Imagine a 64-year-old Canadian retiree who worked for 40 years and contributed regularly to the Canada Pension Plan (CPP). But when the retiree logs into her My Service Canada Account and sees the monthly CPP estimate, she is shocked that it barely covers her retirement expenses.
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How much do CPP and OAS pay in 2026?
The maximum CPP retirement pension at age 65 is $1,507.65 a month in 2026, which takes near-maximum contributions over four decades. The average CPP payout is much lower at $858 a month.
The maximum Old Age Security (OAS) payout for Canadians aged 65 to 74 is $762.50, rising to $838.75 for those over 75. You need 40 years of Canadian residency after age 18 for the full OAS amount.
Add the average CPP to full OAS and a single retiree receives about $1,620 a month, or roughly $19,440 a year. By comparison, the maximum CPP and OAS total around $27,200 a year. Further, both benefits are taxable, so the final number could be lower.
What is the retirement income gap?
We need to compare the pension payouts with your retirement lifestyle. For example, a retiree might need $50,000 a year before tax for housing, food, utilities, travel, and spending time with family and grandkids.
If we assume a $50,000 annual income requirement and compare it to the average CPP and full OAS payment, the shortfall is around $30,000. At a 4% withdrawal rate, you would need about $750,000 in savings.
The shortfall for the maximum CPP and full OAS is lower, at $23,000, so you would need around $575,000 in retirement savings.
The retirement savings gap could be smaller for couples with combined annual expenses of $75,000, while pension payouts could double to almost $40,000.
How can Canadians shrink the retirement gap?
Canadians can shrink the retirement gap by delaying CPP, which rises by 0.7% for each month you delay it. So, if you delay starting the CPP, you can increase your pension by 42%. Similarly, OAS increases by 0.6% each month and 36% over five years.
Next, watch the OAS clawback. If you earned more than $93,454 in 2025, the OAS will be reduced by 15% on a marginal basis. This threshold stands at $95,323 in 2026. You can prioritize withdrawals from the TFSA (Tax-Free Savings Account), as they are tax-free.
The last strategy is to build a recurring passive income stream by owning blue-chip dividend stocks with attractive payouts.
Is BAM a good dividend stock in 2026?
Valued at a market cap of $101 billion, Brookfield Asset Management (TSX: BAM) offers a yield of 4.7% in October 2026.
Among the world’s largest alternative asset managers, Brookfield Asset Management manages around US$670 billion in fee-bearing capital. It aims to double the fee-bearing capital to US$1.3 trillion by 2031. In the last 12 months, BAM raised US$163 billion, and management expects 2026 to be a record fundraising year.
Fee-related earnings per share are projected to rise from $1.97 today to $4.08 by 2031. Moreover, distributable earnings per share are projected to grow from $1.75 to $3.99 over this period, which should support future dividend hikes.
Management also targets 15% annual dividend growth. Notably, BAM has raised the annual dividend from $1.28 per share in 2024 to $2.01 per share in 2026.
For a retiree, a growing dividend is more attractive than a company offering an elevated, unsustainable yield.
The Foolish takeaway
Retirees should log into the My Service Canada Account and check the estimated CPP payout. Add it to your likely OAS, along with the balances from registered accounts such as the TFSA and the RRSP (Registered Retirement Savings Account), and subtract the total from the annual retirement income you want.
Then multiply that number by 25 (the 4% rule) to get your retirement gap.
Finally, create an investment plan to fill the retirement gap as soon as you can.
