantages:

• ✓ Tax-free: Reverse mortgage proceeds are a loan, not income — they do not appear on your CRA tax return
• ✓ No monthly payments required during the bridge period (or ever)
• ✓ No impact on future OAS or GIS eligibility
• ✓ You stay in your home throughout
• ✓ The cost of the bridge loan is finite and quantifiable

The Full Math: Bridge Cost vs. Lifetime Benefit Gain

Let us model a realistic Ontario scenario. Margaret is 65, owns a home worth $750,000 with no mortgage, and her average CPP entitlement at 65 is $1,000/month. Her OAS would be $727/month at 65.

The Bridge Loan

Margaret takes a reverse mortgage of $120,000 to cover five years of living expenses from 65 to 70, drawing $2,000/month. At a reverse mortgage rate of 6.89%, the balance after five years (with compounding on drawn amounts) is approximately $142,000.

The Benefit Gain

Scenario	Monthly CPP + OAS	Annual Total	Age 70–90 Total (20 years)
Take at 65	$1,727	$20,724	$414,480
Defer to 70 (with bridge)	$2,349	$28,188	$563,760
Difference	+$622/month	+$7,464/year	+$149,280

Margaret's reverse mortgage bridge cost her approximately $142,000 in accumulated loan balance. Her lifetime benefit gain from deferral is approximately $149,280 — and that is before inflation indexing, which adds substantially more over 20 years.

Net gain from the deferral strategy: approximately $7,000 to $50,000+, depending on how long Margaret lives and how inflation adjustments compound.

The Breakeven Point

The breakeven age — when the cumulative extra benefits from deferral exceed both the foregone benefits during the bridge years and the cost of the reverse mortgage — is typically around age 82 to 84. Given that the average life expectancy for a 65-year-old Canadian woman is approximately 87, the odds strongly favour deferral.

Age at Death	Net Gain (Loss) from Deferral Strategy
75	−$55,000 (died too soon)
80	−$12,000 (near breakeven)
83	+$8,000 (breakeven crossed)
85	+$23,000
90	+$57,000
95	+$95,000+

When This Strategy Does NOT Make Sense

The deferral-plus-reverse-mortgage strategy is not universally optimal. It does not make sense if:

• ✗ You have a serious health condition that significantly reduces life expectancy — the breakeven point requires living to your early 80s
• ✗ Your home equity is limited and you need the reverse mortgage capacity for other essential purposes (healthcare, debt elimination)
• ✗ You already have ample TFSA or non-registered savings to bridge the gap without borrowing
• ✗ You are already receiving GIS at 65 — deferring OAS means deferring GIS as well, and GIS cannot be deferred independently
• ✗ Your CPP entitlement is very low (under $400/month at 65) — the absolute dollar gain from a 42% increase on a small base may not justify the bridge cost

The GIS Consideration

Guaranteed Income Supplement (GIS) recipients face a unique dilemma. GIS is available only to OAS recipients, so deferring OAS means forgoing GIS during the deferral period. For low-income seniors, GIS can provide up to $1,086/month (single) — losing this for five years could outweigh the deferral benefit. Rick Sekhon can model your specific GIS situation to determine whether deferral makes sense.

Comparing the Deferral Strategy to Alternatives

Bridge Strategy	Tax Impact	OAS/GIS Impact	Monthly Cost	Risk
Reverse mortgage bridge	None	None	None	Loan balance grows
RRIF drawdown	Fully taxable	Can trigger clawback	None (but tax drag)	Portfolio depletion
Part-time work	Taxable income	Counts toward thresholds	Time commitment	Health/availability
TFSA drawdown	None	None	None	Depletes savings
Line of credit (HELOC)	None	None	Monthly interest payments	Payment obligation

The reverse mortgage and TFSA approaches are both tax-neutral, but the reverse mortgage preserves your TFSA for true emergencies while using home equity — an asset that many retirees would not otherwise access. For a detailed comparison of reverse mortgages and HELOCs, see our reverse mortgage vs HELOC guide.

How to Implement This Strategy with Rick Sekhon

The CPP/OAS deferral strategy requires careful planning and precise timing. Here is how Rick Sekhon, a licensed Ontario reverse mortgage broker, structures this for clients:

1. Assessment at age 63–64: Review CPP Statement of Contributions, estimate OAS entitlement, and obtain a reverse mortgage pre-qualification from CHIP or Equitable Bank
2. Bridge calculation: Determine exact monthly income needed from 65 to 70 and the total reverse mortgage draw required
3. Application at 64–65: Secure the reverse mortgage before turning 65, with draws structured to begin when CPP/OAS would have started
4. Staged draws: Rather than taking the full $120,000+ at once, arrange periodic draws to minimize compounding — only borrow what you need each quarter or year
5. Deferral confirmation: Formally defer CPP and OAS through Service Canada
6. Review at 70: Once enhanced CPP and OAS begin flowing, assess whether to make voluntary interest payments on the reverse mortgage or let it continue accruing

FSRAO (Financial Services Regulatory Authority of Ontario) requires independent legal advice before closing any reverse mortgage, ensuring you fully understand the terms.

The OSFI Factor: Why This Strategy Is Well-Timed

OSFI (Office of the Superintendent of Financial Institutions) has maintained conservative lending guidelines that keep reverse mortgage loan-to-value ratios manageable. This means the bridge loan amount ($120,000–$150,000) is well within typical borrowing limits for Ontario homeowners with properties valued at $500,000 or more, leaving substantial remaining equity.

For those interested in how current rates affect this strategy, see our reverse mortgage interest rates guide.

FAQ

Is delaying CPP to 70 always better than taking it at 65? Not always. The deferral strategy favours those who live past approximately age 82–84 (the breakeven point). If you have significant health concerns that reduce expected longevity, taking CPP at 65 — or even 60 — may result in higher total lifetime benefits. The reverse mortgage bridge only makes sense if the deferral itself is advantageous.

Can I defer CPP but not OAS, or vice versa? Yes. CPP and OAS deferral decisions are independent. Some retirees choose to defer CPP (with its 42% increase) but take OAS at 65 (with its 36% increase for deferral). The optimal combination depends on your income level, GIS eligibility, and personal circumstances.

Does the reverse mortgage bridge affect my credit score? No. Reverse mortgages do not require credit checks for qualification and are not reported to credit bureaus as revolving debt. Your credit score remains unaffected.

What if home values decline during the bridge period? Reverse mortgages in Canada include a no-negative-equity guarantee — you will never owe more than the fair market value of your home at the time of sale. Even if your home value drops, the bridge strategy cost is capped. The enhanced CPP and OAS benefits, however, are guaranteed for life regardless of what happens to real estate.

Can I use this strategy if I still have a small mortgage on my home? Yes, but the existing mortgage must be paid off from the reverse mortgage proceeds first. If you owe $80,000 on your home and need a $120,000 bridge, you would need a reverse mortgage of at least $200,000. Rick Sekhon can calculate whether your equity supports both requirements.

What happens to the reverse mortgage balance after I turn 70? Nothing changes — the reverse mortgage continues as before, with interest compounding on the balance. You are never required to make payments. Many clients choose to use a portion of their enhanced CPP and OAS to make voluntary interest-only payments, which keeps the balance from growing further. Others simply let it accrue and settle the balance from their estate.

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Speak to a licensed mortgage professional. Independent legal advice is required before closing a reverse mortgage in Ontario.

Get your free Ontario Reverse Mortgage Guide →

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This content is for illustrative purposes only. Rates may vary. Call Rick Sekhon for the best rates and more information.