Imagine opening a letter from Service Canada a few months before your 65th birthday, detailing a monthly cheque you will receive for the rest of your life.
But a few quiet rules decide whether that cheque grows, shrinks, or gets partly taken back.
Here is what to know before that letter arrives.
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What is Old Age Security and who qualifies for the payout?
Old Age Security (OAS) is a monthly pension paid from general federal tax revenue. Unlike the Canada Pension Plan, it does not depend on your work history. Instead, it depends on factors such as your age and how long you have lived in Canada.
You need 40 years of residence after age 18 to be eligible for the maximum OAS pension. Service Canada usually identifies eligible seniors around age 64 and emails them a letter.
How much OAS will you get in 2026?
OAS rises with inflation, and Service Canada reviews the amount each quarter. For instance, payments rose 1.4% for October to December 2026.
At 65, the maximum OAS payout is $762.50 a month, and at 75, it climbs to $838.75. The remaining payments this quarter arrive on October 28, November 26, and December 22, according to Canada.ca.
With fewer than 40 years of Canadian residence, expect a prorated amount.
Should you defer OAS past age 65?
For every month you delay the OAS after 65, it adds 0.6% to your payment, up to age 70. So, if you delay the OAS for five years, the payout will increase by 36%. In 2026, the maximum OAS payment is over $1,000.
You can choose to defer the OAS if you are still working or have significant savings in retirement.
How does the OAS clawback work?
If you have a sizeable annual income, the OAS could attract a clawback. The clawback runs on a July-to-June cycle, so two thresholds are in play.
Right now, your payments from July 2026 to June 2027 are based on your 2025 income and a $93,454 threshold. The income you earn in 2026 faces a higher $95,323 threshold and will set your payments from July 2027 to June 2028.
Above the threshold, 15 cents of every dollar goes back to Ottawa. For seniors aged 65 to 74, OAS disappears completely at roughly $154,700 of 2026 income, according to the CRA.
Net income is broader than a paycheque and includes CPP, pensions, RRIF (Registered Retirement Income Fund) withdrawals, interest and taxable capital gains. It also includes dividends from Canadian companies held in a taxable account.
Three ways to protect your OAS from the clawback
A few smart choices can keep your net income in check.
- Use your TFSA: Withdrawals from a Tax-Free Savings Account do not count toward the clawback calculation.
- Split pension income: Eligible pension income, including RRIF withdrawals after 65, can be split up to 50% with a spouse or partner.
- Smooth your withdrawals: Drawing down your RRSP gradually before RRIF minimums begin helps you avoid income spikes.
How a dividend stock like BMO can affect your OAS
Consider a Canadian retiree who owns 1,000 shares of Bank of Montreal (TSX: BMO), which pays an annual dividend of $6.84 per share.
So, the retiree will earn $6840 in yearly dividends. In a taxable account, the gross-up at 38% turns that into roughly $9,439 of income, which counts toward your threshold.
Inside a TFSA, the dividends you earn are not included towards your net income calculation.
BMO remains a top dividend stock to own in October 2026. In fiscal Q3 (ended in July), BMO reported a return on equity of 14%, up from 9.8% in 2024. The bank also posted a record pre-provision, pre-tax profit of $4.5 billion.
However, Q3 net income fell to $1.75 billion or $2.38 per share, down from $2.33 billion or $3.14 per share last year.
BMO tied the decline to a goodwill charge linked to the sale of its Transportation and Vendor Finance businesses.
The Foolish takeaway
OAS is only one piece of the puzzle. The next step is deciding which quality dividend stocks deserve a place in your TFSA, so that you can avoid the OAS clawback.
