Making Old Age Security Part Of Your Retirement Plan
Old Age Security, or OAS, provides eligible Canadians with a monthly payment beginning as early as age 65.
Unlike the Canada Pension Plan, OAS is not based on how much you earned or contributed while working. Eligibility and payment amounts are primarily based on how long you have lived in Canada after age 18. Generally, 40 years of Canadian residence is required to receive the full pension, although a partial pension may be available with fewer years of residence.
The basic rules are straightforward. Deciding when to begin receiving OAS is not.
How Much Can You Receive?
For July to September 2026, the maximum OAS payment for someone aged 65 to 74 is approximately $752 per month, or just over $9,000 per year.
You can begin receiving OAS at 65 or defer it for as long as five years. For every month you wait, your payment increases by 0.6%, or 7.2% for each full year. Deferring from age 65 to age 70 increases the payment by 36%. Based on current rates, that would increase the maximum monthly payment from approximately:
- $752 at age 65; to
- $1,023 at age 70.
That is an increase of about $271 per month, or roughly $3,250 per year. These are maximum amounts before tax and any OAS recovery tax (discussed below). Actual payments may be lower for someone who has lived in Canada for fewer than 40 years after age 18. OAS rates are also adjusted regularly for inflation, so the dollar amounts will change over time.
OAS payments automatically increase by a further 10% beginning the month after the recipient turns 75. At current rates, someone receiving the maximum pension from age 65 would receive approximately $827 per month at 75. Someone who deferred to 70 would receive approximately $1,125 per month at 75.
The increase for delaying OAS is attractive. But that does not make deferring an automatic choice.
What Are You Giving Up by Waiting?
Someone who delays OAS from 65 to 70 gives up five years of payments. At today’s maximum rate, that represents more than $45,000 of OAS payments before tax, ignoring future inflation adjustments. In exchange, the retiree receives a larger monthly payment beginning at 70.
Whether that trade-off works depends heavily on how long the person lives. Someone who lives well into their 80s or 90s has more years to benefit from the larger payment. Someone who dies earlier may collect less OAS over their lifetime than they would have by starting at 65.
This is why the decision cannot be reduced to the 36% increase alone. The increase is guaranteed, but the number of years for which it will be received is not.
OAS as Protection Against Living a Long Time
One reason to defer OAS is to increase the amount of guaranteed, inflation-protected income available later in retirement. The financial risk many retirees face is not simply that markets may perform poorly. It is that they may live much longer than expected and need their savings to support 30 years or more of retirement spending.
For someone in good health who can comfortably fund the first five years of retirement from other sources, deferring OAS can provide a larger lifetime income stream later. That income continues regardless of how long the person lives or how financial markets perform.
Seen this way, deferring OAS is partly a form of longevity protection. It reduces the risk of running short of dependable income at an advanced age. That protection comes at a cost, however. The retiree must give up payments between 65 and 70 and draw more heavily on employment income, savings or investments during those years.
The right decision depends on whether the additional income later (and the related longevity insurance) is worth the income given up today.
Taxes and the OAS Clawback
OAS is fully taxable and may also be subject to the OAS recovery tax, commonly called the clawback. For the July 2026 to June 2027 payment period, the clawback begins when 2025 net income exceeds $93,454. The repayment is equal to 15% of the income above that threshold. For example, if someone had net income of $100,000 in 2025:
$100,000 − $93,454 = $6,546
$6,546 × 15% = $981.90
That person would have to repay approximately $982 of OAS, generally through deductions from monthly OAS payments during the following July-to-June period.
This can make deferral attractive for someone who is still working or receiving substantial business income in their late 60s. Starting OAS while income is high may result in much of the benefit being taxed or clawed back. Waiting until employment or business income declines may allow the retiree to keep more of each payment.
However, deferral does not necessarily eliminate the clawback. The larger OAS payment beginning at 70 is itself taxable, and future RRIF withdrawals, pensions and investment income may still push the retiree above the threshold. The relevant question is therefore not simply whether OAS will be clawed back at 65. It is how the person’s taxable income is expected to change throughout retirement.
Cash Flow Today Also Matters
Deferring OAS only works if the retiree can comfortably replace the missing income. Someone who needs OAS to cover regular living expenses may be better served by starting at 65. Drawing more heavily from investments to defer OAS could create unnecessary stress, particularly during a market downturn.
Retirement planning is not solely about maximizing lifetime dollars. Money received in your late 60s may have more practical value if those are the years when you expect to travel, help family members or enjoy more expensive activities. Conversely, someone with ample income and savings may find that OAS adds little to their lifestyle at 65. For that person, giving up the early payments in return for more guaranteed income later may be an easier trade-off.
Consider OAS Alongside CPP and RRSP Withdrawals
OAS should not be considered in isolation. CPP can also be deferred to age 70 and increases by 0.7% for each month after age 65, or 42% over five years. Because the CPP deferral increase is larger, someone who can afford to delay only one benefit may decide that CPP should take priority.
The years between 65 and 71 can also provide an opportunity to draw money from RRSPs before they must be converted to RRIFs. Taking planned RRSP withdrawals during lower-income years may reduce future RRIF balances, mandatory withdrawals and exposure to the OAS clawback later in retirement.
The best approach could therefore involve:
- starting OAS while delaying CPP;
- delaying both benefits;
- starting both at 65; or
- drawing down registered savings while delaying one or both government pensions.
The right combination depends on expected income, tax rates, portfolio size and longevity. Couples should also consider both spouses together. Different start dates may be appropriate based on their ages, health, income and expected lifespans. OAS ends when the recipient dies and does not leave a survivor benefit or value for the estate.
There is also generally no advantage to deferring OAS for someone eligible for the Guaranteed Income Supplement. A person cannot receive GIS while delaying OAS, and GIS does not increase as a result of waiting.
The Bridgeport Perspective
OAS timing should not be considered in isolation. It affects taxable income, RRSP and RRIF withdrawals, the OAS clawback, CPP decisions and how heavily a portfolio may need to be drawn upon.
For some clients, deferring OAS to age 70 can provide valuable protection against a long retirement. For others, starting at 65 may provide greater practical value. The right decision depends on health, cash-flow needs, taxes, other pension income and personal priorities—not a simple rule of thumb.
If you are approaching this decision, or made it several years ago without considering the broader implications, we would be pleased to review it with you as part of your overall wealth plan.
This article provides general information only and does not constitute individualized investment, tax or legal advice. OAS amounts and income thresholds are adjusted periodically and may change. The appropriate strategy depends on your individual circumstances.