Key timing levers
🇺🇸 Social Security
- • Early: Age 62 (75% of full benefit)
- • Full retirement: Age 67 (100% of benefit)
- • Delayed: Age 70 (132% of benefit)
- • Annual increase: ~8% per year of delay
- • Inflation protection: Cost-of-living adjustments
🇨🇦 Canada Pension Plan
- • Early: Age 60 (64% of full benefit)
- • Standard: Age 65 (100% of benefit)
- • Delayed: Age 70 (142% of benefit)
- • Annual increase: 7.2% per year of delay
- • Plus OAS: Starts at 65, can defer to 70
Bridge strategy: spend portfolio early, delay pensions
Why This Works
Reduces sequence of returns risk
Less portfolio pressure during vulnerable early retirement years
Locks in higher lifetime income
Guaranteed 7-8% annual increases beat most investment returns
Provides longevity insurance
Higher monthly payments for life, especially valuable if you live long
Breakeven analysis
| Country | Early vs Normal | Normal vs Delayed | Breakeven Age |
|---|---|---|---|
| US Social Security | 62 vs 67 | 67 vs 70 | ~78-82 years |
| Canada CPP | 60 vs 65 | 65 vs 70 | ~74-79 years |
Breakeven Considerations
If you expect average longevity: Delaying often wins financially
If you have serious health issues: Taking benefits early may be better
Don't forget inflation protection: Government pensions include cost-of-living adjustments
Consider opportunity cost: What could you earn investing early benefits?
Tax implications and benefits coordination
🇺🇸 United States
Social Security taxation
Up to 85% taxable depending on total income
IRMAA thresholds
Medicare premium surcharges start at $103,000 income (single)
Roth withdrawals coordination
Use tax-free Roth funds to stay under income thresholds
🇨🇦 Canada
CPP is fully taxable
Included in taxable income at marginal rate
OAS clawback
Reduces at incomes over $86,912 (2024), eliminated at $142,609
GIS eligibility
Income-tested benefit affected by all pension income
Coordination strategies
Strategy 1: Full Deferral
Delay CPP/SS to age 70 for maximum benefits
Use portfolio withdrawals and cash to bridge gap
Best for: Good health, adequate savings, longevity in family
Strategy 2: Partial Bridge
Take pensions at full retirement age (65-67)
Reduces portfolio withdrawal pressure moderately
Best for: Average health, moderate savings, balanced approach
Strategy 3: Early Claiming
Take benefits early (60-62) despite reduced payments
Preserves portfolio for later years or legacy
Best for: Health concerns, large portfolio, prefer certainty
Survivor benefit considerations
Protecting the Surviving Spouse
Higher earner delays
Surviving spouse gets the higher of the two Social Security benefits
Lower earner starts early
Provides some income while higher earner's benefit grows
CPP survivor benefits
Surviving spouse gets combination of their CPP plus survivor portion
Sample coordination plan
Example: $1M Portfolio, Retire at 62
Ages 62-67: Bridge Phase
- • Withdraw $50,000/year from portfolio (5% initially)
- • Portfolio balance: $1M → ~$850K (withdrawals + modest growth)
- • No Social Security/CPP yet
Ages 67-70: Transition Phase
- • Continue delaying Social Security for 8%/year growth
- • Withdraw $40,000/year from portfolio
- • Portfolio balance: ~$750K
Age 70+: Optimized Phase
- • Start maximized Social Security: ~$45,000/year
- • Reduce portfolio withdrawals to $20,000/year
- • Total income: $65,000 with lower sequence risk
When NOT to delay pensions
⚠️ Consider Taking Benefits Early When:
- • Serious health issues: Life expectancy significantly below average
- • Immediate cash needs: Portfolio insufficient to bridge to delayed benefits
- • Very large portfolio: Don't need optimization, prefer certainty of early benefits
- • High current tax rates: Better to realize pension income in low-tax years
- • Extreme market valuations: Bear market may make bridging strategy risky
Action planning
Calculate benefits at different ages
Use government calculators to model 62/65/70 claiming scenarios
Simulate tax implications
Model how pension income affects overall tax burden and benefit eligibility
Stress-test portfolio withdrawal plan
Ensure portfolio can sustain bridging strategy through bear markets
Consider partial annuitization
Compare delayed pensions vs immediate annuities for guaranteed income
Review annually
Health changes, market performance, and laws evolve—stay flexible
💡 Pro Tips
- • Spousal coordination: Different strategies for each spouse based on earnings history
- • File and suspend ended: US no longer allows this strategy as of 2016
- • Earnings test: Working while collecting early SS reduces benefits temporarily
- • Tax withholding: Consider voluntary withholding on pension benefits
Frequently Asked Questions
Is delaying pensions always the best strategy?
Not always. Health, immediate cash needs, tax considerations, and portfolio size all matter. The 7-8% annual increases are excellent, but only valuable if you live long enough to benefit.
Should I work while claiming Social Security/CPP?
In the US, working while collecting early SS (before full retirement age) reduces benefits temporarily via earnings test. In Canada, you can work and collect CPP without penalty, and it may increase future benefits through additional contributions.
What if markets crash during my bridging strategy?
This is exactly why delaying pensions can be valuable—it provides a stabilizer. You can reduce portfolio withdrawals and let the delayed pension credits continue growing while markets recover.
How do I coordinate this with RMDs?
Plan for required minimum distributions starting at age 73 (US). The combination of RMDs plus pension income may push you into higher tax brackets, making Roth conversions valuable in your 60s.