Bridge-to-Retirement Strategy: Funding the Gap Before CPP and OAS

Many Canadians stop working before they start their government pensions, and that gap is where a surprising amount of retirement planning happens. Whether you retire at 58, 60, or 62, you may choose to delay CPP and OAS for several years in order to receive larger payments for the rest of your life. A bridge-to-retirement strategy is simply the plan for living comfortably during those in-between years, usually by drawing on your own savings first.

This article is for Canadians in Ottawa and across Ontario who are retiring, or hope to retire, before their pensions begin. We will explain why bridging can be worthwhile, how the timing of CPP and OAS changes the maths, and how to sequence withdrawals so you manage tax and protect your benefits along the way.

What a bridge strategy is and why it matters

A bridge strategy funds the years between your last paycheque and the start of your government pensions. The core idea is a deliberate trade: you spend down accessible savings early so that you can delay CPP and OAS and lock in permanently higher guaranteed income for life.

This matters because both pensions reward patience. The increases are not trivial, and because they last your whole life and are at least partly protected against inflation, delaying effectively buys you more guaranteed, inflation-aware income than almost any product could. The catch is that you need enough savings to live on in the meantime, which is precisely what the strategy plans for.

How delaying CPP and OAS changes the numbers

The timing decisions are the engine of a bridge strategy. Both pensions can start as early as 60 (CPP) or 65 (OAS), or be deferred, and the adjustments are significant.

Pension	Earliest start	Standard	Deferral effect at 70
CPP	60, reduced about 0.6% per month	65	Increased about 0.7% per month, roughly +42%
OAS	65	65	Increased 0.6% per month, roughly +36%

Starting CPP at 60 permanently reduces it by about 36% compared with 65; waiting until 70 raises it by about 42%. OAS cannot start before 65 but rises about 36% if deferred to 70. These are lifelong changes, which is why the decision deserves careful thought rather than a default. Our guide on when to start CPP explores that choice in depth.

Where the bridge money comes from

A bridge is funded from the assets you can access before your pensions begin. The common sources, roughly in the order many plans consider them, are:

• Non-registered savings and cash, which have already been taxed on the principal.
• TFSA withdrawals, which are tax-free and do not count as income.
• RRSP or RRIF withdrawals, which are fully taxable but can be useful to draw during low-income years.
• A workplace pension or LIRA, depending on its rules.

The art lies in the mix. Drawing entirely from one source is rarely optimal. A thoughtful bridge blends sources to keep taxable income in a sensible range each year, which is where the strategy starts to pay off.

Using the bridge years for tax efficiency

The bridge period is often a window of unusually low income: you have stopped earning a salary but have not yet started your pensions. That window is valuable. Drawing taxable RRSP or RRIF income during these lower-income years can mean paying tax at a lower rate than you might face later, once pensions and required minimums stack up.

There are two particular benefits:

• Reducing RRSP or RRIF balances early lowers the required minimum withdrawals that begin after conversion, which otherwise push up taxable income in later years.
• Keeping later income lower can reduce or avoid the OAS clawback, a recovery tax that applies once income passes an annual threshold.

This is a genuine planning opportunity, not a loophole. By smoothing income across the years rather than letting it spike late, many retirees pay less tax over the full retirement. The right amounts depend on your situation and should be confirmed with your advisor; our guides on RRSP-to-RRIF conversion and the OAS clawback go deeper on each.

Sequencing withdrawals across accounts

Because each account is taxed differently and affects your benefits differently, the order in which you draw matters. There is no single correct sequence, but the principles are consistent: use the bridge years to realize taxable income at low rates, preserve the tax-free compounding of a TFSA where sensible, and avoid letting any one year’s income spike into a higher bracket or trigger a clawback.

A common approach blends a base of non-registered or TFSA money for flexibility with deliberate RRSP or RRIF withdrawals sized to fill up lower tax brackets. The exact design is personal, and it interacts with your pension timing, which is why bridging and pension deferral are planned together rather than separately. Our guide on retirement withdrawal order in Canada lays out the sequencing in more detail.

Do you have enough to bridge?

A bridge strategy only works if you have enough accessible savings to live on while pensions are deferred. The longer the bridge and the higher your spending, the more you need. This is where the strategy connects to the bigger question of retirement readiness.

Before committing to delay your pensions, confirm that your savings can comfortably fund the gap without forcing you to sell investments at a bad time or run your reserves too low. If the numbers are tight, a partial bridge, delaying one pension but not both, or delaying for a few years rather than to 70, can still capture much of the benefit. Our guide on how much you need to retire in Canada can help you test the foundation.

An illustrative example of the trade-off

The following is a simplified, hypothetical example to show how a bridge works. It uses round numbers for clarity, is not a recommendation, and your own result would depend entirely on your circumstances.

Imagine someone who stops working at 62 and is deciding whether to start CPP immediately or delay it to 70. If they start at 62, they lock in a smaller payment for life. If they delay to 70, the payment is substantially larger, roughly 42% above the age-65 amount, and that higher, partly inflation-protected income continues for the rest of their life.

To delay, they need to fund the eight-year gap from their own savings. This is the bridge. During those years their employment income is gone and their pensions have not started, so their taxable income is unusually low. That low-income window is an opportunity: they can draw taxable RRSP or RRIF income at modest tax rates, reducing the registered balances that would otherwise drive up required minimum withdrawals, and the associated tax, later in retirement.

The trade-off, then, is between spending down flexible savings now in exchange for larger guaranteed income later, while using the gap years to smooth tax. Whether it comes out ahead depends on longevity, other income, tax rates, and how the invested savings perform, none of which can be known in advance. That uncertainty is exactly why the decision is modelled carefully rather than assumed.

A partial bridge is always available too. Delaying one pension but not both, or deferring for a few years rather than all the way to 70, captures much of the benefit while demanding less from your savings.

How Kevin Hayes Financial Services can help

A bridge-to-retirement strategy is one of the clearest examples of how coordinated advice adds value: the pension timing, the withdrawal order, the tax smoothing, and the clawback management all interact, and small differences compound over a long retirement. Our practice helps retirees across Ottawa and Ontario design and run these strategies with care. Book a private consultation to model your own bridge, or learn more about our approach to retirement planning and tax planning.