Canada Retirement Age Rules 2025: What Changes at 60, 65, and 70?

As we approach 2025, Canadians may find themselves navigating changes to retirement rules that could affect their financial planning, pension eligibility, and overall retirement goals. While retirement in Canada is often seen as a milestone, the rules governing when and how Canadians can retire continue to evolve. Depending on whether you’re looking at the age of 60, 65, or 70, there are some key considerations that could impact your retirement decisions.

In this article, we’ll break down the important changes that are taking place, particularly focusing on how the retirement age thresholds affect pension benefits, eligibility for Old Age Security (OAS), and Canada Pension Plan (CPP) payouts. Whether you’re thinking about retiring early or planning for a longer work life, understanding these changes will help you make informed choices.

Changes to the Canada Pension Plan (CPP)

The Canada Pension Plan (CPP) is a key component of retirement income for many Canadians. While the standard age to begin receiving CPP is 65, there are options to begin receiving your pension as early as age 60, or as late as age 70. Here’s what you need to know:

Starting CPP at 60

In 2025, the option to start receiving your CPP pension at age 60 remains available. However, it’s important to remember that there will be a reduction in the amount you receive if you start before 65. The reduction is 0.6% per month, or 7.2% per year, for every year you take your pension early. This means if you start your CPP at age 60, you could see a reduction of up to 36% from what you would receive at age 65.

While this may seem like a substantial decrease, it may make sense for some people who need immediate income or those who are in good health and expect to live only a short time into retirement. The decision to take CPP early should be based on personal circumstances, including health, financial needs, and the potential longevity of your retirement savings.

Starting CPP at 65

The most common option is to start receiving CPP benefits at the age of 65. This ensures that you’ll receive your full pension amount, without any reductions or penalties. However, for some, continuing to work until age 65 may be necessary to ensure they have enough income to sustain their retirement lifestyle.

Starting CPP at 70

In 2025, you’ll still be able to delay your CPP benefits until age 70, which results in an increase in your monthly payment. For each month after 65 that you delay your CPP pension, your benefit will increase by 0.7%, up to a maximum of 42% more at age 70. This can make a significant difference for individuals who are financially secure enough to wait and want a higher monthly benefit later in life. It also makes sense for individuals who anticipate living longer and want to ensure they receive larger payments for as long as possible.

The Impact of Old Age Security (OAS)

Old Age Security (OAS) is another government program that provides income to Canadians aged 65 and older. In 2025, the OAS rules and eligibility criteria largely remain the same, but it’s important to understand the basics and how the program works.

OAS Eligibility at 65

OAS payments generally begin at age 65, provided you meet the residency requirements. Canadians who have lived in the country for at least 10 years after the age of 18 are eligible for OAS, but the full benefit is only available if you’ve lived in Canada for 40 years or more after turning 18. If you’ve lived in Canada for a period of time less than 40 years, you will receive a prorated amount based on your years of residence.

The OAS Clawback

While OAS is a universally accessible benefit for those 65 and older, the amount you receive can be reduced if your income exceeds a certain threshold. In 2025, the OAS clawback will still apply. If you earn more than a set income level, you may have to repay part or all of your OAS benefits. For individuals with a net income above $79,845 (for 2025), the clawback begins, and for those earning over $128,137, the entire benefit could be clawed back.

This makes it important to plan for your income in retirement to avoid paying back OAS if you are living on a higher income.

OAS at 70

Unlike the CPP, there is no financial incentive to delay OAS past age 65. You will not receive an increased amount by deferring your OAS payments. However, if you prefer to delay OAS for other personal reasons, such as wanting to continue working or having sufficient income from other sources, you can choose to postpone receiving your OAS benefits. Your OAS will still be available once you reach the age of 70, but you will not see an increased monthly amount as you would with the CPP.

Changes in Retirement Savings and Taxation

As Canadians approach retirement, their accumulated savings in programs like RRSPs (Registered Retirement Savings Plans) and TFSA (Tax-Free Savings Accounts) play a crucial role. However, tax rules around these accounts and the amount you can withdraw are subject to change over time. It’s important to remain updated on the latest regulations regarding tax treatment of retirement savings.

In 2025, Canadians who are still working at 60 or 65 may have the opportunity to contribute to their RRSPs and build more retirement savings, although the ability to contribute will phase out after age 71. By age 71, RRSPs must be converted into a RRIF (Registered Retirement Income Fund) or annuity, and the withdrawals from these accounts will be subject to tax.

For those 70 and older, there’s still an opportunity to contribute to a TFSA, as there’s no age limit for TFSA contributions. This can be an advantageous way to continue saving tax-free for retirement, especially for those with retirement income that might be subject to taxation.

Social and Economic Changes by 2025

In 2025, Canadians will also face broader economic and social changes that could influence their retirement plans. These include:

• Inflation: The cost of living in Canada continues to rise, making retirement planning more complex. As the price of goods and services increases, individuals may need to save more or plan for a later retirement age to maintain their standard of living.
• Healthcare: The aging population of Canada means that healthcare costs will become a growing concern. Even with universal healthcare, additional health-related costs such as medications, private insurance, and long-term care may require extra financial planning.
• Workforce Changes: The shift toward gig economy jobs and flexible work arrangements could allow for earlier or later retirement depending on personal preferences. Some people may choose to phase into retirement, working part-time or on contract for a few years past the traditional retirement age.

Conclusion

Retirement in Canada is changing, and with these changes comes more flexibility in how and when individuals can retire. Whether you are considering retiring at age 60, 65, or 70, each option offers distinct benefits and trade-offs. While taking your Canada Pension Plan at age 60 provides an early option, it comes with reductions that can impact your long-term financial stability. Delaying your benefits until 70 increases your payout, but this requires planning for additional years of work.

Old Age Security remains a key part of retirement income, but the clawback for higher earners means you’ll need to consider your overall income in retirement. With adjustments to the tax treatment of retirement savings accounts and ongoing changes in the broader economy, planning for retirement at any age requires careful thought and consideration.

Understanding the rules around retirement age and pensions will help ensure that Canadians can enjoy their golden years with peace of mind and financial security. Whether you’re planning to retire early or later, 2025 will bring new opportunities and challenges to the retirement landscape.