If you’re nearing retirement, understanding the role of government benefits for your income plan is critical—especially OAS.

For the average Canadian senior household with a combined annual after-tax retirement income of $75,000, around half of that income typically comes from the Canada Pension Plan (CPP) and Old Age Security (OAS).¹ While CPP is based on work history and contributions, OAS is a universal benefit available to most Canadians regardless of work history. And because it’s income-tested, the timing of when to start OAS can have a major impact on how much you receive—and how much you keep.

While the decision of when to begin OAS depends on individual circumstances—such as income needs or life expectancy—planning ahead can help maximize benefits. Here are key factors to consider:

Delaying OAS can increase benefits. OAS payments typically begin at age 65. The maximum monthly OAS payment is $727.67 (Q1 2025, ages 65 to 74*), which equates to $8,732 per year. Unlike the CPP, which can begin at age 60, you cannot start OAS early. However, you can delay OAS benefits until age 70, increasing payments by 0.6 percent per month to a maximum of 36 percent (which equates to an additional $262 per month or $3,144 more per year based on current figures).

Understanding the clawback. Unlike CPP, OAS is subject to a recovery tax (clawback). If your net annual income is greater than $93,454 (2025), your OAS is reduced by 15 percent of the excess amount. If net income reaches $151,668 (ages 65 to 74), your OAS benefit is fully eliminated.

Other income sources can affect OAS timing. Due to the clawback, it is important to consider how other income streams can impact benefits, including:

• Employment income—If you plan to continue working past the age of 65 and have a high income, delaying OAS may help you avoid the clawback.

• Mandatory RRIF withdrawals—If you convert your RRSP to the RRIF at age 71, mandatory RRIF withdrawals will begin at age 72, increasing taxable income. Some retirees choose to convert their RRSP to the RRIF earlier and withdraw smaller amounts before 65 to reduce the size of mandatory withdrawals later. This strategy can help manage taxable income and potentially mitigate the impact of the OAS clawback.

• CPP payments—CPP payments are taxable and will increase net income. The maximum monthly CPP payment is $1,433 (2025), or $17,196 annually. If you choose to delay CPP, this will increase payments by 8.4 percent per year after age 65, to a maximum of 42 percent (equating to an additional $602/month or $7,222/year).

• TFSA withdrawals—TFSA withdrawals are not taxable and therefore will not impact OAS eligibility, making the TFSA a potentially useful tool to preserve benefits if income is needed.

Preserving benefits through pension income splitting. If you have a spouse or common-law partner, splitting eligible pension income may help reduce taxable income to avoid the clawback. However, be aware that it could impact a spouse’s OAS eligibility.

What If Your Circumstances Change?

If you plan to defer OAS but later experience health issues or a shortened life expectancy, you may be eligible for retroactive payments, up to a maximum of 11 months, from the date an application is received by Service Canada.

Need Support?

Deciding when to take OAS is just one part of a comprehensive retirement strategy. We are here to help you navigate these decisions and optimize your retirement income. For a deeper discussion, please reach out.

^{1. Statistics Canada 2024 Canadian Income Survey, in 2022 was approximately $74,200 per year.}

^{*Or $800.44 per month for ages 75 and older. You will receive the increase in the month following your 75th birthday.}

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